Scudder
Emerging Markets
Income Fund
Annual Report
October 31, 1997
Pure No-Load(TM) Funds
For investors seeking high current income and, secondarily, long-term capital
appreciation through investment primarily in high-yielding debt securities
issued in emerging markets.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
In Brief
o Scudder Emerging Markets Income Fund posted a 12.34% total return for its most
recent fiscal year ended October 31, 1997. The J.P. Morgan Composite Emerging
Markets Bond/Latin Eurobond Index returned 13.01% over the same time period. The
Fund closed its fiscal year with a 30-day net annualized yield of 8.31%.
o Emerging markets from Thailand to Brazil weathered a series of currency crises
over the second half of the Fund's fiscal year as these countries struggled to
deal with current account deficits and rising interest rates.
o The Fund continues to maintain a liquid, diversified portfolio -- with bonds
issued in Latin America, eastern Europe, the Middle East, and northern Africa --
that we believe is well positioned to benefit from improving economic
fundamentals while earning a high level of current income.
Table of Contents
3 Letter from the Fund's Chairman 17 Notes to Financial Statements
4 Performance Update 21 Report of Independent Accountants
5 Portfolio Summary 22 Tax Information
6 Portfolio Management Discussion 22 Officers and Directors
9 Glossary of Investment Terms 23 Stockholder Meeting Results
10 Investment Portfolio 25 Investment Products and Services
13 Financial Statements 26 Scudder Solutions
16 Financial Highlights
2 - Scudder Emerging Markets Income Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to report on Scudder Emerging Markets Income Fund's
performance over its most recent annual period. Despite market uncertainties
arising from assaults on currency valuations in several emerging countries, the
Fund posted a solid 12.34% total return for the 12-month period ended October
31, 1997. During this period, the Fund took a cautious approach, and the
management team is currently emphasizing countries such as Mexico, Panama, Peru,
and Venezuela that continue to display positive credit fundamentals and strong
hard currency reserve positions. Please see the Portfolio Management Discussion
beginning on page 6 for more information about the Fund's strategy.
For those interested in other offerings from Scudder, we would like to take
this opportunity to tell you about a recent addition to Scudder's family of
funds -- Scudder International Growth and Income Fund. The Fund employs a
yield-oriented approach to international investing and seeks to provide
long-term growth of capital plus current income. Investors who desire
international exposure but who wish to take a more conservative approach to
international equity investing may appreciate the Fund's emphasis on the
dividend-paying stocks of established companies listed on foreign exchanges.
Please see pages 25 through 27 for more information on Scudder products and
services. As always, please call a Scudder Investor Information representative
at 1-800-225-2470 if you have questions about your account or any Scudder fund.
Thank you for investing with Scudder.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Emerging Markets Income Fund
3 - Scudder Emerging Markets Income Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/97 $10,000 Cumulative Annual
- ------------------------------------------------
SCUDDER EMERGING MARKETS INCOME FUND
TICKER SYMBOL: SCEMX
- ------------------------------------------------
1 Year $ 11,234 12.34% 12.34%
Life of Fund* $ 15,672 56.72% 12.43%
- ------------------------------------------------
JP MORGAN COMPOSITE EMERGING MARKETS
BOND/LATIN EUROBOND INDEX
- ------------------------------------------------
1 Year $ 11,301 13.01% 13.01%
Life of Fund* $ 14,605 46.05% 10.38%
- ------------------------------------------------
*The Fund commenced operations on December 31, 1993.
Index comparisons begin December 31, 1993.
- ---------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- ----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
SCUDDER EMERGING MARKETS INCOME FUND
Year Amount
- ----------------------
12/93* $10,000
4/94 $ 8,962
10/94 $ 9,646
4/95 $ 8,858
10/95 $ 9,980
4/96 $12,131
10/96 $13,951
4/97 $15,567
10/97 $15,672
JP MORGAN COMPOSITE EMERGING MARKETS BOND/
LATIN EUROBOND INDEX
Year Amount
- ----------------------
12/93* $10,000
4/94 $ 8,314
10/94 $ 8,771
4/95 $ 8,149
10/95 $ 9,460
4/96 $11,351
10/96 $12,923
4/97 $14,408
10/97 $14,605
The unmanaged JP Morgan Composite Emerging Markets Bond/Latin Eurobond
Index (EMBI/LEI) tracks the performance of U.S. dollar-denominated sovereign
restructured bonds (mostly Brady bonds) and Latin-issued Eurobonds. The
composite includes debt issues from five countries in Latin America, plus
Bulgaria, Nigeria, the Philippines and Poland. Index returns assume reinvested
dividends and, unlike Fund returns, do not reflect fees or expenses.
- ----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- ----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED OCTOBER 31
1994* 1995 1996 1997
----------------------------------------------
NET ASSET VALUE......... $ 11.05 $ 10.26 $ 12.98 $ 12.22
INCOME DIVIDENDS........ $ .51 $ 1.11 $ 1.19 $ 1.10
CAPITAL GAINS
DIVIDENDS............... $ -- -- -- 1.18
FUND TOTAL RETURN (%)... -3.54 3.46 39.78 12.34
INDEX TOTAL RETURN (%).. -12.23 7.85 36.46 13.01
Performance is historical and assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than when purchased. If the Adviser had not maintained the
Fund's expenses, the total return for the life of Fund period would have been
lower.
4 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1997
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Debt Obligations 97%
Cash Equivalents 3%
- --------------------------------------
100%
- --------------------------------------
The Fund is largely
invested in the fixed
income markets of
emerging economies, with
a cash position of less
than 5%.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
GEOGRAPHICAL EXPOSURE
(Excludes 3% Cash Equivalents)
- --------------------------------------------------------------------------
Mexico 26%
Panama 13%
Venezuela 12%
Argentina 12%
Brazil 10%
Bulgaria 10%
Jamaica 4%
Peru 3%
Turkey 3%
Other 7%
- --------------------------------------
100%
- --------------------------------------
Latin America markets continue
to make up the highest percentage
of fund assets.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
CURRENCY EXPOSURE
(Excludes 3% Cash Equivalents)
- --------------------------------------------------------------------------
United States 92%
Turkey 3%
South Africa 2%
Chile 2%
Germany 1%
- --------------------------------------
100%
- --------------------------------------
As part of a conservative strategy,
we reduced the Fund's local currency
assets to approximately 6% by the
close of the period.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
AVERAGE LIFE
(Excludes 3% Cash Equivalents)
- --------------------------------------------------------------------------
0 - 3 years 8%
3 - 5 years 8%
5 - 10 years 25%
Greater than 10 years 59%
- --------------------------------------
100%
- --------------------------------------
Fund assets are invested
in instruments with a
range of maturities.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's investment portfolio, see page 10.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
5 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
During a period of economic uncertainty for emerging countries, Scudder Emerging
Markets Income Fund pursued a conservative strategy, posting a 12.34% total
return for its most recent fiscal year ended October 31, 1997. The J.P. Morgan
Composite Emerging Markets Bond/Latin Eurobond Index returned 13.01% over the
same time period. The Fund also closed its fiscal year with a 30-day net
annualized yield of 8.31%.
Asian Currency Turmoil
Spills Over
In July, Thailand, attempting to deal with a large current account deficit,
devalued its currency. This event sparked pressure on currencies in several
other Southeast Asia markets, including Malaysia, Indonesia, and the
Philippines. The crisis proceeded to spread to large Asian economies such as
Korea, Hong Kong, and Japan, where currency and property exposure in the banking
systems began to worry investors. Having no holdings in emerging Asia, Scudder
Emerging Markets Income Fund was well positioned to withstand the currency
turmoil.
As the Asian crisis proceeded, concerns over countries posting significant
current account deficits and overvalued currencies -- in combination with a
general move toward global risk reduction by investors -- began to put pressure
on other markets and countries. Brazil's currency soon came under pressure:
Heavy selling of the Brazilian real began in late October, and the country's
central bank spent an estimated $8 billion in reserves to defend the currency.
In addition, Brazil raised interest rates to an annual rate of 45% to encourage
investors to hold the real. President Cardoso also renewed his efforts to push
additional reforms through Congress, targeting tight fiscal policy and increased
government revenues. The real held firm through this initial assault, relieving
some pressure on other Latin American countries. The speed with which Brazil
passed legislation aimed at reducing the fiscal deficit also served to calm
investors and renew confidence locally.
A Conservative Strategy
Scudder Emerging Markets Income Fund had adopted a more conservative stance
prior to the outbreak of the Asian turmoil and was thus well positioned as the
yield differential (or "spread") between emerging market bonds and Treasury
bonds of similar maturity widened from approximately 3.3 percentage points to 6
percentage points by the close of the period. This conservative strategy
included reducing the Fund's average effective maturity, underweighting Brazil
and Argentina, and overweighting Mexico, Panama, Peru, and Venezuela. We also
reduced the Fund's local currency assets to approximately 6% by the close of the
period.
During the most recent fiscal year, the Fund increased its position in Mexico
through additional holdings of dollar-denominated debt. With strong credit
fundamentals, we expect Mexico to outperform other emerging countries in the
coming months and exhibit less volatility due to its strong ties with the U.S.
and a relatively flexible currency regime that frees Mexico from having to dip
into reserves to defend its currency. Inflation appears to be declining in
6 - Scudder Emerging Markets Income Fund
<PAGE>
Mexico, and retail sales have been strong. Preliminary budget discussions also
point towards a relatively low budget deficit for the coming fiscal year.
We took advantage of opportunities to add back substantial Panamanian sovereign
bond holdings during the period based on our continued optimism concerning the
country's economic outlook and improving relative value. In addition, Panama's
economy is largely dollarized and thus is relatively isolated from
currency-related volatility.
Our Outlook
Emerging market bonds currently represent attractive relative value, especially
in the context of the recent sell-off. As a comparison, yields on U.S. high
yield bonds with an average credit rating of B were less than two percentage
points higher than comparable maturity Treasuries at the close of the period.
Emerging market bonds, which on average have a higher credit rating than the
B-rated U.S. High Yield Index, yielded 6 percentage points more than Treasuries
of similar maturity. That said, we do expect continued volatility, especially in
light of the continued vulnerability of the Brazilian, Korean, and other
currencies.
We will continue to pursue a cautious strategy, confining our focus to countries
with strong credit fundamentals and banking systems, as well as limited current
account deficits, flexible exchange rates, and positive capital flows. Several
Latin American countries in particular have made great strides in structural
reform and have already undergone adjustments to alleviate potential currency
and current account pressures. We believe that investors worldwide will return
7 - Scudder Emerging Markets Income Fund
<PAGE>
to the market as those emerging countries with solid fundamentals and growing
domestic economies once again begin to distinguish themselves.
Over the coming months, we will continue to search for opportunities to provide
high current income and long-term capital appreciation to our shareholders.
Thank you for investing in Scudder Emerging Markets Income Fund.
Sincerely,
Your Portfolio Management Team
/s/Susan E. Gray /s/M. Isabel Saltzman
Susan E. Gray M. Isabel Saltzman
Scudder Emerging Markets Income Fund:
A Team Approach to Investing
Scudder Emerging Markets Income Fund is managed by a team of Scudder
investment professionals who each play 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 Scudder's large staff of economists, research analysts, traders, and other
investment specialists who work in Scudder's offices across the United States
and abroad. Scudder believes its team approach benefits Fund investors by
bringing together many disciplines and leveraging Scudder's extensive
resources.
Lead Portfolio Manager Susan E. Gray assumed responsibility for the Fund's
investment strategies and day-to-day management in 1996. Susan, who has over
seven years of investment experience in emerging markets, joined the Fund's
team in 1994 and has worked at Scudder since 1987. M. Isabel Saltzman,
Portfolio Manager, assists with the development and execution of investment
strategy. Isabel, who joined Scudder in 1990, has been involved in foreign
finance and investing since 1979 and contributes special expertise in Latin
America.
8 - Scudder Emerging Markets Income Fund
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by a
government or a corporation that obligates the
issuer to pay the bondholder a specified amount of
interest for a stated period -- usually a number
of years -- and to repay the face amount of the
bond at its maturity date.
CAPITAL FLOWS The movement of money from one country to another
in search of investment opportunities and to
accommodate trade.
COUPON The interest rate on a bond the issuer (in the
case of sovereign emerging market bonds, a
country) 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 will pay $100 of the $1,000 face amount
each year.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of goods
available in the marketplace -- in other words,
when too much money is chasing too few goods. High
inflation has a negative impact on the prices of
fixed-income securities.
30-DAY SEC YIELD The standard yield reference for bond funds based
on a formula prescribed by the SEC. This yield
calculation reflects the 30-day average of the net
annualized income earnings capability of every
holding in a given fund's portfolio, assuming each
is held to maturity.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return -- annualized
or cumulative -- is based on share price changes
plus income and capital gain distributions, if
any, expressed as a percentage gain or loss in
value.
YIELD SPREAD The difference in yield between various types of
bonds. An emerging market bond's yield is
generally measured against the yield of a Treasury
bond of similar maturity as a market yardstick. If
yield spreads are "narrow," for example, it often
means that emerging market bond yields have been
declining, and prices rising, compared with
Treasury bonds of similar maturity.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
9 - Scudder Emerging Markets Income Fund
<PAGE>
Investment Portfolio as of October 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount ($) (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 2.8%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/97 at 5.7%,
to be repurchased at $8,010,803 on 11/3/97, collateralized by a $6,141,000 -----------
U.S. Treasury Note, 10.75%, 8/15/05 (Cost $8,007,000) ........................ 8,007,000 8,007,000
-----------
Short-Term Debt 4.8%
- ------------------------------------------------------------------------------------------------------------------------------
Chile 1.6%
Citibank Time Deposit linked to Chilean Peso, 9.5%, 11/24/97 ................... CLP 806,722,705 1,913,066
Citibank Time Deposit linked to Chilean Peso, 10.7%, 4/2/98 .................... CLP 1,140,700,000 2,704,350
-----------
4,617,416
-----------
Turkey 3.2%
J.P. Morgan & Co. Time Deposit linked to Turkish Lira, 79.5%, 12/30/97 ......... TRL 1,702,269,000,000 9,381,878
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Debt (Cost $14,477,275) 13,999,294
- ------------------------------------------------------------------------------------------------------------------------------
Debt Obligations 92.4%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 11.5%
Argentine Republic, Bonos de Consolidacion de Deudas Previsionales Pre 2
(BOCON), 5.65625%, 4/1/01 (c) ................................................ 10,578,092 9,787,547
Argentine Republic, Floating Rate Bond, Series L, LIBOR plus .8125% (6.688%),
3/31/05 (c) .................................................................. 3,600,000 3,127,500
Argentine Republic, Collateralized Par Bond, Series L, Step-up Coupon, 5.5%,
3/31/23 (c) .................................................................. 29,500,000 20,244,375
-----------
33,159,422
-----------
Brazil 9.6%
Federative Republic of Brazil, Debt Conversion Bond, Series L, LIBOR plus .875%
(6.75%), 4/15/12 ............................................................. 2,000,000 1,395,000
Federative Republic of Brazil, Debt Conversion Bond, Series L, LIBOR plus .875%
(6.75%), 4/15/12 (c) ......................................................... 11,000,000 7,672,500
Federative Republic of Brazil, Collateralized Discount Bond, Floating Rate Bond,
LIBOR plus .8125% (6.688%), 4/15/24 (c) ...................................... 24,500,000 18,742,500
-----------
27,810,000
-----------
Bulgaria 9.5%
Republic of Bulgaria, Interest Arrears Bond, LIBOR plus .8125%
(6.688%), 7/28/11 ............................................................ 19,750,000 13,035,000
Republic of Bulgaria, Floating Rate Interest Reduction Bond, "A", Step-up
Coupon, 2.25%, 7/28/12 ....................................................... 13,500,000 7,290,000
Republic of Bulgaria, Collateralized Discount Bond, Tranche A, LIBOR
plus .8125% (6.688%), 7/28/24 ................................................ 10,250,000 7,072,500
-----------
27,397,500
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Costa Rica 0.0%
Banco Central de Costa Rica Principal Bond, Series B, 6.25%, 5/21/15 ........... 200,000 144,000
-----------
Ecuador 0.1%
Republic of Ecuador, Collateralized Global Par Bond, Step-up Coupon,
3.5%, 2/28/25 ................................................................ 750,000 378,750
-----------
Jamaica 3.9%
Government of Jamaica, 9.625%, 7/2/02 .......................................... 12,000,000 11,220,000
-----------
Mexico 25.4%
AXA S.A. de C.V., 9%, 8/4/04 ................................................... 2,500,000 2,425,000
Petroleos Mexicanos, 9.5%, 9/15/27 ............................................. 11,750,000 10,751,250
United Mexican States, Collateralized Par Bond, (Detachable Oil Priced
Indexed Value Recovery Rights), 6.25%, Series A, 12/31/19 .................... 4,500,000 3,600,000
United Mexican States Collateralized Par Bond, (Detachable Oil Priced
Indexed Value Recovery Rights), 6.25%, Series B, 12/31/19 .................... 9,000,000 7,200,000
United Mexican States, Collateralized Par Bond, (Detachable Oil Priced
Indexed Value Recovery Rights), Series B, 6.25%, 12/31/19 .................... 10,250,000 8,200,000
United Mexican States, Collateralized Par Bond, (Detachable Oil Priced
Indexed Value Recovery Rights), Series A, 6.25%, 12/31/19 .................... 45,000,000 36,000,000
United Mexican States, Global Bond, 11.5%, 5/15/26 ............................. 4,750,000 5,165,626
-----------
73,341,876
-----------
Morocco 1.8%
Kingdom of Morocco, Restructuring and Consolidation Agreement, Tranche A,
Floating Rate Bond, LIBOR plus .8125% (6.813%), 1/1/09 ....................... 4,350,000 3,523,500
SNAP Limited, Morocco Repackaged Euro Note, Kingdom of Morocco, Morocco Loan
Tranche A, 11.5%, 1/29/09 .................................................... DEM 2,750,000 1,626,370
-----------
5,149,870
-----------
Panama 12.4%
Republic of Panama, Interest Reduction Bond, Step-up Coupon, 3.75%, 7/17/14 (c) 43,000,000 30,315,000
Republic of Panama, Past Due Interest Bond, LIBOR plus .8125% (6.688%), 4% with
2.5% Interest Capitalization, 7/17/16 ........................................ 5,423,579 3,954,362
Republic of Panama, 8.875%, 9/30/27 ............................................ 1,835,000 1,559,750
-----------
35,829,112
-----------
Peru 3.2%
Republic of Peru Floating Rate Interest Reduction Bond, 3.25%, 3/7/17 .......... 15,250,000 7,625,000
Republic of Peru Past Due Interest Bond, 4%, 3/7/17 ............................ 2,750,000 1,567,500
-----------
9,192,500
Russia 1.6%
Russian Federation Principal Loans (When issued), 12/15/20 (d) ................. 7,750,000 4,630,625
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
South Africa 1.7%
Republic of South Africa, 12%, 2/28/05 ......................................... ZAR 26,213,000 4,792,239
-----------
Venezuela 11.7%
Republic of Venezuela, Collateralized Front Loaded Interest Reduction Bond,
Series A, LIBOR plus .875% (6.75%), 3/31/07 .................................. 4,976,190 4,304,405
Republic of Venezuela, Collateralized Front Loaded Interest Reduction Bond,
Series B, LIBOR plus .875% (6.75%), 3/31/07 (c) .............................. 4,071,429 3,521,786
Republic of Venezuela, Debt Conversion Bond, Floating Rate Bond, Series DL, LIBOR
plus .8125%, (6.75%), 12/18/07 (c) ........................................... 21,750,000 18,868,125
Republic of Venezuela, Collateralized Discount Bond, Floating Rate Note,
Series B, LIBOR plus .8125% (6.8125%), 3/31/20 ............................... 1,750,000 1,548,750
Republic of Venezuela, Discount Floating Rate Note, Series A, LIBOR plus .8125%
(6.75%), 3/31/20 ............................................................. 500,000 442,500
Republic of Venezuela Global, 9.25%, 9/15/27 ................................... 6,283,000 5,246,305
-----------
33,931,871
- ------------------------------------------------------------------------------------------------------------------------------
Total Debt Obligations (Cost $284,398,089) 266,977,765
- ------------------------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks 0.0%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina -----------
Nortel Inversora "A" (ADR) (Telecommunication services) (Cost $75,709) (e) ..... 7,805 99,280
-----------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $306,958,073) (a) 289,083,339
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $308,499,006. At October 31,
1997, net unrealized depreciation for all securities based on tax cost was
$19,415,667. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $1,876,247 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$21,291,914.
(b) Principal amount is stated in U.S. dollars unless otherwise noted.
(c) At October 31, 1997, these securities, in whole or in part, have been
segregated to cover when-issued securities.
(d) When-issued or forward delivery securities.
(e) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $99,280 (.03% of net assets) and have
been noted in the investment portfolio as of October 31, 1997. Their
values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at October 31, 1997 aggregated $75,709.
Currency Abbreviations
CLP Chilean Peso
DEM Deutsche Mark
TRL Turkish Lira
ZAR South African Rands
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1997
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $306,958,073) ................ $ 289,083,339
Cash ................................................................. 936
Receivable for investments sold ...................................... 38,462,913
Receivable for when-issued and forward delivery securities ........... 139,229,819
Interest receivable .................................................. 5,361,480
Receivable for Fund shares sold ...................................... 295,962
Deferred organization expenses ....................................... 17,957
Unrealized appreciation on forward foreign currency exchange
contracts .......................................................... 106,286
Other assets ......................................................... 4,703
----------------
Total assets ......................................................... 472,563,395
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 7,626,461
Payable for when-issued and forward delivery securities .............. 138,777,139
Payable for Fund shares redeemed ..................................... 1,287,576
Unrealized depreciation on forward foreign currency exchange
contracts .......................................................... 608,778
Accrued management fee ............................................... 322,723
Other payables and accrued expenses .................................. 312,636
----------------
Total liabilities .................................................... 148,935,313
--------------------------------------------------------------------------------------------
Net assets, at market value $ 323,628,082
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................. 1,595,671
Unrealized depreciation on:
Investments ....................................................... (17,874,734)
Foreign currency related transactions ............................. (563,638)
Accumulated net realized gain ........................................ 39,692,157
Paid-in capital ...................................................... 300,778,626
--------------------------------------------------------------------------------------------
Net assets, at market value $ 323,628,082
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($323,628,082 / 26,485,043 shares of capital stock outstanding, ----------------
$.01 par value, 100,000,000 shares authorized) .................... $12.22
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Statement of Operations
year ended October 31, 1997
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Interest ............................................................. $ 33,888,113
Dividends ............................................................ 5,572
-----------------
...................................................................................... 33,893,685
Expenses:
Management fee ....................................................... 3,563,175
Services to shareholders ............................................. 919,850
Directors' fees and expenses ......................................... 50,106
Custodian and accounting fees ........................................ 461,155
Auditing ............................................................. 82,410
Reports to shareholders .............................................. 103,690
Legal ................................................................ 23,670
Registration fees .................................................... 32,242
Amortization of organization expense ................................. 15,309
Other ................................................................ 43,924
-----------------
5,295,531
---------------------------------------------------------------------------------------------
Net investment income 28,598,154
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .......................................................... 40,227,622
Foreign currency related transactions ................................ (735,683)
-----------------
39,491,939
Net unrealized depreciation during the period on:
Investments .......................................................... (31,603,230)
Foreign currency related transactions ................................ (396,696)
-----------------
(31,999,926)
---------------------------------------------------------------------------------------------
Net gain on investment transactions 7,492,013
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 36,090,167
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 28,598,154 $ 24,405,811
Net realized gain (loss) from investment transactions ....... 39,491,939 35,677,374
Net unrealized appreciation (depreciation) on investment
transactions during the period ........................... (31,999,926) 15,111,903
-------------- --------------
Net increase in net assets resulting from operations ........ 36,090,167 75,195,088
-------------- --------------
Distributions to shareholders from:
Net investment income ....................................... (29,393,701) (23,976,386)
-------------- --------------
Net realized gains .......................................... (27,924,210) --
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................... 316,479,213 265,528,712
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................ 49,926,221 20,013,011
Cost of shares redeemed ..................................... (326,157,592) (201,555,242)
-------------- --------------
Net increase in net assets from Fund share transactions ..... 40,247,842 83,986,481
-------------- --------------
Increase in net assets ...................................... 19,020,098 135,205,183
Net assets at beginning of period ........................... 304,607,984 169,402,801
Net assets at end of period (including undistributed net
investment income of $1,595,671 and $226,767, -------------- --------------
respectively) ............................................ $323,628,082 $304,607,984
-------------- --------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 23,465,219 16,511,433
-------------- --------------
Shares sold ................................................. 24,276,198 22,121,034
Shares issued to shareholders in reinvestment of
distributions ............................................ 3,969,587 1,684,014
Shares redeemed ............................................. (25,225,961) (16,851,262)
-------------- --------------
Net increase in Fund shares ................................. 3,019,824 6,953,786
-------------- --------------
Shares outstanding at end of period ......................... 26,485,043 23,465,219
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
December 31,
1993
(commencement
of operations) to
Years Ended October 31, October 31,
1997 (a) 1996 (a) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------
Net asset value, beginning of period ......................... $12.98 $10.26 $11.05 $12.00
----------------------------------------------
Income from investment operations:
Net investment income ........................................ 1.06 1.20 1.14 0.60
Net realized and unrealized gain (loss) on
investments ............................................... .46 2.71 (.82) (1.04)
----------------------------------------------
Total from investment operations ............................. 1.52 3.91 .32 (.44)
----------------------------------------------
Less distributions from:
Net investment income ..................................... (1.10) (1.19) (1.11) (.51)
Net realized gain on investment transactions .............. (1.18) -- -- --
----------------------------------------------
Total distributions .......................................... (2.28) (1.19) (1.11) (.51)
----------------------------------------------
----------------------------------------------
Net asset value, end of period ............................... $12.22 $12.98 $10.26 $11.05
- -------------------------------------------------------------------------------------------------------------
Total Return (%) (b) ......................................... 12.34 39.78 3.46 (3.54)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ....................... 324 305 169 95
Ratio of operating expenses, net to average daily
net assets (%) ............................................ 1.49 1.44 1.50 1.50*
Ratio of operating expense before expense
reductions, to average daily net assets (%) ............... 1.49 1.45 1.68 2.23*
Ratio of net investment income to average daily
net assets (%) ............................................ 8.03 10.05 12.83 9.17*
Portfolio turnover rate (%) .................................. 409.5 430.0(c) 302.2 180.6*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns are higher due to maintenance of Fund expenses.
(c) Economic and market conditions necessitated more active trading, resulting
in a higher portfolio turnover rate.
* Annualized
** Not annualized
16 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Emerging Markets Income Fund (the "Fund") is a non-diversified series of
Scudder Global Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities with original maturities greater
than sixty days are valued by pricing agents approved by the Officers of the
Fund, which 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 investments having 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.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at the
daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and certain
expenses at the daily rates of exchange prevailing on the respective dates
of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on interest
and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
17 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
When-issued and Forward Delivery Securities. The Fund may purchase securities on
a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time.
At the time the Fund makes the commitment to purchase a security on a
when-issued basis or forward delivery basis, it will record the transaction and
reflect the value of the security in determining its net asset value. During the
period between purchase and settlement, no payment is made by the Fund to the
issuer and no interest accrues to the Fund. At the time of settlement, the
market value of the security may be more or less than the purchase price. The
Fund will establish a segregated account in which it will maintain cash and/or
liquid debt securities equal in value to commitments for when-issued or forward
delivery securities.
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.
Distribution of Income and Gains. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to foreign denominated investments and certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
The Fund uses the specific identified cost method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
Other. Investment security transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are amortized/accreted for both tax and financial reporting purposes.
18 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
B. Purchases and Sales of Securities
For the year ended October 31, 1997, purchases and sales (including maturities)
of investment securities (excluding short-term investments) aggregated
$1,241,332,306 and $1,257,588,346, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the investments of
the Fund in accordance with its investment objectives, policies, and
restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 1.00% of the Fund's
average daily net assets, computed and accrued daily and payable monthly. For
the year ended October 31, 1997, the fee pursuant to the Management Agreement
amounted to $3,563,175, of which $322,723 is unpaid at October 31, 1997.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close by the end of the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1997, the amount charged to the Fund by SSC aggregated
$606,320, of which $52,262 is unpaid at October 31, 1997.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1997, the amount charged to the Fund by STC aggregated $33,703, of which $3,039
is unpaid at October 31, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1997, the amount charged to the Fund by SFAC aggregated $258,022, of
which $42,235 is unpaid at October 31, 1997.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At October 31, 1997, the
Special Servicing Agreement expense charged to the Fund amounted to $93,146.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1997, Directors' fees and expenses aggregated $50,106.
19 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
D. Credit Risk
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. Commitments
As of October 31, 1997, the Fund had entered into the following forward currency
exchange contracts resulting in net unrealized depreciation of $502,492.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Contracts to Deliver In Exchange For Settlement Date (U.S.$)
----------------------- ----------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
USD 13,775,000 DEM 23,844,525 11/17/97 60,791
ZAR 14,547,173 USD 3,065,790 11/6/97 45,495
DEM 27,678,465 USD 15,592,271 11/17/97 (468,164)
DEM 2,758,718 USD 1,554,085 11/17/97 (46,662)
DEM 8,584,898 USD 4,900,000 12/30/97 (93,952)
-------------
(502,492)
=============
</TABLE>
F. Lines of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated 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 25 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
20 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder Emerging Markets Income Fund, Inc. and to
the Shareholders of Scudder Emerging Markets Income Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Emerging Markets Income Fund including the investment portfolio, as of October
31, 1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the three years in the period
then ended and for the period December 31, 1993 (commencement of operations) to
October 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Emerging Markets Income Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
three years in the period then ended and for the period December 31, 1993
(commencement of operations) to October 31, 1994 in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 19, 1997
21 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Tax Information
The Fund paid distributions of $0.06 per share from net long-term capital gains
during its year ended October 31, 1997. Pursuant to section 852 of the Internal
Revenue Code, the Fund designates $716,250 as capital gain dividends for the
year ended October 31, 1997.
Officers and Directors
Daniel Pierce*
Chairman of the Board, Director and Vice President
Nicholas Bratt*
President
Paul Bancroft III
Director; Venture Capitalist and Consultant
Sheryle J. Bolton
Director; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin
Director; General Partner, Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; Consultant; Guest Scholar, Brookings Institute
William H. Luers
Director; President, The Metropolitan Museum of Art
Kathryn L. Quirk*
Director, Vice President and Assistant Secretary
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman Emeritus and Director, Kirby Corporation
Susan E. Gray*
Vice President
Jerard K. Hartman*
Vice President
Gary P. Johnson*
Vice President
Thomas W. Joseph*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
*Scudder, Stevens & Clark, Inc.
22 -- SCUDDER EMERGING MARKETS INCOME FUND
<PAGE>
Tax Information
The Fund paid distributions of $0.06 per share from net long-term capital gains
during its year ended October 31, 1997. Pursuant to section 852 of the Internal
Revenue Code, the Fund designates $716,250 as capital gain dividends for the
year ended October 31, 1997.
Officers and Directors
Daniel Pierce*
Chairman of the Board, Director
and Vice President
Nicholas Bratt*
President
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Chief Executive
Officer, Scientific Learning
Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; Consultant; Guest
Scholar, Brookings Institute
William H. Luers
Director; President, The
Metropolitan Museum of Art
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Robert W. Lear
Honorary Director;
Executive-in-Residence, Visiting
Professor, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Susan E. Gray*
Vice President
Jerard K. Hartman*
Vice President
Gary P. Johnson*
Vice President
Thomas W. Joseph*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
David S. Lee*
Vice President and Assistant
Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant
Treasurer
*Scudder, Stevens & Clark, Inc.
22 - Scudder Emerging Markets Income Fund
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder Emerging Markets
Income Fund (the "Fund") was held on October 27, 1997, at the offices of
Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street),
New York, New York 10154. At the Meeting, as adjourned and reconvened, the
following matters were voted upon by the stockholders (the resulting votes for
each matter are presented below.) With regard to certain proposals, it was
recommended that the Meeting be reconvened in order to provide stockholders with
an additional opportunity to return their proxies. The date of the reconvened
meeting at which the matters were decided is noted after the proposed matter.
1. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Paul Bancroft III 15,187,359 556,275
Sheryle J. Bolton 15,196,206 547,428
William T. Burgin 15,194,729 548,905
Thomas J. Devine 15,184,869 558,765
Keith R. Fox 15,196,072 547,562
William H. Gleysteen, Jr. 15,181,641 561,993
William H. Luers 15,195,388 548,246
Daniel Pierce 15,187,144 556,490
Kathryn L. Quirk 15,178,045 565,589
2. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
14,778,702 597,149 367,783 1,615,312
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise. (Approved on December 2, 1997.)
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
14,373,422 1,270,547 605,086 1,338,396
23 - Scudder Emerging Markets Income Fund
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 12,717,114 806,588 604,620 1,615,312
4.2 Borrowing 12,465,778 1,049,976 612,568 1,615,312
4.3 Senior securities 12,560,524 954,444 613,354 1,615,312
4.4 Purchase of physical 12,544,496 975,249 608,577 1,615,312
commodities
4.5 Concentration 12,675,222 853,949 599,151 1,615,312
4.6 Underwriting of securities 12,654,763 875,666 597,893 1,615,312
4.7 Investment in real estate 12,709,894 720,515 697,913 1,615,312
4.8 Lending 12,650,114 768,864 709,344 1,615,312
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
15,063,361 224,355 455,918
* 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.
24 - Scudder Emerging Markets Income Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
25 - Scudder Emerging Markets Income Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
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Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
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26 - Scudder Emerging Markets Income Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
27 - Scudder Emerging Markets Income Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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