SCUDDER
INVESTMENTS(SM)
[LOGO]
--------------------
BOND/GLOBAL
--------------------
Scudder Global Bond Fund
Annual Report
October 31, 2000
The fund seeks to provide total return with an emphasis on current income.
Capital appreciation is a secondary objective.
<PAGE>
Contents
--------------------------------------------------------------------------------
4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
17 Glossary of Investment Terms
19 Investment Portfolio
23 Financial Statements
25 Financial Highlights
27 Notes to Financial Statements
37 Report of Independent Accountants
38 Shareholder Meeting Results
39 Officers and Directors
40 Investment Products and Services
42 Account Management Resources
2
<PAGE>
Scudder Global Bond Fund
--------------------------------------------------------------------------------
Class AARP ticker symbol SGBDX fund number 161
Class S ticker symbol SSTGX fund number 061
--------------------------------------------------------------------------------
Date of o Scudder Global Bond Fund -- Class S provided a total
Inception: return of -0.84%, outperforming the -5.08% return
3/1/91 over the same period of the Salomon Brothers World
Government Bond Index.
Total Net o The strength of the dollar versus the euro and the yen
Assets as was a major contributor to volatility in global bond
of 10/31/00 -- markets during the period.
Class AARP: o The fund's U.S. exposure contributed to performance, as
$997 the United States has had the best bond returns of any
country in the Salomon Index, due in part to increases
Class S: in worker productivity, and to the dwindling supply of
$143,368,241 U.S. government debt.
3
<PAGE>
Letter from the Fund's President
--------------------------------------------------------------------------------
Dear Shareholders,
Over the past year, nearly all sectors of the global interest rates markets
have experienced low price volatility, thanks in part to the benign inflation
environment around the globe. However, while almost all countries had
positive bond returns for the year, the currency of every country, with the
exception of Canada, lost more value relative to the U.S. dollar than the
bonds gained. Also, while most emerging markets showed positive performance
over the past year, that situation began to deteriorate recently amid
investor anticipation of a global economic slowdown. In this environment,
Scudder Global Bond Fund -- Class S provided a total return of -0.84%,
outperforming the -5.08% 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 consistently hedged a substantial portion of its
euro and yen exposure, protecting it from the decrease in value of those
currencies. At the same time, the fund had little or no exposure to the
Australian dollar, which fell substantially relative to the U.S. dollar over
the past year. The fund's exposure to emerging markets also contributed to
performance, as several of these markets benefited
4
<PAGE>
from moderate global inflation, stronger economic fundamentals and, in
several cases, higher oil prices.
At this time, the fund is maintaining a conservative strategy as the U.S.
economy appears to be headed for slower growth. Should the slowdown be a
"soft landing" in which we return to growth levels that are close to
longer-term trends without developing into a recession, this would generally
create a more favorable environment for corporate bond issuers, who would
find it easier to meet coupon payments. In any event, 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 global markets.
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/Linda C. Coughlin
Linda C. Coughlin
President
Scudder Global Bond Fund
5
<PAGE>
Performance Update
--------------------------------------------------------------------------------
October 31, 2000
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Salomon Brothers
Currency-Hedged
Salomon Brothers World Government
Scudder Global World Government Bond Index
Bond Fund -- Class S Bond Index* (1-3 years)**
-------------------- ----------- -------------
3/91*** 10000 10000 10000
'91 10665 10572 10075
'92 11500 12040 10896
'93 12321 13484 11072
'94 12290 13972 12058
'95 12958 16098 12748
'96 13472 16962 13625
'97 13560 17405 0
'98 14769 19588 0
'99 14623 19107 0
'00 14500 18138 0
Yearly periods ended October 31
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder Global Bond Fund -- Class S
--------------------------------------------------------------------------------
1 year $ 9,916 -.84% -.84%
--------------------------------------------------------------------------------
5 year $ 11,190 11.90% 2.27%
--------------------------------------------------------------------------------
Life of Fund** $ 14,500 45.00% 3.92%
--------------------------------------------------------------------------------
Salomon Brothers World Government Bond Index*
--------------------------------------------------------------------------------
1 year $ 9,492 -5.08% -5.08%
--------------------------------------------------------------------------------
5 year $ 11,268 12.68% 2.41%
--------------------------------------------------------------------------------
Life of Fund** $ 18,138 81.38% 6.34%
--------------------------------------------------------------------------------
6
<PAGE>
--------------------------------------------------------------------------------
Returns and Per Share Information
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA LEFT SIDE OF CHART:
Yearly periods ended October 31
Salomon Brothers
Scudder Global World Government
Bond Fund -- Class S Bond Index*
-------------------- -----------
1991*** 6.65 1991*** 5.56
1992 7.83 1992 7.56
1993 7.14 1993 6.08
1994 -0.35 1994 1.87
1995 5.43 1995 9.68
1996 0.0 1996 0.0
1997 0.0 1997 0.0
1998 0.0 1998 0.0
1999 0.0 1999 0.0
2000 0.0 2000 0.0
BAR CHART DATA RIGHT SIDE OF CHART:
Salomon Brothers
Currency-Hedged
World Government
Scudder Global Bond Index
Bond Fund -- Class S (1-3 years)**
-------------------- -------------
1991*** 0 1991*** 0
1992 0 1992 0
1993 0 1993 0
1994 0 1994 0
1995 0 1995 0
1996 3.97 1996 5.36
1997 0.66 1997 2.62
1998 8.91 1998 12.54
1999 -0.99 1999 -2.46
2000 -0.84 2000 -5.08
<TABLE>
<CAPTION>
1991*** 1992 1993 1994 1995 | 1996 1997 1998 1999 2000
-------------------------------------------------|-----------------------------------
<S> <C> <C> <C> <C> <C> | <C> <C> <C> <C> <C>
Fund Total |
Return (%) 6.65 7.83 7.14 -.25 5.43 | 3.97 .66 8.91 -.99 -.84
-------------------------------------------------|-----------------------------------
Index Total |
Return (%) 5.56 7.56 6.08 1.87 9.68 | 5.36 2.62 12.54 -2.46 -5.08
-------------------------------------------------|-----------------------------------
Net Asset Value |
($) 12.01 11.84 11.68 10.78 10.53 | 10.25 9.71 9.92 9.34 8.83
-------------------------------------------------|-----------------------------------
Dividends ($) .76 1.08 .95 .87 .80 | .67 .59 .62 .49 .44
-------------------------------------------------|-----------------------------------
Capital Gains |
Distributions ($) -- -- .02 -- -- | -- -- -- -- --
-------------------------------------------------|-----------------------------------
* The unmanaged Salomon Brothers 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.
** 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 10.27%. 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. On September 22, 2000,
existing shares of the Fund were redesignated as Class S shares.
On October 2, 2000, the Fund commenced offering Class AARP shares. The total
return information provided is for the Fund's Class S shares.
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
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
October 31, 2000
--------------------------------------------------------------------------------
Geographical Exposure
--------------------------------------------------------------------------------
The fund's U.S. exposure contributed
to performance, as the United States has had the
best bond returns of any country in the Salomon
Index, due in part to the dwindling supply of
U.S. government debt.
U.S. 41.0%
Germany 10.9%
France 9.8%
U.K. 5.6%
Norway 5.2%
Italy 5.0%
Canada 4.2%
Denmark 3.8%
El Salvador 3.5%
Belgium 2.9%
Supra-National 2.1%
Japan 1.9%
Brazil 1.2%
Other 2.9%
----------------------------------
100.0%
----------------------------------
--------------------------------------------------------------------------------
Interest Rate Exposure
--------------------------------------------------------------------------------
Over the past year, nearly all sectors of the
global interest rates markets have experienced
low price volatility, thanks in part to the
benign inflation environment around the globe.
Euro 38.3%
U.S. 37.5%
Japan 12.7%
U.K. 6.3%
Norway 5.2%
----------------------------------
100.0%
----------------------------------
--------------------------------------------------------------------------------
Currency Exposure (a)
--------------------------------------------------------------------------------
The strength of the dollar versus the euro and
the yen was a major contributor to volatility in
global bond markets during the period.
U.S. 71.4%
Euro 11.5%
Japan 8.8%
Norway 5.2%
U.K. 2.1%
Other 1.0%
----------------------------------
100.0%
----------------------------------
(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 19. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
October 31, 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 12-month period ended October 31, 2000.
Q: How did the fund perform over the 12 months ended October 31, 2000?
A: The fund's Class S shares returned -0.84%, outperforming the Salomon Brothers
World Government Bond Index (the Salomon Index), which had a -5.08% return over
the same period. The negative return of the index is attributable entirely to
weakening currencies. While every country in the index had positive bond returns
for the year, the currency of every country, with the exception of Canada, lost
more value relative to the U.S. dollar than the bonds gained. The two weakest
currencies were the euro, which dropped by approximately 20% over the past year,
and the Australian dollar, which fell by over 23%. The weak euro has a very
significant impact on the index performance as euro-bloc issues represent over
30% of the index, while Australia's much lower weighting makes its influence on
overall return correspondingly much lower. The Japanese yen's decline was
relatively less severe, at 4.5%, but because the yen constitutes over 25% of the
index, the fall in the yen also hurt the performance of the index.
Q: How would you characterize market conditions during this period?
A: The past year has been characterized by low price volatility in nearly all
sectors of the interest rate markets. While dollar bloc countries such as the
United States and Canada have provided the best returns over the period, all
countries had positive returns. The one laggard was Japan, whose very low
interest rates and continued borrowing to pay for fiscal spending held back the
performance of Japanese government bonds.
Much of the positive performance and low volatility of bonds is attributable to
the benign inflation environment around the globe. Meanwhile, although emerging
markets
9
<PAGE>
also exhibited low volatility and positive performance over the past year, that
situation has begun to deteriorate over the past couple of months as investors
begin to anticipate the beginnings of a global economic slowdown. The other
sector beginning to show more volatility is the U.S. credit market, where
high-yield credit spreads, or the difference in yield between high-yield bonds
and comparable maturity Treasury securities, have increased dramatically, while
investment-grade credit spreads also are increasing.
Q: What were some of the key factors affecting the fund's performance?
A: The dominant driver of the fund's performance was the currency hedging used
over the past year. The fund consistently hedged a substantial portion of its
euro and yen exposure, protecting it from the decrease in value of those
currencies. Further, the fund had little or no exposure to the Australian
dollar, which fell substantially relative to the U.S. dollar over the past year.
Another significant factor driving the fund's performance was its exposure to
emerging markets. The J.P. Morgan EMBI+ Index, an unmanaged index of emerging
market bond performance, was up over 20% in the past year, and the fund has
consistently had a small amount of exposure to a number of the countries in this
index, including Mexico, Venezuela, Brazil, and Panama.
Other than emerging market securities, the fund held no below-investment-grade
securities over the past year and only a moderate amount of high-quality
investment-grade bonds. The fund predominantly held developed-country government
bonds, such as U.S. Treasuries, German bunds, and British gilts. Prices of
high-yield securities have declined as this market has sold off markedly, while
investment-grade spreads have also widened, so the fund benefited from this
cautious credit posture.
10
<PAGE>
Q: How has renewed global growth, along with rising commodity prices, especially
oil, affected your strategy?
A: Typically, growth is the first warning signal that it's time to start
reducing exposure to potential changes in interest rates, because growth is seen
as a harbinger of inflation. This is not good for bond prices because as
inflation expectations increase, interest rates demanded by bond investors also
increase, resulting in lower bond prices. Furthermore, rising prices for oil and
other energy products have a history of leading to higher inflation. For this
reason, we have become cautious about the potential for a pickup in inflation,
although we do not want to simply assume that history is going to repeat itself.
In fact, the United States has enjoyed several years of above-average growth
without significant inflation. And, while the United States has enjoyed such
strong economic growth, it also has had the best bond returns of any country in
the Salomon Index. This is due in part to remarkable increases in worker
productivity, and in part to a dwindling supply of U.S. government debt as the
budget continues to operate at a surplus.
Similarly in Europe, economic growth has begun to pick up and oil prices have
increased even more than in the United States due to the fall in the value of
the euro. Yet there is no significant evidence of price pressure, and European
countries also are benefiting from budget surpluses which reduce the supply of
outstanding government debt. Thus, we are carefully watching the mitigating
factors which have so far prevented the traditional "growth leads to inflation"
scenario from playing out. It currently appears that growth will moderate both
in the United States and Europe before inflation has a chance to take hold,
which would be positive for those bond markets.
11
<PAGE>
Q: What effect has the continued weakness of the euro had on European bonds?
A: The weak euro has caused a number of market participants to be more cautious
about holding European bonds than they might be otherwise. This has certainly
contributed to the underperformance of the European bond markets relative to the
dollar bloc. Aside from direct currency risk, the weakening euro has caused a
number of market participants to be concerned about increasing inflation in the
euro-bloc. This concern reduces demand for euro-denominated bonds.
One benefit worth noting is that short-term interest rates in the U.S. are 1.75%
higher than they are in Europe. This interest rate differential means that a
hedge on euro-denominated bonds increases the yield on a hedged euro bond by
1.75%. This results from the hedge transaction, where the investor is selling
the euro, which yields 4.75%, and buying the dollar, which yields 6.5%. Thus, a
hedged-dollar investor does not incur a hedging expense but rather gets a
hedging benefit, and incurs no currency risk. So, while the weak currency has
certainly not helped the European bond market, the ability of the dollar
investor to hedge has limited the harm from the weak euro.
Q: What percentage of the portfolio consists of emerging market bonds, and what
impact have they had on the fund?
A: As noted earlier, the fund has consistently held a small amount of emerging
market securities. On average, the range has been approximately 3% to 7% over
the past year. The exposure has been beneficial as emerging market countries
generally have performed quite well. In particular, the increase in oil prices
helped the debt of Venezuela and other oil-producing countries. Strong global
growth also helped emerging market debt to perform positively. In an effort to
be defensive, we have attempted to remain out of countries that are experiencing
political turmoil such as Peru and the Philippines. Furthermore,
12
<PAGE>
we have been avoiding most Asian countries due to the lack of economic growth in
that region of the globe.
Q: How significant was the fund's U.S. exposure?
A: The fund had substantial exposure to the U.S. interest rate market and to the
U.S. dollar over the entire period. The United States represents over 25% of the
Salomon Index; it and Japan are the two largest countries in the index. U.S.
holdings are very high quality, consisting of Treasuries, mortgage-backed
securities, and a small percentage of investment-grade corporate bonds. As far
as currency, the fund consistently held more U.S. dollars than the index, so its
currency exposure benefited performance relative to the Salomon Index.
Q: Can you discuss some investments that did not fare well?
A: While the fund consistently held less euros than the benchmark, it did have
some exposure to the euro over the past year. As we have already noted, the euro
fell substantially relative to the dollar, so any euro exposure hurt
performance. We did not want to fully hedge our euro exposure due to the
conflicting fundamentals and technicals of the euro. Fundamentally, we believe
the euro is undervalued, and has been driven lower primarily due to technical
selling (selling that attempts to take advantage of short-term price movements
rather than long-term investment considerations) and capital flows from the
euro-bloc to the United States. We believe that the euro could turn and
strengthen relative to the dollar in the short term if economic fundamentals
begin to have more influence over the currency, though it is possible that
technical factors could continue to dominate for some time, which would push the
euro lower. With such a mixed outlook, we currently believe it would be
imprudent and risky to have no exposure to the euro.
Other investments that have not fared well are those holdings with higher credit
spreads relative to Treasuries. While emerging markets did well, other
higher-rated debt
13
<PAGE>
securities have lost value relative to government securities. The fund reduced
its exposure to spread product over the past year; however, the benchmark
contains only government securities so the spread widening which has occurred on
those bonds has hurt the performance of the fund relative to the benchmark.
Other than its emerging markets allocation, the fund currently holds only very
high quality investment-grade securities. We anticipate that we will maintain
those holdings as they offer a yield advantage relative to government bonds and
should not widen much further due to their high credit quality.
Q: You have been managing the fund for a little over a year. What changes or
enhancements have you made to the investment process?
A: We have focused on two particular aspects relating to the fund. First, we
have sought to enhance the process for forecasting potential returns from
countries. Second, we have attempted to improve risk control. The return
forecasting process is based on a model which helps us determine which of the
major interest-rate blocs may outperform or underperform the index. The output
from that model serves as a baseline which we combine with fundamental research
to provide an overall outlook for the relative performance of interest rates in
developed market countries.
Enhancements relating to risk control involve measuring risk relative to both
the index and the peer group. This helps us understand how much risk we are
taking compared to our published benchmark as well as to our competitors (as
determined by Lipper, Inc., an independent analyst of investment performance).
Our process allows us to identify sources of risk, such as interest rates,
currency, and credit. This risk management, combined with our forecasting
process, helps us make investments that we believe offer the best return
opportunity -- taking into account the risk associated with the trade. We
believe this emphasis on risk management can help keep the fund from
14
<PAGE>
underperforming either competitors or the benchmark by too great a degree.
Q: What is your strategy going forward?
A: We are closely watching the behavior of the euro and the U.S. economy and our
strategy depends largely on what we observe taking place there. If relative
growth rates between the euro-bloc and the United States narrow, and capital
flows between the euro-bloc and the United States slow, we believe that the euro
could rally relative to the U.S. dollar. Should this scenario unfold, we would
consider reducing the fund's euro hedge in an effort to benefit from the
strengthening euro.
Our current strategy is very conservative as the U.S. economy appears to be
headed for slower growth. Should the slowdown be a "soft landing" in which we
return to growth levels that are close to longer-term trends without developing
into a recession, this would create a more favorable environment for corporate
bond issuers, who would find it easier to meet coupon payments. We would take
this opportunity to increase the fund's exposure to quality issuers. Also, this
would improve the yield of the fund, enhancing income. If, on the other hand, we
experience a "hard landing" in which we experience recessionary conditions,
credit spreads in relation to Treasuries could widen, or increase further before
improving. In this case, we would maintain the conservative credit strategy for
a longer time to avoid holding bonds which have increased risk during slow
economic periods.
The opinions expressed are those of the portfolio management team as of October
31, 2000, and may not actually come to pass.
15
<PAGE>
Scudder Global Bond Fund:
A Team Approach to Investing
Scudder Global Bond Fund is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals, each of whom plays an important role in the
fund's management process. Team members work together to develop investment
strategies and select securities for the fund's portfolio. They are supported by
the Adviser's large staff of economists, research analysts, traders, and other
investment specialists who work in offices across the United States and abroad.
The Adviser believes that a team approach benefits fund investors by bringing
together many disciplines and leveraging the firm's extensive resources.
Lead portfolio manager Jan C. Faller joined the Adviser in 1999 and assumed
responsibility for the fund's day-to-day management and overall investment
strategy in 1999. Mr. Faller began his investment career in 1988.
Portfolio manager Jeremy L. Ragus joined the Adviser in 1990 and the fund team
in 1999. Mr. Ragus is the director of Derivatives Trading, responsible for all
fixed income, equity, and currency derivatives. Mr. Ragus began his investment
career in 1988.
16
<PAGE>
Glossary of Investment Terms
--------------------------------------------------------------------------------
Bond An interest-bearing security issued by a government or
corporation that obligates the issuer to pay the bondholder
a specified amount of interest for a state period -- usually
a number of years -- and to repay the face amount of the bond
at its maturity date.
Coupon The interest rate on a bond the issuer promises to pay to
the holder of the bond until maturity, expressed as an
annual percentage of face value. As an example, a bond with
a 10% coupon would pay $100 on $1,000 of the face amount
each year.
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 a 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 Devaluation A significant decline of a currency's value relative to
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 Exchange The price at which one country's currency can be exchanged
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.
17
<PAGE>
EMU (European The integration of European economies involving, among other
Monetary Union) changes, a move to a single currency for member nations. To
qualify for EMU membership, nations will be required to meet
certain guidelines concerning total governmental debt and
annual budget deficits, designed to ensure a strong common
currency.
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.
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.
</TABLE>
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
18
<PAGE>
Investment Portfolio as of October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value ($)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Short-Term Investments 1.8%
----------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollars
Student Loan Marketing Association, 6.45%*, 11/1/2000
(Cost $2,468,000) ....................................... 2,468,000 2,468,000
----------------------------------------------------------------------------------------
Foreign Denominated Debt Obligations 62.5%
----------------------------------------------------------------------------------------
British Pounds 6.3%
General Motors Acceptance Corp., 6.875%, 9/9/2004 .......... 1,700,000 2,479,087
United Kingdom Treasury Bond, 5.75%, 12/7/2009 ............. 1,500,000 2,266,996
United Kingdom Treasury Bond, 9%, 7/12/2011 ................ 2,100,000 3,988,548
------------
8,734,631
------------
Euro 38.3%
Belgium Kingdom, 8.5%, 10/1/2007 ........................... 4,000,000 3,967,264
Bonos Y oblig Del Estado, 4.95%, 7/30/2005 ................. 5,750,000 4,804,540
Bundesschatzeisungen, 4%, 12/14/2001 ....................... 6,300,000 5,284,969
Buoni Poliennali Del Tes, 4.75%, 7/1/2005 .................. 8,400,000 6,960,955
Caisse D'Amort Dette Soc, 3.375%, 7/12/2004 ................ 6,150,000 4,889,093
Depfa Pfandbrief Bank, 4.75%, 7/15/2008 .................... 4,250,000 3,393,077
Federal Republic of Germany, 6.25%, 1/4/2024 ............... 9,000,000 8,190,308
Ford Motor Credit Corp., 3.75%, 7/12/2004 .................. 930,000 729,779
French Treasury Note, 4.5%, 7/12/2003 ...................... 8,450,000 7,058,361
Government of France, 5.5%, 4/25/2010 ...................... 2,000,000 1,714,264
Rheinische Hypo Bank, 4.5%, 8/26/2003 ...................... 4,300,000 3,564,444
Tokyo Electric Power Co., 4.375%, 5/14/2009 ................ 3,600,000 2,710,895
------------
53,267,949
------------
Japanese Yen 12.7%
European Investment Bank, 2.125%, 9/20/2007 ................ 300,000,000 2,871,566
Federal National Mortgage Association, 2.125%,
10/9/2007 ............................................... 630,000,000 6,012,323
KFW International Finance, 1.75%, 3/23/2010 ................ 325,000,000 2,967,793
Province of Ontario, 1.875%, 1/25/2010 ..................... 642,000,000 5,895,498
------------
17,747,180
------------
Norwegian Kroner 5.2%
Norwegian Government, 9.5%, 10/31/2002 ..................... 65,000,000 7,302,292
------------
----------------------------------------------------------------------------------------
Total Foreign Denominated Debt Obligations (Cost $97,209,006) 87,052,052
----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value ($)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
U.S. Denominated Debt Obligations 35.7%
-----------------------------------------------------------------------------------
<S> <C> <C>
Argentine Republic, 11.375%, 1/30/2017 .................. 525,000 441,000
Argentine Republic, Floating Rate Bond, LIBOR plus .8125%
(7.625%), 3/31/2005 .................................. 306,000 267,368
DaimlerChrysler AG, 7.45%, 3/1/2027 ..................... 1,825,000 1,711,211
Federal National Mortgage Association,
5.125%, 2/13/2004 .................................... 2,593,000 2,488,476
Federative Republic of Brazil, 11.625%, 4/15/2004 ....... 312,000 315,120
Federative Republic of Brazil, 14.5%, 10/15/2009 ........ 395,000 421,663
Federative Republic of Brazil, "New" Money Bond,
Floating Rate Bond, LIBOR plus .875%
(7.688%), 4/15/2009 .................................. 285,000 243,675
Federative Republic of Brazil C Bond, 8%, 4/15/2014 ..... 570,142 426,181
Federative Republic of Brazil Global Bond,
10.125%, 5/15/2027 ................................... 379,000 286,145
Government National Mortgage Association Pass-thru, 7.00%
with various maturities to 4/15/2029 ................. 4,304,225 4,245,042
IBM Corp., 5.375%, 2/1/2009 ............................. 2,300,000 2,038,628
Midland Bank PLC, 7.625%, 6/15/2006 ..................... 1,500,000 1,525,965
Republic of Panama, 10.75%, 5/15/2020 ................... 285,000 279,300
Republic of Bulgaria, Collateralized Floating Rate
Interest Reduction Bond, "A", Step-up Coupon,
3.00%, 7/28/2012 ..................................... 320,000 228,000
Republic of Bulgaria, Floating Rate Bond,
LIBOR plus .8125%, 7.75%, 7/28/2011 .................. 845,000 629,525
Republic of Columbia, 9.75%, 4/23/2009 .................. 575,000 458,563
Republic of Venezuela, Debt Conversion Bond,
Floating Rate Bond, Series DL, LIBOR plus .875%
(7.875%), 12/18/2007 ................................. 357,140 298,212
Republic of Venezuela Global Bond, 9.25%, 9/15/2027 ..... 50,000 32,938
U.S. Treasury Bond, 5.25%, 11/15/2028 ................... 2,400,000 2,179,128
U.S. Treasury Bond, 7.5%, 11/15/2016 .................... 5,375,000 6,192,161
U.S. Treasury Bond, 8.5%, 2/15/2020 ..................... 1,810,000 2,319,063
U.S. Treasury Note, 5.625%, 12/31/2002 (b) .............. 6,390,000 6,349,040
U.S. Treasury Note, 6%, 8/15/2004 ....................... 1,485,000 1,491,965
U.S. Treasury Note, 6%, 8/15/2009 ....................... 5,000,000 5,050,000
U.S. Treasury Note, 6.5%, 8/15/2005 ..................... 3,725,000 3,828,034
U.S. Treasury Note, 6.5%, 10/15/2006 .................... 3,725,000 3,840,810
U.S. Treasury Note, 7.875%, 8/15/2001 ................... 600,000 606,750
United Mexican States, 11.5%, 5/15/2026 ................. 425,000 500,969
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value ($)
--------------------------------------------------------------------------------
<S> <C> <C>
United Mexican States Global Bond, 9.875%, 2/1/2010 ....... 300,000 312,000
United Mexican States Global Bond, 11.375%, 9/15/2016 ..... 595,000 673,838
--------------------------------------------------------------------------------
Total U.S. Dollar Denominated Debt Obligations (Cost $49,866,469) 49,680,770
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost $149,543,475) (a) 139,200,822
--------------------------------------------------------------------------------
</TABLE>
* Annualized yield at purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $150,644,534. At October
31, 2000, net unrealized depreciation for all securities based on tax
cost was $11,443,712. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $705,805 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over value
of $12,149,517.
(b) At October 31, 2000, this security has been pledged to cover, in whole
or in part, initial margin requirements for open futures.
--------------------------------------------------------------------------------
At October 31, 2000, open futures contracts purchased were as follows:
<TABLE>
<CAPTION>
Unrealized
Aggregate Appreciation
Expiration Face (Depreciation)
Futures Date Contracts Value ($) Value ($) ($)
----------------- ------------ --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Liffe Gilt 12/27/2000 58 9,507,567 9,551,139 43,572
Japanese 10-Year
Bond TSE 12/11/2000 2 2,405,622 2,445,259 39,637
At October 31, 2000, open futures contracts sold were as follows:
Unrealized
Aggregate Appreciation
Expiration Face (Depreciation)
Futures Date Contracts Value ($) Value ($) ($)
----------------- ------------ --------- ------------ ----------- -------------
U.S. 10-Year
Treasury Note 12/19/2000 197 19,655,834 19,838,516 (182,682)
Total net unrealized depreciation on open futures contracts ...... (99,473)
</TABLE>
Currency Abbreviation
----------------------------------------------------------------------------
ARA Argentine Peso JPY Japanese Yen
BRC Brazilian Cruzeiros 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>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
----------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $149,543,475) ...................... $ 139,200,822
Cash ......................................................................... 18,298
Foreign currency, at value (cost $84,855) ................................... 81,700
Net receivable for closed forward foreign currency exchange
contracts ................................................................. 1,041,514
Interest receivable .......................................................... 2,840,356
Receivable for Fund shares sold .............................................. 18,246
Net receivable for daily variation margin on open futures contracts .......... 50,818
Unrealized appreciation on forward currency exchange contracts ............... 1,335,334
Duefrom Adviser .............................................................. 28,773
Other assets ................................................................. 183
---------------
Total assets ................................................................. 144,616,044
Liabilities
----------------------------------------------------------------------------------------------
Dividends payable ............................................................ 120,494
Payable for Fund shares redeemed ............................................. 72,101
Unrealized depreciation on forward currency exchange contracts ............... 280,750
Accrued Directors' fees and expenses ......................................... 58,679
Accrued management fee ....................................................... 110,665
Other accrued expenses and payables .......................................... 604,117
---------------
Total liabilities ............................................................ 1,246,806
----------------------------------------------------------------------------------------------
Net assets, at value $ 143,369,238
----------------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ................. (3,181,513)
Net unrealized appreciation (depreciation) on:
Investment securities ...................................................... (10,342,653)
Futures .................................................................... (99,473)
Foreign currency related transactions ...................................... 945,071
Accumulated net realized gain (loss) ......................................... (82,262,483)
Paid-in capital .............................................................. 238,310,289
----------------------------------------------------------------------------------------------
Net assets, at value $ 143,369,238
----------------------------------------------------------------------------------------------
Net Asset Value
Class AARP
Net Asset Value, offering and redemption price per share ($997 / 113 shares of
capital stock outstanding, $.01 par value, 100,000,000 shares
authorized) ............................................................... $ 8.82
Class S
Net Asset Value, offering and redemption price per share ($143,368,241 /
16,238,223 shares of capital stock outstanding, $.01 par value, 300,000,000
shares authorized) ........................................................ $ 8.83
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 2000
------------------------------------------------------------------------------
Investment Income
------------------------------------------------------------------------------
Income:
Interest ....................................................... $ 4,855,767
---------------
Expenses:
Management fee ................................................. 606,970
Services to shareholders ....................................... 191,945
Custodian and accounting fees .................................. 141,158
Auditing ....................................................... 51,388
Legal .......................................................... 6,515
Directors' fees and expenses ................................... 84,268
Reports to shareholders ........................................ 22,895
Registration fees .............................................. 29,459
Reorganization ................................................. 16,603
Administrative fee ............................................. 55,140
---------------
Total expenses, before expense reductions ...................... 1,206,341
Expense reductions ............................................. (236,499)
---------------
Total expenses, after expense reductions ....................... 969,842
Net investment income .......................................... 3,885,925
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... (5,824,619)
Futures ........................................................ 364,318
Written options ................................................ 466,919
Foreign currency related transactions .......................... 1,712,374
---------------
(3,281,008)
---------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (1,928,401)
Futures ........................................................ (66,939)
Written options ................................................ 202,340
Foreign currency related transactions .......................... 515,263
---------------
(1,277,737)
------------------------------------------------------------------------------
Net gain (loss) on investment transactions (4,558,745)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (672,820)
------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
------------------------------------------------------------------------------
Statement of Changes in Net Assets
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 2000 1999
-------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income .......................... $ 3,885,925 $ 4,917,726
Net realized gain (loss) on investment
transactions ................................ (3,281,008) (1,150,008)
Net unrealized appreciation (depreciation) on
investment transactions during the period ... (1,277,737) (4,713,075)
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations ............................. (672,820) (945,357)
--------------- ---------------
Distributions to shareholders from:
Net investment income:
Class AARP ................................... (1) --
--------------- ---------------
Class S ...................................... (1,153,704) (3,413,831)
--------------- ---------------
Tax return of capital:
Class AARP ................................... (2) --
--------------- ---------------
Class S ...................................... (2,741,877) (1,499,196)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ...................... 19,776,242 14,334,815
Net assets acquired in tax-free reorganization . 81,108,097 --
Net asset value of shares issued to shareholders
in reinvestment of distributions ............ 2,898,325 3,565,063
Cost of shares redeemed ........................ (40,808,765) (34,802,146)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions .......................... 62,973,899 (16,902,268)
--------------- ---------------
Increase (decrease) in net assets .............. 58,405,495 (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 $3,181,513 and
$952,212, respectively) ..................... $ 143,369,238 $ 84,963,743
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Class AARP
--------------------------------------------------------------------------------
2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.86
----------
--------------------------------------------------------------------------------
Income (loss) from investment operations:
--------------------------------------------------------------------------------
Net investment income .03
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (.04)
----------
--------------------------------------------------------------------------------
Total from investment operations (.01) Less distributions from:
--------------------------------------------------------------------------------
Net investment income (.01)
--------------------------------------------------------------------------------
Tax return of capital (.02)
----------
--------------------------------------------------------------------------------
Total distributions (.03)
--------------------------------------------------------------------------------
Net asset value, end of period $ 8.82
----------
--------------------------------------------------------------------------------
Total Return (%) (.11)**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ millions) .001
--------------------------------------------------------------------------------
Ratio of expenses (%) 1.13*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 4.23*
--------------------------------------------------------------------------------
Portfolio turnover rate (%) 95
--------------------------------------------------------------------------------
(a) For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
* Annualized
** Not annualized
25
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class S (a)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Years Ended October 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.34 $ 9.92 $ 9.71 $10.25 $10.53
--------------------------------------------
------------------------------------------------------------------------------------
Income (loss) from investment
operations:
------------------------------------------------------------------------------------
Net investment income .44 .49 .62 .59 .67
------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions (.51) (.58) .21 (.54) (.28)
--------------------------------------------
------------------------------------------------------------------------------------
Total from investment operations (.07) (.09) .83 .05 .39
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.13) (.33) (.60) (.14) (.42)
------------------------------------------------------------------------------------
Tax return of capital (.31) (.16) (.02) (.45) (.25)
--------------------------------------------
------------------------------------------------------------------------------------
Total distributions (.44) (.49) (.62) (.59) (.67)
------------------------------------------------------------------------------------
Net asset value, end of period $ 8.83 $ 9.34 $ 9.92 $ 9.71 $10.25
--------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) (b) (.84) (.99) 8.91 .66 3.97
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 143 85 108 135 217
------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.49(c) 1.41 1.48 1.39 1.28
------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.20(c) 1.16 1.00 1.00 1.00
------------------------------------------------------------------------------------
Ratio of net investment income (%) 4.81 5.04 6.43 6.00 6.67
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 95 149 218 257 336
------------------------------------------------------------------------------------
</TABLE>
(a) On September 22, 2000, existing shares of the Fund were redesignated as
Class S.
(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 1.40%
and 1.14%, respectively (see Notes to Financial Statements). 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.
26
<PAGE>
Notes to Financial Statements
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.
On September 22, 2000, existing shares of the Fund were redesignated as Class S
shares. In addition, all of the net assets acquired from the merger with Scudder
International Bond Fund (see Note G) were designated as Class S shares.
Effective October 2, 2000, the Fund commenced offering Class AARP shares. The
two classes of shares provide investors with different purchase options. Shares
of Class AARP are especially designed for members of AARP. Investment income,
realized and unrealized gains and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on the basis of relative net
assets by the holders of both classes except that each class bears certain
expenses unique to that class such as reorganization expenses (see Note F).
Differences in class-level expenses may result in payment of different per share
dividends by class. All shares of the Fund have equal rights with respect to
voting subject to class-specific arrangements. Effective October 2, 2000 there
are no class-specific expenses.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America which require the
use of management estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Portfolio debt securities
purchased with an original maturity greater than sixty days are valued by
pricing agents approved by the officers of the Corporation, whose quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Money market instruments purchased with an original maturity of sixty days or
less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
27
<PAGE>
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
transactions.
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.
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.
28
<PAGE>
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 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.
29
<PAGE>
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge against changes in the exchange rates
relating to foreign currency denominated assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Sales and
purchases of forward contracts having the same settlement date and broker are
offset and any gain (loss) is realized on the date of offset; otherwise, gain
(loss) is realized on settlement date. Realized and unrealized gains and losses
which represent the difference between the value of a forward contract to buy
and a forward contract to sell are included in net realized and unrealized gain
(loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the 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, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $82,298,000, which may be applied against any realized net taxable
gains of each succeeding year until fully utilized or until October 31, 2001
($64,329,000), October 31, 2002 ($6,779,000), October 31, 2003 ($5,010,000),
October 31, 2004 ($737,000), October 31, 2005 ($494,000), October 31, 2006
($2,311,000), October 31, 2007 ($1,557,000) and October 31, 2008 ($1,081,000),
the respective expiration dates, whichever occurs first.
A portion of the losses attributable to Scudder Global Bond Fund incurred prior
to its merger with Scudder International Bond Fund may be limited in their
usability.
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
30
<PAGE>
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 accounting principles generally accepted in the United
States of America. 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.
B. Purchases and Sales of Securities
During the year ended October 31, 2000, purchases and sales of investment
securities (excluding short-term investments and U.S. Government obligations)
aggregated $61,956,311 and $86,769,352, respectively. Purchases and sales of
U.S. Government obligations aggregated $28,863,047 and $19,189,369,
respectively. Transactions in written options for the year ended October 31,
2000 are summarized as follows:
Over-the-Counter Options on Currencies
(000 omitted)
---------------------------------------
EUR GBP JPY Premiums
----------------------------------- ----------------
Beginning of Period ... -- -- 272,500 $ 35,425
Written ............... 22,818 3,937 411,030 432,192
Closed ................ -- -- (272,500) (35,425)
Expired ............... (22,818) (3,937) (411,030) (432,192)
End of Period ......... -- -- -- $ --
31
<PAGE>
C. Related Parties
As described in Note F, Scudder Kemper Investments, Inc. has initiated a
restructuring program for most of its Scudder no-load open-end funds. As part of
the reorganization, the Fund entered into an Administrative Agreement. This
agreement was effective September 25, 2000. The terms of the newly adopted and
the pre-existing agreements are set out below.
Management Agreement. 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.
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 year ended October 31, 2000, the Adviser did not impose a portion of its
management fee aggregating $207,726 and the amount imposed aggregated $399,244.
This was equivalent to an annual effective rate of 0.49% of the Fund's average
daily net assets.
Administrative Fee. Effective September 25, 2000, the Fund, as approved by the
Fund's Board of Directors, adopted an Administrative Agreement (the
"Administrative Agreement") with Scudder Kemper. Under the Administrative
Agreement the Adviser provides or pays others to provide substantially all of
the administrative services required by the Fund (other than those provided by
Scudder Kemper under its Management Agreement with the Fund, as described above)
in exchange for the payment by the Fund of an administrative services fee (the
"Administrative Fee") of 0.375% of average daily net assets. As of the effective
date of the Administrative Agreement, each service provider will continue to
provide the services that it currently provides to the Fund (i.e., fund
accounting, shareholder services, custody, audit and legal), under the current
arrangements, except that Scudder Kemper will pay
32
<PAGE>
these entities for the provision of their services to the Fund and will pay most
other Fund expenses, including insurance, registration, printing and postage
fees. Certain expenses of the Fund will not be borne by Scudder Kemper under the
Administrative Agreement, such as taxes, brokerage, interest and extraordinary
expenses, and the fees and expenses of the Independent Directors (including the
fees and expenses of their independent counsel). For the period September 25,
2000 through October 31, 2000, the Administrative Agreement expense charged to
the Fund amounted to $55,140, all of which is unpaid at October 31, 2000.
Service Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser,
is the transfer, dividend-paying and shareholder service agent for the Fund.
Prior to September 25, 2000, the amount charged to the Fund by SSC aggregated
$194,251, of which $50,971 is unpaid at October 31, 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. Prior to September 25, 2000, the
amount charged to the Fund by STC aggregated $14,525, of which $6,205 is unpaid
at October 31, 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. Prior to September 25,
2000, the amount charged to the Fund by SFAC aggregated $66,107, of which
$16,741 is unpaid at October 31, 2000. Effective September 25, 2000, the above
fees will be paid by the Adviser in accordance with the Administrative
Agreement.
Directors' Fees and Expenses. The Fund pays each of its Directors not affiliated
with the Adviser an annual retainer, plus specified amounts for attended board
and committee meetings. For the year ended October 31, 2000, Directors' fees and
expenses aggregated $26,723. In addition, a one-time fee of $57,545 was accrued
by Class S prior to October 2, 2000 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.
Other Related Parties. Effective October 2, 2000, Scudder Kemper has agreed to
pay a fee to AARP and/or its affiliates in return for advice relating to
investments by AARP members in Class AARP shares of the Fund. This fee is
calculated on a daily basis as a percentage of the combined net assets of the
33
<PAGE>
AARP classes of all funds managed by Scudder Kemper. The fee rates, which
decrease as the aggregate net assets of the AARP classes become larger, are as
follows: 0.07% for the first $6,000,000,000 of net assets, 0.06% for the next
$10,000,000,000 of such net assets and 0.05% of such net assets thereafter.
D. Commitments
As of October 31, 2000, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized appreciation of
$1,054,584.
Net Unrealized
Settlement Appreciation
Contracts to Deliver In Exchange For Date (Depreciation)
--------------------------------------------------------------------------------
EUR 4,432,938 USD 3,868,314 11/4/2000 $ 103,184
USD 79,430 PLZ 364,562 11/6/2000 (1,084)
EUR 36,597 USD 32,231 11/7/2000 1,147
EUR 8,370,770 USD 7,305,757 11/7/2000 196,015
EUR 14,005,073 USD 12,200,660 11/7/2000 305,402
EUR 22,817,583 USD 19,854,720 11/7/2000 474,527
USD 5,258,535 EUR 5,970,722 11/7/2000 (187,281)
USD 63,920 INR 564,929,202 11/10/2000 (3,644)
USD 54,490 THB 2,313,627 11/10/2000 (1,803)
USD 217,509 HUF 65,774,852 11/13/2000 (5,828)
USD 55,439 SGD 96,608 11/13/2000 (398)
GBP 89,045 USD 134,205 11/15/2000 5,122
JPY 259,462,900 USD 2,494,164 11/15/2000 109,353
JPY 787,613,117 USD 7,376,727 11/15/2000 137,509
USD 582,442 JPY 62,146,580 11/15/2000 (11,232)
USD 2,431,705 JPY 256,462,900 11/15/2000 (46,894)
USD 1,280,316 JPY 138,530,218 11/15/2000 (7,038)
GBP 3,937,033 USD 5,692,359 11/15/2000 (14,940)
USD 15,230 MXP 146,360 11/16/2000 7
USD 34,294 CNR 284,139 11/16/2000 (13)
USD 80,800 MXP 770,428 11/16/2000 (595)
USD 32,160 COP 70,301,760 11/20/2000 670
USD 15,600 COP 33,883,200 11/20/2000 223
USD 47,415 CLP 27,173,537 11/24/2000 95
USD 110,018 ARA 110,418 11/27/2000 160
USD 48,324 BRC 93,604 11/27/2000 726
USD 15,230 BRC 29,196 11/27/2000 69
USD 106,250 TRL 73,950,000,000 11/30/2000 312
USD 56,515 ZAR 434,968 11/30/2000 813
$ 1,054,584
34
<PAGE>
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. In addition, after December 29, 2000, Class
S shares of the Fund will generally not be available to new investors.
G. Acquisition of Assets
On September 22, 2000, the Fund acquired all the net assets of Scudder
International Bond Fund pursuant to a plan of reorganization approved by
shareholders on July 13, 2000. The acquisition was accomplished by a tax-free
exchange of 9,154,575 Class S shares of the Fund for 9,160,779 shares of Scudder
International Bond Fund outstanding on September 22, 2000. Scudder International
Bond Fund's net assets at that date ($81,108,097), including $6,632,293 of net
unrealized depreciation, were combined with those of the Fund. The aggregate net
assets of the Fund immediately before the acquisition were $66,437,392. The
combined net assets of the Fund immediately following the acquisition were
$147,545,489.
35
<PAGE>
H. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
---------------------------------------------------------------------
Shares Dollars Shares Dollars
Shares sold
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class AARP* ... 113 $ 1,000 -- $ --
Class S** ..... 2,225,928 19,775,242 1,462,774 14,334,815
$ 19,776,242 $ 14,334,815
Shares issued in a tax-free reorganization
-------------------------------------------------------------------------------------
Class S** ..... 9,154,575 $ 81,108,097 -- $ --
Shares issued to shareholders in reinvestment of distributions
-------------------------------------------------------------------------------------
Class AARP* ... 0*** $ 3 -- $ --
Class S** ..... 323,475 2,898,322 368,311 3,565,106
$ 2,898,325 $ 3,565,106
Shares redeemed
-------------------------------------------------------------------------------------
Class AARP* ... -- $ -- -- $ --
Class S** ..... (4,559,106) (40,808,765) (3,595,274) (34,802,146)
$ (40,808,765) $ (34,802,146)
Net increase (decrease)
-------------------------------------------------------------------------------------
Class AARP* ... 113 $ 1,003 -- $ --
Class S** ..... 7,144,872 62,975,988 (1,764,189) (16,902,268)
$ 62,976,991 $ (16,902,268)
</TABLE>
* For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
** On September 22, 2000, existing shares of the Fund were redesignated as
Class S shares.
*** Fractional shares.
36
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder Global/International Fund, Inc. and to the
Shareholders of Scudder Global Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Global Bond Fund (the
"Fund") at October 31, 2000, 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 accounting principles generally accepted in the
United States of America. 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 auditing standards generally accepted in
the United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 18, 2000
37
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Global Bond Fund
(the "fund"), a series of Global/International Fund, Inc., was held on July 13,
2000, 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 elect Directors of the Global/International Fund, Inc.
Number of Votes:
Director For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 4,039,960 149,776
Linda C. Coughlin 4,042,304 147,432
Dawn-Marie Driscoll 4,046,209 143,527
Edgar R. Fiedler 4,040,920 148,816
Keith R. Fox 4,046,461 143,275
Joan E. Spero 4,041,784 147,952
Jean Gleason Stromberg 4,042,379 147,357
Jean C. Tempel 4,036,205 153,531
Steven Zaleznick 4,032,465 157,271
--------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending October 31, 2000.
Number of Votes:
For Against Abstain Broker
Non-Votes*
--------------------------------------------------------------------------------
4,049,577 37,368 102,791 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* 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.
38
<PAGE>
Officers and Directors
<TABLE>
<S> <C>
Linda C. Coughlin* Susah E. Dahl*
o President and Director o Vice President
Henry P. Becton, Jr. William F. Glavin*
o Director; President, o Vice President
WGBH Educational Foundation
William E. Holzer*
Dawn-Marie Driscoll o Vice President
o Director; President,
Driscoll Associates; James E. Masur*
Executive Fellow, Center for o Vice President
Business Ethics, Bentley College
Gerald J. Moran*
Edgar R. Fiedler o Vice President
o Director; Senior Fellow and
Economic Counsellor, The M. Isabel Saltzman*
Conference Board, Inc. o Vice President
Keith R. Fox Howard S. Schneider*
o Director; General Partner, o Vice President
The Exeter Group of Funds
John Millette*
Joan E. Spero o Vice President and Secretary
o Director; President, The
Doris Duke Charitable Foundation Kathryn L. Quirk*
o Vice President and Assistant Secretary
Jean Gleason Stromberg
o Director; Consultant John R. Hebble*
o Treasurer
Jean C. Tempel
o Director; Managing Director, Brenda Lyons*
First Light Capital, LLC o Assistant Treasurer
Steven Zaleznick Caroline Pearson*
o Director; President and o Assistant Secretary
Chief Executive Officer,
AARP Services, Inc.
*Scudder Kemper Investments, Inc.
Thomas V. Bruns*
o Vice President
</TABLE>
39
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Scudder Funds
--------------------------------------------------------------------------------
<TABLE>
<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
Managed Shares Growth
Scudder Tax Free Money Fund Scudder Classic Growth Fund
Scudder Capital Growth Fund
Tax Free Scudder Large Company Growth Fund
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund
Scudder California Tax Free Fund Scudder 21st Century Growth Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund
Scudder GNMA Fund Scudder Global Discovery Fund
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio Scudder Health Care Fund
Scudder Pathway Growth Portfolio Scudder Technology 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
40
<PAGE>
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Closed-End Funds
--------------------------------------------------------------------------------
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>
Scudder funds are offered by prospectus only. For more complete information on
any fund or variable annuity registered in your state, including information
about a fund's objectives, strategies, risks, advisory fees, distribution
charges, and other expenses, please order a free prospectus. Read the prospectus
before investing in any fund to ensure the fund is appropriate for your goals
and risk tolerance. There is no assurance that the objective of any fund will be
achieved, and fund returns and net asset values fluctuate. Shares are redeemable
at current net asset value, which may be more or less than their original cost.
A money market mutual fund investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although a
money market mutual fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in such a fund.
The services and products described should not be considered a solicitation to
buy or an offer to sell a security to any person in any jurisdiction where such
offer, solicitation, purchase, or sale would be unlawful under the securities
laws of such jurisdiction.
Scudder Investor Services, Inc.
41
<PAGE>
Account Management Resources
--------------------------------------------------------------------------------
For shareholders of Scudder funds including those in the AARP Investment Program
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- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to
exchange or redeem shares, and information on other
Scudder funds and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.scudder.com
Personal Investment Organizer: Offering account
information and transactions, interactive worksheets,
prospectuses and applications for all Scudder funds,
plus your current asset allocation, whenever you need
them. Scudder's site also provides news about Scudder
funds, retirement planning information, and more.
42
<PAGE>
--------------------------------------------------------------------------------
Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the
proceeds for schedule (as frequently as once a month) and amount
living expenses of the redemptions, and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into
automated the bank account you designate within three business
withdrawal days after 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 Scudder Class S Shareholders:
information
about these Call a Scudder representative at
services 1-800-SCUDDER
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 219669
Kansas City, MO
64121-9669
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 219735
Kansas City, MO
64121-9735
43
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<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.
SCUDDER
INVESTMENTS(SM)
[LOGO]
AARP Investment
Program from Scudder
PO Box 219735
Kansas City, MO 64121-9735
1-800-253-2277
aarp.scudder.com
Scudder Funds
PO Box 219669
Kansas City, MO 64121-9669
1-800-SCUDDER
www.scudder.com
