Scudder
Global
Discovery Fund
Semiannual Report
April 30, 1998
For investors seeking above-average capital appreciation over the long term by
investing primarily in the equity securities of small companies located
throughout the world.
Scudder Global Discovery Fund is properly known as Global Discovery Fund.
The Fund is a diversified series of Global/International Fund, Inc.
SCUDDER (logo)
<PAGE>
Scudder Global Discovery Fund
- --------------------------------------------------------------------------------
Total Net Assets
of Scudder Shares
Date of Inception:9/10/91 as of 4/30/98: $400.2 million Ticker Symbol: SGSCX
- --------------------------------------------------------------------------------
o The Scudder Shares of Global Discovery Fund returned 20.29%, surpassing the
12.11% return of the Fund's benchmark, the unmanaged Salomon Brothers World
Equity Extended Market Index, for the six-month period ended April 30, 1998.
0 The Fund benefited significantly from its individual stock selection approach,
an emphasis on European holdings (one of the best performing regions over the
six months), underweightings in Asia, and minimal participation in Latin
America.
o Morningstar assigned the Scudder Shares of Global Discovery Fund a 4-star
rating for its risk-adjusted performance among 740 international funds as of
April 30, 1998.^1
Table of Contents
3 Letter from the Fund's Chairman 18 Financial Highlights
4 Performance Update 22 Notes to Financial Statements
5 Portfolio Summary 27 Report of Independent Accountants
6 Portfolio Management Discussion 28 Officers and Directors
10 Investment Portfolio 29 Investment Products and Services
15 Financial Statements 30 Scudder Solutions
^1 Morningstar's proprietary ratings reflect historical risk-adjusted
performance of Scudder Shares of Global Discovery Fund as of April 30,
1998. Ratings are subject to change monthly and are calculated from a
fund's three-, five-, and ten-year average annual returns in excess of
90-day Treasury bill returns with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. In an
investment category, the top 10% of funds receive 5 stars and the next 20%
receive 4 stars. In the international equity category, the Scudder Shares
received 5 stars for the three-year period and 4 stars for the five-year
period among 740 and 326 funds, respectively. The Scudder Shares were not
rated for the ten-year period because operations commenced on September 10,
1991. Past performance is no guarantee of future results.
2 - Scudder Global Discovery Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to report on the performance of the Scudder Shares of Global
Discovery Fund (the "Shares") for the six-month period ended April 30, 1998.
During this period, the Shares outperformed the Fund's benchmark by a
significant margin, helped primarily by good stock selection. The Fund's
stock-by-stock approach to investing in small- and mid-sized company stocks
around the globe resulted in an overweighting in several strong performing
markets in Europe and an underweighting in Asia and Latin America. Lead
portfolio manager Gerry Moran believes that the impending monetary union of 11
European countries at the beginning of 1999 is providing a number of attractive
growth opportunities, especially for many smaller companies. Gerry provides a
more detailed discussion of the market environment and the Fund's strategy
beginning on page 6.
At the beginning of 1998, your Fund's investment adviser changed its name
to Scudder Kemper Investments, Inc. from Scudder, Stevens & Clark, Inc.,
reflecting the acquisition of a majority interest in Scudder by Zurich Insurance
Company, and the combining of Scudder's business with that of Zurich Kemper
Investments, Inc. We think this combination is very positive, and will provide
your Fund's manager with expanded resources.
For those of you who are interested in new Scudder products, April 6th
marked the debut of our latest entrant in the growth and income category,
Scudder Real Estate Investment Fund. In addition, we will add another fund in
this category on July 17, Scudder Dividend & Growth Fund. For further
information on these new funds, please call 1-800-225-2470.
Thank you for your investment in Scudder Global Discovery Fund. If you have
any questions about your Fund, please call Scudder Investor Relations at the
number above, or visit our web site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Global Discovery Fund
3 - Scudder Global Discovery Fund
<PAGE>
PERFORMANCE UPDATE as of April 30, 1998
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
- ---------------------------------------------
Period Ended Growth of Average
4/30/98 $10,000 Cumulative Annual
- ---------------------------------------------
GLOBAL DISCOVERY FUND--SCUDDER SHARES
- ---------------------------------------------
1 Year $ 13,788 37.88% 37.88%
5 Year $ 20,972 109.72% 15.97%
Life of Fund* $ 24,644 146.44% 14.55%
- ---------------------------------------------
SALOMON BROTHERS WORLD EQUITY EMI
- ---------------------------------------------
1 Year $ 12,745 27.45% 27.45%
5 Year $ 18,217 82.17% 12.74%
Life of Fund* $ 21,052 110.52% 11.97%
- ---------------------------------------------
* The Fund commenced operations on September 10, 1991.
Index comparisons begin September 30, 1991.
- ----------------------------------------------------------------
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:
GLOBAL DISCOVERY FUND--SCUDDER SHARES
Year Amount
- ----------------------
9/91* $10,000
'92 $10,107
'93 $11,558
'94 $13,496
'95 $13,090
'96 $17,502
'97 $17,581
'98 $24,240
SALOMON BROTHERS WORLD EQUITY EMI
Year Amount
- ----------------------
9/91* $10,000
'92 $ 9,862
'93 $11,556
'94 $13,233
'95 $13,690
'96 $16,733
'97 $16,518
'98 $21,052
YEARLY PERIODS ENDED APRIL 30
The Salomon Brothers World Equity Extended Market Index is an unmanaged small
capitalization stock universe of 22 countries. Index returns assume dividends
reinvested net of withholding tax and, unlike Fund returns, do not reflect
any 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 APRIL 30
<TABLE>
<CAPTION>
1992* 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
NET ASSET VALUE... $ 12.31 $ 13.86 $ 15.87 $ 15.31 $ 19.74 $ 18.88 $ 23.55
INCOME DIVIDENDS.. $ .02 $ .07 $ .18 $ -- $ .20 $ .13 $ .64
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .12 $ .15 $ .08 $ .44 $ .86 $ 1.41
FUND TOTAL
RETURN (%)........ 2.76 14.35 16.77 -3.01 33.71 .45 37.88
INDEX TOTAL
RETURN (%)........ -3.04 15.66 11.86 9.74 18.71 -1.29 27.45
</TABLE>
Effective April 16, 1998, the Fund changed its name from Scudder Global
Discovery Fund to Global Discovery Fund and an additional three classes of
shares were offered. Existing shares of Global Discovery Fund outstanding on
that date were redesignated Scudder Shares of the Fund. The total return
information provided is for the Fund's Scudder Share class. Prior to March 6,
1996, the Fund was known as the Scudder Global Small Company Fund. All
performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased. If the Adviser had not maintained the Fund's
expenses, the total returns for the five year and life of Fund periods would
have been lower.
**Prior to April 30, 1997, the Morgan Stanley Capital International World Index
was used as a comparative index.
4 - Scudder Global Discovery Fund
<PAGE>
PORTFOLIO SUMMARY as of April 30, 1998
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 5% Cash Equivalents)
- ---------------------------------------------------------------------------
Europe 54%
U.S. & Canada 41%
Japan 3%
Latin America 2%
- --------------------------------------
100%
- --------------------------------------
The Fund overweighting in
Europe benefited from strong
market performance in
anticipation of potential benefits
from Economic and Monetary
Union at the beginning of 1999.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS
(Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------
Service Industries 21%
Financial 16%
Technology 14%
Health 10%
Consumer Staples 9%
Consumer Discretionary 7%
Communications 6%
Energy 4%
Media 4%
Other 9%
- --------------------------------------
100%
- --------------------------------------
The Fund's individual stock selection
approach tends to result in
diversification across multiple
industries and business lines.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(32% of Portfolio)
- --------------------------------------------------------------------------
1. BANK OF IRELAND PLC
Bank in Ireland
2. NETWORK APPLIANCE, INC.
Designer and manufacturer of network data
storage devices in the United States
3. SERCO GROUP PLC
Facilities management company in the United
Kingdom
4. JERONIMO MARTINS SA
Food producer and retailer in Portugal
5. BILLING CONCEPTS
Billing and information management services
in the United States
6. STERLING COMMERCE, INC.
Producer of electronic data interchange
products and services in the United States
7. SOLA INTERNATIONAL, INC.
Manufacturer of plastic eyeglass lenses in the
United States
8. PROVIDENT FINANCIAL PLC
Personal finance group in the United
Kingdom
9. MILLICOM INTERNATIONAL CELLULAR S.A.
Developer and operator of cellular telephone
networks in Luxembourg
10. VITESSE SEMICONDUCTOR CORP.
Manufacturers of digital integrated circuits
in the United States
The portfolio's major holdings
have been largely unchanged over
the six months, with some of the
strongest contributors to
performance coming from
long-term fund holdings -- such
as top holding Bank of Ireland.
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 Global Discovery Fund
<PAGE>
Portfolio Management Discussion
We asked Gerald J. Moran, lead portfolio manager of Scudder Global Discovery
Fund, to discuss the market environment and the Fund's current investment
strategy.
Q: How did the Shares perform for the six-month period ended April 30, 1998?
A: The Shares returned 20.29%, exceeding the 12.11% return of the Fund's
benchmark, the unmanaged Salomon Brothers World Equity Extended Market Index.
The Shares also surpassed the 18.85% return of the larger-cap MSCI World Index
for the same period. Relative to its peers, the Shares have continued to provide
top-notch competitive returns among similar global small-cap funds: for the six-
and 12-month periods the Shares ranked among the top 6% of 35 and 33 funds,
respectively, as of April 30, 1998.
Q: How do you explain the Shares' outperformance of both small- and large-cap
stock indices?
A: In short, three factors contributed to the Shares' strong outperformance:
good stock selection, an overweighting in Europe, and an underweighting in Asia
and Latin America. Avoiding the weak markets of Asia and Latin America were a
big help, but we emphasize individual stock selection, and as such, the Fund's
weightings are the result of our bottom-up approach, rather than a top-down
allocation strategy. Our stock picking has paid off, too, as 60% of the Shares'
returns were from the top ten holdings. Europe, of course, has been one of the
best performing areas in the world, as many countries continued to take steps to
prepare for European Monetary Union (EMU). Asia, on the other hand, remains
troubled. While we have seen some positive progress with several IMF
(International Monetary Fund) agreements, we believe the worst is not behind us
yet.
Q: How did you manage the portfolio over the period?
A: We continued to stick with our strategy of selecting well-run, rapidly
growing companies in diverse markets and industries. Over the six months, we did
not make major changes to the portfolio. In fact, many of our strongest
contributors to performance have been in the portfolio for many years, such as
Bank of Ireland and Germany's MLP (Marschollek Lautenschlaeger und Partner), a
leading independent life insurer. Our approach to selecting companies is one
that seeks diversification through exposure to multiple countries, industries,
and business lines. This tends to result in holdings with a relatively low
correlation to one another, thereby reducing overall portfolio volatility. Good
examples of this approach are three of the fund's largest holdings: Network
Appliance (U.S. technology), Jeronimo Martins (supermarkets in Portugal, Brazil,
and Poland), and Bank of Ireland. The performance of each of these stocks is
driven by different factors.
Q: Europe was the top performing region over the six-month period. What is
happening there?
A: The Fund's European holdings continued to comprise a substantial share of the
portfolio and have been important contributors to the Shares' outperformance.
Over the period, expectations for a single currency continued to build, and near
period end EMU member nations (11 of 15 Western European countries) agreed to
merge currencies into the new euro. Because the potential benefits are expected
to be substantial, many markets rose strongly.
6 - Scudder Global Discovery Fund
<PAGE>
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
Stock Market and Currency Performance
BAR CHART PERIOD:
Six Months Ended April 30, 1998
----------------------------------------------------------------------
% Change in % Change in
Stock Market Currency Relative
Index (Local) to U.S. Dollar
----------------------------------------------------------------------
Italy 54.5% -4.4%
Netherlands 25.1% -3.8%
Germany 32.4% -4.0%
France 40.5% -4.0%
U.K. 21.7% -0.2%
U.S. 21.1% 0.0%
Mexico 10.5% -1.1%
Brazil 30.0% -3.6%
Argentina 13.3% -0.1%
Taiwan 8.5% -6.2%
Japan -3.7% -9.4%
Hong Kong -8.0% -0.2%
Indonesia -9.0% -55.6%
Korea 9.7% -27.8%
Singapore -3.0% -0.7%
Philippines 14.6% -13.4%
Thailand -13.6% 4.4%
Malaysia -10.0% -9.7%
----------------------------------------------------------------------
Source: Datastream
European small-cap stocks led market returns over the six-month period while
Asian markets continued to struggle.
- ----------
Q: Not all the members of EMU are on exactly the same footing. Tell us about the
so-called "peripheral" countries.
A: Peripheral countries are those which historically have not met the strict
debt and deficit level requirements established for joining EMU. As a result,
these countries (including Ireland, Portugal, Spain, and Italy) traditionally
have had higher interest rates and unemployment, and proportionately larger
budget deficits than non-peripheral countries, such as Germany. In the past few
years, however, government policymakers in these countries have succeeded in
bringing their financial budgets into compliance. Joining a common currency
essentially requires equal interest rates among all EMU countries. The resulting
economic stimulation brought about by lower interest rates has been especially
favorable for stock markets in these countries.
Q: What are the risks?
A: Political instability is the primary risk, as illustrated by the recent
dissension over who should head the new central bank. Longer term, the
comfortable lifestyles and generous benefit programs that Europeans currently
enjoy may drag down the competitiveness of some companies. As the markets become
deregulated, companies that maintain these practices will become uncompetitive
in the local and global markets, which could result in higher unemployment. More
importantly, the economic situation will differ from country to country, but the
election of a common currency precludes a country from adopting a separate
7 - Scudder Global Discovery Fund
<PAGE>
monetary policy to address its specific needs. While there are always concerns
with changes of this magnitude, we believe the benefits far outweigh the risks.
Q: You believe that small European companies will have some advantages in this
environment. What is different about small companies in Europe?
A: We think that the experience of the United States will be replicated. Small
companies have been responsible for virtually all employment growth in the
United States over the last decade. We think that European governments will
increasingly take steps to foster an environment more favorable to
entrepreneurs, thereby encouraging the formation of small companies. We have
already seen some steps in this direction with the establishment of several new
stock exchanges including the Neuer Markt in Germany and the Nouveau Marche in
France.
Q: Ireland is one of the Fund's largest country positions among its European
holdings and was the largest European contributor to the Shares' performance.
What is special about Ireland?
A: The Fund's holdings in Ireland have been excellent performers, with
one-quarter of the Shares' gains over the six months coming from this tiny
country alone. Ireland has been a favorite among U.S. multinationals as a
springboard for selling into Europe. For example, over 60% of the software
imported into Europe comes through Ireland. It is still cost competitive versus
other countries in Europe and has directed its educational system to produce
high level employees that are sought by U.S. technology and pharmaceutical
companies. As English is clearly the global language of business, Ireland stands
out as the only English-speaking country in the EMU. Already a number of
companies such as Citibank have established significant operations there. As a
peripheral country, interest rates have already declined in Ireland, thereby
further stimulating the local economy. Fund holdings Bank of Ireland and Irish
Life have benefited significantly as a result. Finally, with a significantly
younger population than their European neighbors and without the heavy burden of
excessive promises made to an aging population, the stage has been set for
future productivity gains.
One theme that we have been capitalizing on throughout the portfolio is
Europeans' propensity for cellular phones. We hold ESAT Telecom, an Irish
cellular phone company that was among the Fund's top ten contributors to
performance over the six-month period. Europeans have a much higher comfort and
usage level of cellular phones than Americans. This theme carries over into
Portugal where we held shares of Telecel-Communicacoes Pessoais, which is also
benefiting from the growth of the telecommunications industry in Europe.
Q: What about the trend of aging baby boomers? Do you have any holdings that are
a play on this group?
A: We have several holdings that should benefit from the aging world population,
including shares of two vision care companies: Sola International and Wesley
Jessen VisionCare, both U.S. companies. Sola is an eyeglass lens manufacturer.
The company has a global platform for distribution and has developed more
expensive, high-tech trifocal lenses that are much lighter than traditional
8 - Scudder Global Discovery Fund
<PAGE>
lenses. We think as the population ages, many more people will need them, boding
well for expansion.
Wesley Jessen VisionCare makes soft contact lenses that are available in
different colors, allowing customers to change the color of their eyes. The
company also makes hard toric lenses for astigmatism and lenses that provide UV
protection. We think people are more willing to pay up for eyewear, and with
Wesley's leadership position in this field, we believe the company is well
positioned to benefit.
Continuing with the aging population theme, we also held shares in U.S.-based
Total Renal Care. As people live longer, there is going to be an increasing
demand for kidney dialysis treatments. Like Fresenius in Germany and Gambro in
Sweden, this business has gone global. Dialysis is an expensive service funded
by the government with 7-8% annual growth in demand because of the high growth
in the older age group. We like the business because a significant share of the
company's revenues are repeat revenues. Companies generating repeat or
"annuity-type" revenues help to mitigate investment risk.
Q: Millicom International Cellular was the only holding in the top ten that
didn't make a positive contribution to performance. Why?
A: The company announced a breakup that has not been well understood by
investors. Because the company has operations in Latin America, Europe, and
Asia, investors have been unsure about how to value the company's various
components. In addition, the stock has also been negatively affected by the
Asian crisis. We think the business is very attractive and that the stock was
significantly undervalued at the end of the period. As a result, we have held on
to this position.
Q: You have not mentioned any companies in the United Kingdom. Are there any
success stories there?
A: There are a number. Serco Group, which is one of our U.K. holdings, keeps
rolling along. The company is a leading example of the global trend toward
outsourcing. Serco has been taking over the operation of public water services,
maintenance of military areas, and -- in cooperation with Wackenhut of the
United States -- prisons. Serco Group has been successful exporting services
abroad, especially to Australia.
Q: Where do we go from here?
A: As an "equity culture" develops in Europe (traditionally investors have
preferred bonds and interest bearing investments offered by banks), we think
there will be tremendous opportunity for small company investing. Companies in
Germany especially have a considerable way to go to integrate equity investment
into the corporate financing system. We also think Eastern Europe presents some
attractive investment possibilities. With U.S. market valuations relatively high
and the economic cycle extended, we expect to find more attractive opportunities
abroad. Asia has some promising companies, but we believe the region is not out
of the woods yet, and risk exceeds opportunity at this juncture. As events
unfold in the United States, Europe, and Asia in the months ahead, we intend to
continue with our individual stock selection approach which has served the Fund
well to date.
9 - Scudder Global Discovery Fund
<PAGE>
Investment Portfolio as of April 30, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 5.2%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 4/30/98 at 5.5%,
to be repurchased at $20,923,196 on 5/1/98, collateralized by a $17,070,000 ------------
U.S. Treasury Bond, 7.875%, 2/15/21 (Cost $20,920,000) ................................ 20,920,000 20,920,000
------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.8%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 0.7%
Siderca SA (Steel producer) ............................................................. 1,201,163 2,895,223
------------
Australia 0.1%
CI Technologies Group Ltd. (Developer of process monitoring and industrial
automation software) .................................................................. 206,600 363,838
------------
Austria 1.1%
Schoeller Bleckmann Oilfield Equipment AG (Manufacturer of components for oil
and gas drilling equipment) ........................................................... 17,000 2,127,272
Topcall International AG (Manufacturer of electronic messaging systems) ................. 500 542,510
VAE Eisenbahnsysteme (Bearer) AG (Manufacturer of electronic railroad control
systems) .............................................................................. 18,000 1,734,923
------------
4,404,705
------------
Canada 0.6%
Canadian 88 Energy Corp.* (Oil and natural gas exploration and production) .............. 384,500 1,881,707
StressGen Biotechnologies Corp. "A"* (Developer of products for treatment of
cancer and certain infectious diseases) ............................................... 205,000 444,297
------------
2,326,004
------------
Chile 0.4%
Linea Aerea Nacional de Chile* (ADR) (Provider of domestic and international
passenger and cargo air services) ..................................................... 114,050 1,553,931
------------
Croatia 0.2%
Pliva D.D. (GDR) (Pharmaceutical company) ............................................... 45,600 825,360
------------
Czech Republic 1.8%
Central European Media Enterprises Ltd. "A"* (Owner and operator of national
and regional private commercial television stations in central Europe and
Germany) .............................................................................. 257,700 7,199,494
------------
Finland 0.1%
KCI Konecranes International "B" (Manufacturer of elevators) ............................ 9,500 453,973
------------
France 2.1%
Alliance et Gestion Commerciale (Manufacturer and renter of modular buildings) .......... 4,942 509,739
Altran Technologies, SA (Engineering and consulting services for aerospace,
telecommunications and electronics fields) ............................................ 33,516 5,347,171
Dassault Systemes SA (Computer aided design, manufacturing and engineering
software products) .................................................................... 42,691 1,676,106
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Global Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Leon de Bruxelles SA* (Operator of low cost family restaurants) ......................... 3,816 403,121
Penauille Polyservices SA (Industrial cleaning and security services) ................... 1,460 414,124
------------
8,350,261
------------
Germany 3.0%
Beta Systems Software AG* (Developer of processing automation software) ................. 26,653 2,103,598
Kamps AG* (Producer and distributor of baked goods) ..................................... 17,256 485,719
Marschollek Lautenschlaeger und Partner AG (pfd.) (Leading independent life
insurance company) .................................................................... 19,100 7,446,881
Pfeifer Vacuum Technology AG (ADR)* (Manufacturer of various pumps and vacuum
systems) .............................................................................. 30,800 2,182,950
------------
12,219,148
------------
Hungary 1.2%
Richter Gedeon Rt (Pharmaceutical company) .............................................. 26,200 2,806,721
Richter Gedeon Rt (GDR) ................................................................. 19,800 2,108,700
------------
4,915,421
------------
Ireland 10.1%
Bank of Ireland PLC (Bank) .............................................................. 873,768 17,723,074
ESAT Telecom Group PLC* (ADR) (Provider of telecommunication services in the
Republic of Ireland) .................................................................. 111,800 3,577,600
Irish Continental Group PLC (Transport of passengers, freight and containers
between Ireland, the U.K. and the continent) .......................................... 184,505 3,315,067
Irish Life PLC (Provider of life and disability insurance and pensions) ................. 814,550 7,557,766
Irish Permanent PLC (Retail financial services group) ................................... 182,152 2,454,593
Jury's Hotel Group PLC (Hotel operator) ................................................. 501,255 4,362,392
Ryan Hotels PLC (Owner and operator of hotel chain) ..................................... 1,213,200 1,668,909
------------
40,659,401
------------
Israel 0.4%
ESC Medical Systems Ltd.* (Producer of devices for non-invasive treatment of
benign vascular lesions) .............................................................. 44,100 1,433,250
------------
Italy 4.4%
Aeroporti di Roma SpA (Management of Fiumicino and Ciampino airports) ................... 425,500 5,957,264
Bulgari SpA (Manufacturer and retailer of fine jewelry, luxury watches and
perfumes) ............................................................................. 444,800 2,714,477
Saes Getters SpA di Risparmio (Manufacturer of getters, refined chemicals used
in cathode-ray tubes and other monitors) .............................................. 208,300 2,487,112
Safilo SpA (Manufacturer of frames for glasses) ......................................... 66,400 2,275,372
Saipem SpA (International contractor in oil and gas exploration and drilling,
construction of refineries and pipelines) ............................................. 748,000 4,303,001
------------
17,737,226
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Global Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Japan 2.9%
Riso Kagaku Corp. (Manufacturer of copying machines) .................................... 50,900 2,655,686
Shohkoh Fund & Co., Ltd. (Finance company for small- and medium-sized firms) ............ 28,000 8,900,634
------------
11,556,320
------------
Luxembourg 2.3%
Millicom International Cellular SA* (Developer and operator of cellular
telephone networks) ................................................................... 239,000 9,350,875
------------
Mexico 0.4%
TV Azteca SA de C.V. (ADR) (Owner and operator of national television networks) ......... 92,700 1,726,538
------------
Netherlands 2.7%
De Telegraaf Holding NV (Leading publisher of newspapers, magazines and books) .......... 69,600 1,615,880
IHC Caland NV (Dredging and offshore services) .......................................... 129,000 7,509,727
Koninklijke Nedlloyd Groep NV (Container shipping and transportation) ................... 71,400 1,714,222
------------
10,839,829
------------
Philippines 0.2%
International Container Terminal Services, Inc.* (Containerized cargo handling
firm) ................................................................................. 4,909,800 648,118
------------
Poland 0.8%
Debica SA "A" (Tire manufacturer) ....................................................... 74,100 1,887,134
Pioneer Poland Fund (Closed-end investment company) (b) (c) ............................. 3 1,361,061
------------
3,248,195
------------
Portugal 5.4%
Jeronimo Martins SA (Food producer and retailer) ........................................ 293,675 13,732,085
Telecel-Comunicacoes Pessoais, SA* (Cellular communication services) .................... 44,366 7,960,407
------------
21,692,492
------------
Spain 1.1%
Aldeasa SA (Operator of airport duty-free shops) ........................................ 49,500 1,787,590
Tele Pizza, SA* (Operator of fast-food pizza restaurants in Spain, Portugal,
Poland, Mexico and Chile) ............................................................. 19,200 2,760,867
------------
4,548,457
------------
Sweden 1.4%
OM Gruppen AB (Free) (Operator of financial exchanges and clearing organizations) ....... 230,400 4,597,882
TV 4 AB (Broadcaster of news, sports, documentaries, entertainment; program
producer) ............................................................................. 44,200 856,368
------------
5,454,250
------------
Switzerland 2.7%
Kuoni Reisen AG (Registered) (Travel agency) ............................................ 1,670 8,959,347
Phoenix Mecano AG (Bearer) (Manufacturer of housings and components for
computers) ............................................................................ 3,537 1,897,557
------------
10,856,904
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Global Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
United Kingdom 10.4%
ARM Holdings PLC* (Producer of RISC microprocessors, technology and software) ........... 30,600 424,832
Aegis Group PLC (Leading independent media services group) .............................. 532,187 818,974
Avis Europe PLC (Car rental services) ................................................... 109,400 422,715
Corporate Services Group PLC (Employment services and training) ......................... 1,372,500 5,532,830
Expro International Group PLC (Provider of oilfield services) ........................... 438,900 3,722,129
Games Workshop Group PLC (Manufacturer of table top war game systems and
miniatures) ........................................................................... 163,000 2,194,833
Provident Financial PLC (Personal finance group) ........................................ 561,192 9,377,669
RM PLC (Information technology solutions for educational markets) ....................... 135,500 3,003,123
Regent Inns PLC (Owner and operator of hotels and restaurants) .......................... 340,900 2,166,848
Serco Group PLC (Facilities management company) ......................................... 703,700 13,924,841
------------
41,588,794
------------
United States 38.3%
Access Health, Inc.* (Personal health management services) .............................. 48,500 1,636,875
Aptargroup, Inc. (Manufacturer of packaging equipment components) ....................... 59,100 3,693,750
Axogen Ltd. (ADR)* (Future development of therapeutic products for treatment of
neurological disorders) ............................................................... 106,100 6,100,750
BE Aerospace, Inc.* (Airline audio/video control systems) ............................... 84,400 2,632,225
Barrett Resources Corp.* (Oil and gas exploration and production) ....................... 64,600 2,398,275
Benton Oil & Gas Co.* (Oil and gas exploration, development and production) ............. 200,000 2,437,500
Billing Concepts Corp.* (Billing and information management services) ................... 481,000 13,468,000
Black Box Corp.* (Manufacturer of wide area networking products, direct
marketing of computer products) ....................................................... 23,300 774,725
Cintas Corp. (Uniform rentals) .......................................................... 62,200 2,962,275
Computer Motion, Inc.* (Develops and markets proprietary robotic and
computerized surgical systems) ........................................................ 4,700 60,513
Concentra Managed Care, Inc.* (Provider of integrated nonrisk-bearing workers'
compensation managed care) ............................................................ 148,100 4,609,613
Dallas Semiconductor Corp. (Manufacturer of silicon integrated circuits and
subsystems) ........................................................................... 36,400 1,403,675
Eagle USA Airfreight, Inc.* (Airfreight forwarding services) ............................ 14,500 476,688
Fiserv Inc.* (Data processing services) ................................................. 120,775 7,895,666
G & K Services, Inc. "A" (Uniform rentals) .............................................. 52,100 2,097,025
General Communication, Inc. "A"* (Telecommunication services) ........................... 332,200 2,346,163
Harveys Casino Resorts (Owner and operator of hotel/casino properties) .................. 115,300 3,127,513
Healthcare Recoveries, Inc.* (Provider of recovery services for private
healthcare payors) .................................................................... 17,300 413,038
IDX Systems Corp.* (Provider of health care information systems to physician
groups and academic medical centers) .................................................. 109,500 4,770,094
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Global Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JLK Direct Distribution, Inc. "A"* (Manufacturer of metalworking tools) ................. 20,700 677,925
MBIA, Inc. (Insurer of municipal bonds) ................................................. 43,852 3,272,456
Network Appliance, Inc.* (Designer and manufacturer of network data storage
devices) .............................................................................. 418,800 15,102,969
North Fork Bancorporation, Inc. (Commercial and savings bank holding company) ........... 10,600 393,525
Samsonite Corp.* (Luggage manufacturer) ................................................. 85,200 2,449,500
Security Dynamics Technologies, Inc.* (Designer, developer and supporter of a
family of security products used to manage access to computer-based
information resources) ................................................................ 53,100 1,281,038
Sepracor, Inc.* (Developer of enhanced forms of existing pharmaceuticals) ............... 64,700 2,992,375
Sola International, Inc.* (Manufacturer of plastic eyeglass lenses) ..................... 290,200 12,333,500
Sterling Commerce, Inc.* (Producer of electronic data interchange products and
services) ............................................................................. 307,934 13,106,441
Suiza Foods Corp.* (Food distributor) ................................................... 71,400 4,230,450
Symbol Technologies, Inc. (Manufacturer of bar code laser scanners) ..................... 111,600 4,296,600
TCI Satellite Entertainment, Inc.* (Television programming via digital satellite) ....... 568,500 4,476,938
Tiffany & Co. (Retailer of jewelry and gift items) ...................................... 125,400 5,705,700
Total Renal Care Holdings, Inc.* (Dialysis services for treatment of chronic
kidney failure) ....................................................................... 128,499 4,256,529
Tower Realty Trust, Inc. (REIT) (Developer and manager of office properties) ............ 55,200 1,304,100
Vantive Corp.* (Provider of customer interaction applications software) ................. 12,900 412,800
Vincam Group, Inc.* (Provider of solutions to complexities and costs of
employment and personnel) ............................................................. 30,000 813,750
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) .............. 159,500 9,201,156
Wackenhut Corrections Corp.* (Manager of privatized correctional and detention
facilities) ........................................................................... 89,800 2,346,025
Wesley Jessen VisionCare, Inc.* (Manufacturer of soft contact lenses) ................... 65,300 2,016,138
------------
153,974,278
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $224,700,292) 380,822,285
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $245,620,292) (a) 401,742,285
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $251,363,819. At April 30,
1998, net unrealized appreciation for all securities based on tax cost was
$150,378,466. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $157,851,623 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$7,473,157.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $1,361,061 (.34% of net assets). Their
values have been estimated by the Valuation Committee 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 April 30, 1998 aggregated $1,477,500.
(c) Market value and cost reflect full payment. The remaining installments
which total $369,375 will be payable upon thirty days prior notice from
Pioneering Management Limited.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
14 - Scudder Global Discovery Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 1998
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $245,620,292) ................ $ 401,742,285
Cash ................................................................. 441
Receivable for investments sold ...................................... 90,510
Receivable for Fund shares sold ...................................... 148,808
Dividends and interest receivable .................................... 710,260
Foreign taxes recoverable ............................................ 44,418
Other assets ......................................................... 3,964
----------------
Total assets ......................................................... 402,740,686
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 724,436
Accrued management fee ............................................... 363,935
Other payables and accrued expenses .................................. 611,758
----------------
Total liabilities .................................................... 1,700,129
-------------------------------------------------------------------------------------------
Net assets, at market value $ 401,040,557
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ......... (10,802,086)
Unrealized appreciation (depreciation) on:
Investments ....................................................... 156,121,993
Foreign currency related transactions ............................. 3,494
Accumulated net realized gain (loss) ................................. (1,111,741)
Paid-in capital ...................................................... 256,828,897
-------------------------------------------------------------------------------------------
Net assets, at market value $ 401,040,557
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Scudder Shares
Net asset value, offering and redemption price per share
($400,233,233 / 16,997,442 shares of capital stock ----------------
outstanding) ....................................................... $23.55
----------------
Class A Shares
Net asset value and redemption price per share ($633,232 / ----------------
26,908 shares of capital stock outstanding) ........................ $23.53
----------------
Maximum offering price per share (net asset value, plus 6.10% ----------------
of net asset value or 5.75% of offering price) ..................... $24.97
----------------
Class B Shares
Net asset value and redemption price (subject to contingent
deferred sales charge) per share ($154,157 / 6,547 shares of ----------------
capital stock outstanding) ......................................... $23.55
----------------
Class C Shares
Net asset value and redemption price (subject to contingent
deferred sales charge) per share ($19,935 / 847 shares of ----------------
capital stock outstanding) ......................................... $23.54
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Global Discovery Fund
<PAGE>
Statement of Operations
six months ended April 30, 1998
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $87,798) ................. $ 1,396,302
Interest ............................................................. 611,742
----------------
2,008,044
Expenses:
Management fee ....................................................... 1,944,544
Services to shareholders ............................................. 546,020
Custodian and accounting fees ........................................ 221,838
Directors' fees and expenses ......................................... 21,047
Reports to shareholders .............................................. 53,326
Auditing ............................................................. 40,959
Legal ................................................................ 10,557
Registration fees .................................................... 21,484
Other ................................................................ 21,078
----------------
2,880,853
-------------------------------------------------------------------------------------------
Net investment loss (872,809)
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .......................................................... (1,078,184)
Foreign currency related transactions ................................ 13,365
----------------
(1,064,819)
Net unrealized appreciation (depreciation) during the period on:
Investments .......................................................... 68,620,790
Foreign currency related transactions ................................ 16,649
----------------
68,637,439
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 67,572,620
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 66,699,811
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Global Discovery Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
April 30, October 31,
Increase (Decrease) in Net Assets 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss .................................................. $ (872,809) $ (2,090,766)
Net realized gain (loss) from investment transactions ................ (1,064,819) 26,874,290
Net unrealized appreciation (depreciation) on
investment transactions during the period .......................... 68,637,439 12,247,359
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ......................................................... 66,699,811 37,030,883
---------------- ----------------
Distributions to shareholders from:
Net investment income (Scudder Shares) ............................ (9,815,437) (2,252,537)
---------------- ----------------
Net realized gains (Scudder Shares) ............................... (21,794,909) (14,901,393)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ............................................ 92,475,119 129,503,033
Net asset value of shares issued to shareholders in
reinvestment of distributions ...................................... 29,399,080 16,335,810
Cost of shares redeemed .............................................. (105,045,061) (167,423,822)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ....................................................... 16,829,138 (21,584,979)
---------------- ----------------
Increase (decrease) in net assets .................................... 51,918,603 (1,708,026)
Net assets at beginning of period .................................... 349,121,954 350,829,980
Net assets at end of period (including accumulated
distributions in excess of net investment income of ---------------- ----------------
$10,802,086 and $113,840, respectively) ............................ $ 401,040,557 $ 349,121,954
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Global Discovery 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.
Scudder Shares (b)
<TABLE>
<CAPTION>
For the Period
September 10,
1991
Six Months (commencement
Ended Years Ended October 31, of operations)
April 30, to October 31,
1998(a)(b) 1997(a) 1996(a) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period ........................ $21.64 $20.45 $17.54 $16.27 $16.14 $12.05 $11.92 $12.00
Income from investment ----------------------------------------------------------------------------------------
operations:
Net investment income (loss) ..... (.05) (.12) (.04) (.03) (.02) .04 .07 .01
Net realized and unrealized
gain (loss) on investment
transactions .................. 4.01 2.30 3.59 1.38 .48 4.24 .08 (.09)
----------------------------------------------------------------------------------------
Total from investment operations.. 3.96 2.18 3.55 1.35 .46 4.28 .15 (.08)
Less distributions: ----------------------------------------------------------------------------------------
From net investment income ....... (.64) (.13) (.20) -- -- (.07) (.02) --
In excess of net investment
income ........................ -- -- -- -- (.18) -- -- --
From net realized gains on
investment transactions ....... (1.41) (.86) (.44) (.08) (.15) (.12) -- --
----------------------------------------------------------------------------------------
Total distributions .............. (2.05) (.99) (.64) (.08) (.33) (.19) (.02) --
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net asset value, end of period ... $23.55 $21.64 $20.45 $17.54 $16.27 $16.14 $12.05 $11.92
----------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................. 20.29** 11.14 20.97 8.32 2.80(c) 36.04(c) 1.26(c) (.67)(c)**
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................. 400 349 351 255 256 198 55 9
Ratio of operating expenses,
net to average daily net
assets (%) .................... 1.63* 1.63 1.60 1.69 1.70 1.50 1.50 1.50*
Ratio of operating expenses
before expense reductions, to
average daily net assets (%)... 1.63* 1.63 1.60 1.69 1.76 2.01 2.53 15.34*
Ratio of net investment income
(loss) to average daily net
assets (%) .................... (.49)* (.58) (.20) (.12) (.28) .53 .78 2.47*
Portfolio turnover rate (%) ...... 36.2* 60.5 63.0 43.7 45.8 54.6 23.4 --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On April 16, 1998 existing shares of the Fund were designated as Scudder
Shares and are generally not available to new investors.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
18 - Scudder Global Discovery Fund
<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 A
<TABLE>
<CAPTION>
For the Period
April 16, 1998
(commencement
of sale of
Class A shares)
to April 30,
1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
-------------------
Net asset value, beginning of period ............................................................... $23.98
Income from investment operations: -------------------
Net investment income (loss) ....................................................................... .00
Net realized and unrealized gain (loss) on investment transactions ................................. (.45)
-------------------
Total from investment operations ................................................................... (.45)
-------------------
-------------------
Net asset value, end of period ..................................................................... $23.53
-------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................................... (1.88)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................................. .6
Ratio of operating expenses, net to average daily net assets (%) ................................... 1.95*
Ratio of net investment income (loss) to average daily net assets (%) .............................. .92*
Portfolio turnover rate (%) ........................................................................ 36.2*
</TABLE>
(a) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
19 - Scudder Global Discovery Fund
<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 B
<TABLE>
<CAPTION>
For the Period
April 16, 1998
(commencement
of sale of
Class B shares)
to April 30,
1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
-------------------
Net asset value, beginning of period ............................................................... $23.98
Income from investment operations: -------------------
Net investment income (loss) ....................................................................... .00
Net realized and unrealized gain (loss) on investment transactions ................................. (.43)
-------------------
Total from investment operations ................................................................... (.43)
-------------------
-------------------
Net asset value, end of period ..................................................................... $23.55
-------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................................... (1.79)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................................. .2
Ratio of operating expenses, net to average daily net assets (%) ................................... 2.83*
Ratio of net investment income (loss) to average daily net assets (%) .............................. .04*
Portfolio turnover rate (%) ........................................................................ 36.2*
</TABLE>
(a) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
20 - Scudder Global Discovery Fund
<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 C
<TABLE>
<CAPTION>
For the Period
April 16, 1998
(commencement
of sale of
Class C shares)
to April 30,
1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
-------------------
Net asset value, beginning of period ............................................................... $23.98
Income from investment operations: -------------------
Net investment income (loss) ....................................................................... .00
Net realized and unrealized gain (loss) on investment transactions ................................. (.44)
-------------------
Total from investment operations ................................................................... (.44)
-------------------
-------------------
Net asset value, end of period ..................................................................... $23.54
-------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................................................................... (1.83)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................................. .02
Ratio of operating expenses, net to average daily net assets (%) ................................... 2.80*
Ratio of net investment income (loss) to average daily net assets (%) .............................. .07*
Portfolio turnover rate (%) ........................................................................ 36.2*
</TABLE>
(a) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
21 - Scudder Global Discovery Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Global Discovery Fund (the "Fund") is a diversified series of
Global/International Fund, Inc. (formally known as Scudder Global Fund, Inc.), a
Maryland corporation registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
Effective April 16, 1998, the Fund changed its name from Scudder Global
Discovery Fund to Global Discovery Fund and an additional three classes of
shares were offered, namely Classes A, B and C. Existing shares of Global
Discovery Fund outstanding on that date were redesignated Scudder Shares. Class
A shares are sold to investors subject to an initial sales charge. Class B
shares are sold without an initial sales charge but are subject to higher
ongoing expenses than Class A and Scudder Shares and a contingent deferred sales
charge payable upon certain redemptions. Class B shares automatically convert to
Class A shares six years after issuance. Class C shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A and
Scudder Shares and a contingent deferred sales charge payable upon certain
redemptions within one year of purchase. Class C shares do not convert into
another class. Scudder Shares are generally not available to new investors and
are not subject to initial or contingent deferred sales charges. Although
shareholders of different classes of the Fund have an interest in the same
portfolio of assets, shareholders of different classes may bear different
expenses in connection with different methods of distribution. Differences in
class expenses will result in the payment of different per share income
dividends by class. All shares of the Fund have equal rights with respect to
voting, dividends and assets, subject to class specific preferences.
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 securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq Stock Market
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on such system. If there are no such sales, the value is the most
recent bid quotation. Securities which are not quoted on the Nasdaq System but
are traded in another over-the-counter market are valued at the most recent sale
price on such market. If no sale occurred, the security is then valued at the
calculated mean between the most recent bid and asked quotations. If there are
no such bid and asked quotations, the most recent bid quotation shall be used.
Portfolio debt securities other than money market instruments with an original
maturity over sixty days are valued by pricing agents approved by the officers
of the 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 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.
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
22 - Scudder Global Discovery Fund
<PAGE>
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, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
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.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized 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.
Distribution of Income and Gains. Distributions of net investment income are
made annually. 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 annually. 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 primarily relate to investments in forward contracts, passive
foreign investment companies, and certain securities sold at a loss. As a
result, net
23 - Scudder Global Discovery Fund
<PAGE>
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Other. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. Capital Share Transactions
The following table summarizes capital share and dollar activity in the Fund:
<TABLE>
<CAPTION>
Six months ended Year ended
April 30, 1998 October 31, 1997
---------------------------------- ---------------------------------
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Shares sold
Class A ............................................ 47,553 $ 1,121,086 -- $ --
Class B ............................................ 6,547 152,537 -- --
Class C ............................................ 847 20,075 -- --
Scudder Shares ..................................... 4,269,052 91,181,421 6,176,506 129,503,033
-------------- -------------- -------------- --------------
4,323,999 92,475,119 6,176,506 129,503,033
-------------- -------------- -------------- --------------
Shares issued to shareholders in reinvestment of
distributions
Class A ............................................ -- $ -- -- $ --
Class B ............................................ -- -- -- --
Class C ............................................ -- -- -- --
Scudder Shares ..................................... 1,514,636 29,399,080 829,650 16,335,810
-------------- -------------- -------------- --------------
1,514,636 29,399,080 829,650 16,335,810
-------------- -------------- -------------- --------------
Shares redeemed
Class A ............................................ (20,645) $ (499,608) -- $ --
Class B ............................................ -- -- -- --
Class C ............................................ -- -- -- --
Scudder Shares ..................................... (4,921,154) (104,545,453) (8,023,612) (167,423,822)
-------------- -------------- -------------- --------------
(4,941,799) (105,045,061) (8,023,612) (167,423,822)
-------------- -------------- -------------- --------------
Net increase (decrease)
Class A ............................................ 26,908 $ 621,478 -- $ --
Class B ............................................ 6,547 152,537 -- --
Class C ............................................ 847 20,075 -- --
Scudder Shares ..................................... 862,534 16,035,048 (1,017,456) (21,584,979)
-------------- -------------- -------------- --------------
896,836 16,829,138 (1,017,456) (21,584,979)
-------------- -------------- -------------- --------------
</TABLE>
24 - Scudder Global Discovery Fund
<PAGE>
C. Purchases and Sales of Securities
During the six months ended April 30, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $61,550,436 and
$82,003,977, respectively.
D. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Directors and by the Fund's Shareholders. The
Management Agreement, which was effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, the Fund has agreed to pay
to the Adviser a fee equal to an annual rate of 1.10% of the Fund's average
daily net assets, computed and accrued daily and payable monthly. As manager of
the assets of the Fund, 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 Management Agreement. For the six months ended
April 30, 1998, the fee pursuant to these agreements amounted to $1,944,544, of
which $357,191 is unpaid at April 30, 1998.
Kemper Distributors, Inc. ("KDI"), a subsidiary of the Adviser, is the principal
underwriter for Classes A, B and C. Underwriting commissions paid in connection
with the distribution of Class A shares for the period beginning April 16, 1998
through April 30, 1998 aggregated $613, of which $6 was retained by KDI and $607
was paid to all other firms including affiliates. For services under the
distribution services agreement, KDI receives a fee of .75% of average daily net
assets of Classes B and C. Pursuant to the agreement, KDI enters into related
selling group agreements with various firms at various rates for sales of Class
B and C shares. In addition, KDI receives any contingent deferred sales charge
(CDSC) from redemptions of Classes B and C shares. Distribution fees and
commissions paid to KDI in connection with the sale of Classes B and C shares,
and the CDSC received in connection with the redemption of such shares for the
period beginning April 16, 1998 through April 30, 1998 aggregated $14, all of
which is unpaid.
KDI provides information and administrative services to Classes A, B and C
shareholders at an annual rate of up to .25% of average daily net assets for
each such class. KDI in turn has various agreements with financial services
firms that provide these services and pays these firms based on assets of
shareholder accounts the firms service. For the period beginning April 16, 1998
through April 30, 1998, the amount of administrative services fees aggregated
$25, all of which is unpaid.
Kemper Service Company ("KSC"), an affiliate of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Fund's Classes A, B and C
Shares. For the period beginning April 16, 1998 through April 30, 1998, the
amount charged
25 - Scudder Global Discovery Fund
<PAGE>
to the relevant classes by KSC aggregated $155, all of which is unpaid. Scudder
Service Corporation ("SSC"), a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Scudder Shares. Included
in services to shareholders is $372,813 charged to the Scudder Shares by SSC for
the six months ended April 30, 1998, of which $63,332 is unpaid at April 30,
1998.
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 Scudder Shares. For the six months ended
April 30, 1998, the amount charged to the Scudder Shares by STC aggregated
$97,610, of which $16,553 is unpaid at April 30, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 1998, the amount charged to the Fund by SFAC aggregated
$109,104, of which $25,761 is unpaid at April 30, 1998.
The Fund pays each Director not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 1998, Directors' fees and expenses aggregated $21,047.
E. 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 33 1/3 percent of its net assets under the agreement. In addition,
the Fund also maintains an uncommitted line of credit.
26 - Scudder Global Discovery Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Global/International Fund, Inc. and to the
Shareholders of Global Discovery Fund:
We have audited the accompanying statement of assets and liabilities of Global
Discovery Fund (formerly Scudder Global Discovery Fund) including the investment
portfolio, as of April 30, 1998, and the related statement of operations for the
six months then ended, the statements of changes in net assets for the six
months then ended and for the year ended October 31, 1997, and the financial
highlights for each of the periods indicated therein. 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 April
30, 1998 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 Global
Discovery Fund as of April 30, 1998, the results of its operations for the six
months then ended, the changes in its net assets for the six months then ended
and for the year ended October 31, 1997, and the financial highlights for each
of the periods indicated therein in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 18, 1998
27 - Scudder Global Discovery Fund
<PAGE>
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
Keith R. Fox
Director; President, Exeter
Capital Management
Corporation
William H. Gleysteen, Jr.
Director; Consultant
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. Dahl*
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
Thomas F. McDonough*
Vice President, Secretary and Treasurer
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder Global Discovery 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
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. +++ +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered
by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
29 - Scudder Global Discovery Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- 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 previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder Global Discovery Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
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
</TABLE>
31 - Scudder Global Discovery Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich 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 Group. The Zurich 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
[LOGO]
<PAGE>
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 1998
[STYLE BOX]
LONG-TERM INVESTING IN A SHORT-TERM WORLD (SM)
[LOGO]
Seeks above-average capital appreciation over the long-term by investing
primarily in equity securities of small companies located throughout the world.
Kemper Global Discovery Fund is properly known as Global Discovery Fund.
KEMPER
GLOBAL DISCOVERY FUND
"...three factors contributed to the shares' strong
outperformance, good stock selection, an
overweighting in Europe, and an underweighting
in Asia and Latin America. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
ABOUT YOUR REPORT
KEMPER GLOBAL DISCOVERY FUND COMMENCED OFFERING CLASS A, B AND C SHARES (THE
KEMPER CLASSES) AS OF APRIL 16, 1998. SHARES OF THE FUND OUTSTANDING AS OF APRIL
16, 1998 WERE REDESIGNATED SCUDDER SHARES (CLASS S SHARES). SINCE THIS REPORTING
PERIOD ENDS APRIL 30, 1998, THE PERFORMANCE INFORMATION REFERS ONLY TO THE CLASS
S SHARES WHICH UNTIL APRIL 16, 1998 WERE THE ONLY OUTSTANDING SHARES OF THE FUND
AND HAVE AN INCEPTION DATE OF SEPTEMBER 10, 1991. CLASS S SHARES ARE GENERALLY
NOT AVAILABLE TO NEW INVESTORS.
GLOBAL DISCOVERY FUND TOTAL RETURN
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1998
[BAR GRAPH]
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
4/30/98 10/31/97
......................................................
<S> <C> <C> <C> <C>
GLOBAL DISCOVERY FUND $23.55 $21.64
......................................................
</TABLE>
Returns are historical for Global Discovery Fund. Class S shares (unlike Class
A, B and C shares) do not have any sales charges, 12b-1 fees, or other class
specific expenses like Administrative and Transfer Agent expenses. Returns and
net asset value fluctuate. Class S shares are redeemable at current net asset
value, which may be more or less than original cost. Investment in foreign
securities presents special risk considerations including fluctuating currency
exchange rates, government regulation and differences in liquidity that may
increase the volatility of your investment.
GLOBAL DISCOVERY FUND
LIPPER RANKINGS*
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GLOBAL SMALL CAP FUNDS CATEGORY
<TABLE>
<CAPTION>
......................................................
<S> <C> <C> <C>
1-YEAR #2 of 33
......................................................
3-YEAR #3 of 21
......................................................
5-YEAR #5 of 13
......................................................
</TABLE>
DIVIDEND REVIEW
DURING THE PERIOD, THE FUND MADE THE FOLLOWING DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
LONG-TERM
INCOME CAPITAL
DIVIDEND GAIN
......................................................
<S> <C> <C> <C> <C>
GLOBAL DISCOVERY FUND $0.635 $1.410
......................................................
</TABLE>
*Lipper rankings and performance information are based solely on performance of
Class S shares, which have an inception date of September 10, 1991. Kemper
Global Discovery Fund Class A, Class B and Class C shares were initially offered
on April 16, 1998, and have not yet been ranked. Returns and rankings are based
upon changes in net asset value with all dividends reinvested.
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE The Morningstar style box is based on Class S
BOX] shares of Global Discovery Fund. Source:
Morningstar, Inc., Chicago, IL 312-696-6000.
(Morningstar Style Box is based on a portfolio
date as of April 30, 1998.) The Equity Funds
Style Box placement is based on a fund's
price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size
of the companies in which it invests, or
median market capitalization.
Please note that style boxes do not represent
an exact assessment of risk and do not
represent future performance. Please consult
the prospectus for a description of investment
policies.
</TABLE>
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. This may be prompted by trading or
central bank intervention (or the lack of intervention) in the currency markets.
For U.S. investors who are investing overseas, a devaluation of a foreign
currency can have the effect of reducing the total return of their investment.
PRICE/EARNINGS RATIO (P/E) (ALSO "EARNINGS MULTIPLE") A widely used gauge of a
stock's valuation that indicates what investors are paying for a company's
earnings on a per share basis. Typically based on a company's projected earnings
for the next 12 months, a higher "earnings multiple" indicates a higher expected
growth rate and the potential for greater price fluctuations.
TRANSPARENCY The degree to which investors can evaluate if a company is managed
in the interests of shareholders. Transparency is often not as good in
developing markets where disclosure requirements may be less stringent, and
protectionism, subsidies, and cronyism may distort the business environment.
At A GLANCE
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
COUNTRY CONCENTRATIONS
10
LARGEST HOLDINGS
11
PORTFOLIO
OF INVESTMENTS
17
REPORT OF
INDEPENDENT ACCOUNTANTS
18
FINANCIAL STATEMENTS
21
FINANCIAL HIGHLIGHTS
23
NOTES TO
FINANCIAL STATEMENTS
Terms To KNOW
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER
FUNDS. IT IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT
ORGANIZATIONS WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR
MUTUAL FUND INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND
CORPORATE CLIENTS, INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL
ACCOUNTS. IT IS ONE OF THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED
STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained lower inflation have
continued to produce a beneficial market environment for investors in the second
quarter of 1998. Despite heightened sensitivity to earnings estimates and
announcements, the market continued to support financial assets. We expect this
favorable climate to continue -- in spite of the sensitivity -- at least over
the shorter term.
As always, expectations have been at the heart of the actions and
reactions that move the markets. Expectations appear to be high, as
demonstrated by a record flow of new cash into mutual funds. As of April 30,
1998, a record $5 trillion in mutual fund assets surpassed total assets of the
nation's banks, according to the Investment Company Institute, a trade
organization that monitors the mutual fund industry, and the Federal Reserve
Bank in Washington.
Unfortunately, high expectations often combine with high anxiety --
today's investors are attuned to even the smallest hint of economic change. The
result is volatility. Many who believe that our long-running bull market is too
good to be true or that stock prices are too high are wondering when the market
will reverse.
While a reversal may not be on the immediate horizon, investors are
wise to watch for several signs that change is underway: rising prices,
indicating higher inflation; repercussions of the Asian economic crisis on
American business, which could appear in the form of reduced earnings; and a
continued widening of our trade deficit, a serious imbalance caused by
heightened American demand for foreign goods and services.
On April 27, expectations were tested by reports that the Federal
Reserve Board ("the Fed") was considering a hike in interest rates. The markets
reacted immediately to this news, driving stock prices downward. But at its
monetary policy meeting on May 19, the Fed chose to leave interest rates alone.
In the coming months, the Fed could raise rates if inflation accelerates or if
growth appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term is based primarily on the
current resiliency of our marketplace. The United States appears to be firmly
planted in the middle of an economic cycle, with no evidence of detrimental
pressures that might be associated with the market's phenomenal growth. We are
not seeing price increases for goods and services or a downturn in the housing
market, both of which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 14 percent in the first
quarter of 1998 and returned more than 13 percent year-to-date through the end
of May. Bonds have also rewarded investors in terms of real return, which is
total return less the rate of inflation. The high yield and corporate debt
fixed-income markets also have performed well.
U.S. economic growth, as measured by the gross domestic product (GDP)
growth rate, was slightly above 4 percent for the first quarter. Our general
expectation for the year is that growth in all of 1998 will increase between
2.5 and 3 percent over last year. In other words, the economy will remain
strong, but will slow down as the year progresses.
Consumer spending and corporate fixed investment have fueled the
economy's solid growth. Spending on both capital goods and high technology has
been strong. Corporate profits have grown between 5 and 10 percent, which
appears to be acceptable in an environment of stable interest rates. U.S.
employment growth has ranged from 2 to 2.25 percent, continuing to exceed
expectations. Consumer confidence has continued to hit near all-time highs. The
increase in output prices, an indicator of inflation measured by the Consumer
Price Index (CPI), has remained at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy
front. At the end of February, the U.S. federal budget deficit essentially
vanished. Recent efforts to reduce the deficit, combined with higher federal
revenues due to the robust economy, have left us with an expected budget
surplus of $60 billion to $80 billion for fiscal 1998. To date, our Democratic
president and Republican Congress have not agreed on any significant
legislation regarding tax credits, spending cuts or health care that could
threaten the newfound federal budget surplus.
Can we expect a little more excitement from overseas? A full-scale
global recession from last year's Asian economic crisis seems unlikely at this
point. The crisis has yet
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (5/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.65 5.81 6.49 6.91
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.5 1.89 2.23 2.89
THE U.S. DOLLAR(4) 6.86 10.26 5.52 9.15
CAPITAL GOODS ORDERS(5)* 9.28 10.28 7.16 3.48
INDUSTRIAL PRODUCTION(5)* 3.85 5.76 4.28 3.79
EMPLOYMENT GROWTH(6) 2.61 2.8 2.5 2.13
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Change in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of April 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
to hurt most U.S. businesses and investors. Quite the contrary. While the mere
threat of repercussions from the Asian crisis added to the anxiety mentioned
earlier, it has also had the effect of keeping U.S. interest rates and prices in
check, making the U.S. economy all the more attractive to investors around the
world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S. markets
as investors generally avoid Asia. Europe also has been benefiting from the
crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
Other major developments abroad include the final selection of countries to
participate in Europe's single currency next year. Many European countries are
adopting more restrictive fiscal policy and reducing inflation in anticipation
of the momentous European Economic and Monetary Union (EMU). But after the EMU
is established in 1999, tensions may indeed mount as countries work to adapt to
the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the end of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
June 10, 1998
4
<PAGE> 5
THE FUND FIRST OFFERED KEMPER CLASSES ON APRIL 16,
1998. THE FUND HAS, HOWEVER, RETAINED THE SAME
SKILLED MANAGEMENT TEAM AND STRONG HISTORICAL
PERFORMANCE FROM THE DATE OF ITS INCEPTION IN 1991.
THE FUND BENEFITED SIGNIFICANTLY FROM ITS
INDIVIDUAL STOCK SELECTION APPROACH, AN EMPHASIS ON
EUROPEAN HOLDINGS (ONE OF THE BEST PERFORMING
REGIONS OVER THE SIX-MONTHS), UNDERWEIGHTINGS IN
ASIA, AND MINIMAL PARTICIPATION IN LATIN AMERICA.
Q
HOW DID THE CLASS S SHARES ("THE SHARES") PERFORM FOR THE SIX-MONTH PERIOD
ENDED APRIL 30, 1998?
A
The shares returned 20.29 percent, exceeding the 12.11 percent return of
the fund's benchmark, the unmanaged Salomon Brothers World Equity Extended
Market Index*. The shares also surpassed the 18.85 percent return of the
larger-cap MSCI World Index** for the same period. Relative to its peers, the
shares have continued to provide top notch competitive returns among similar
global small-cap funds: for both the six- and 12-month periods the shares ranked
among the top 6 percent of 35 and 33 funds, respectively, as of April 30, 1998.
* The Salomon Brothers World Equity Extended Market Index is an unmanaged small
capitalization stock universe of 22 countries. Index returns assume dividends
reinvested net of withholding tax and, unlike fund returns, do not reflect any
fees or expenses.
** The Morgan Stanley Capital International World Index is an unmanaged
capitalization-weighted measure of global stock markets including: the U.S.,
Canada, Europe, Australia and the Far East. Index returns assume dividends
reinvested net of withholding tax and, unlike fund returns, do not reflect any
fees or expenses.
Q
HOW DO YOU EXPLAIN THE SHARES' OUTPERFORMANCE OF BOTH SMALL- AND LARGE-CAP
STOCK INDICES?
A
In short, three factors contributed to the shares' strong outperformance:
good stock selection, an overweighting in Europe, and an underweighting in Asia
and Latin America. Avoiding the weak markets of Asia and Latin America were a
big help, but we emphasize individual stock selection, and as such, the fund's
weightings are the result of our bottom-up approach, rather than a top-down
allocation strategy. Our stock picking has paid off, too, as 60 percent of the
shares' returns were from its top ten holdings. Europe, of course, has been one
of the best performing areas in the world, as many countries continued to take
steps to prepare for European Monetary Union (EMU). Asia, on the other hand,
remains troubled. While we have seen some positive progress with several IMF
(International Monetary Fund) agreements, we believe the worst is not behind us
yet.
PERFORMANCE Update
[MORAN PHOTO]
Gerald J. Moran is a senior vice president of Scudder Kemper Investments, Inc.
and is the lead portfolio manager for Kemper Global Discovery Fund. He has
managed the fund since its inception in 1991. Moran has more than 30 years of
industry experience and has worked exclusively with small company stocks for the
last decade. He received a bachelor of arts degree from Yale in 1961.
Views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report, as stated on the cover. The
manager's views are subject to change at any
5
time, based on market and other conditions.
<PAGE> 6
Q
HOW DID YOU MANAGE THE PORTFOLIO OVER THE PERIOD?
A
We continued to stick with our strategy of selecting well-run, rapidly
growing companies in diverse markets and industries. Over the six months, we did
not make major changes to the portfolio. In fact, many of our strongest
contributors to performance have been in the portfolio for many years, such as
Bank of Ireland and Germany's MLP (Marschollek Lautenschlaeger und Partner), a
leading independent life insurer. Our approach to selecting companies is to seek
diversification through exposure to multiple countries, industries and business
lines. This tends to result in holdings with a relatively low correlation to one
another, thereby reducing
overall portfolio volatility. Good examples of this approach are three of the
top fund holdings: Network Appliance (U.S. technology), Jeronimo Martins
(supermarkets in Portugal, Brazil, and Poland), and Bank of Ireland. The
performance of each of these stocks is driven by different factors.
Q
EUROPE WAS THE TOP-PERFORMING REGION OVER THE SIX-MONTH PERIOD. WHAT IS
HAPPENING THERE?
A
The fund's European holdings continued to comprise a substantial share of
the portfolio and have been important contributors to the shares'
outperformance. Over the period, expectations for a single currency continued to
build, and near period end EMU member
nations (11 of 15 Western European countries) agreed to merge currencies into
the new euro. Because the potential benefits should be substantial, many markets
rose strongly.
Q
NOT ALL THE MEMBERS OF THE EMU ARE ON EXACTLY THE SAME FOOTING. TELL US
ABOUT THE SO-CALLED "PERIPHERAL" COUNTRIES.
A
Peripheral countries are those that historically did not meet the strict
debt and deficit level requirements for joining EMU. As a result, these
countries (including Ireland, Portugal, Spain, and Italy) traditionally have had
higher interest rates and unemployment, and proportionately larger budget
deficits than non-peripheral countries, such as Germany. In the past few years,
however, government policymakers in these countries have succeeded in bringing
their financial budgets into compliance. Joining a common currency essentially
requires equal interest rates among all EMU countries. The resulting economic
stimulation brought about by lower interest rates has been especially favorable
for stock markets in these countries.
Q
WHAT ARE THE RISKS?
A
Political instability is the primary risk, as illustrated by the recent
dissension over who should head the new central bank. Longer term, the
comfortable lifestyles and generous benefit programs that Europeans currently
enjoy may drag down the competitiveness of some companies. As the markets become
deregulated, companies that maintain these practices will likely become
uncompetitive in the local and global markets, which could result in higher
unemployment. More importantly, the economic situation will differ from country
to
BAR GRAPH
6
Performance UPDATE
<PAGE> 7
country, but the election of a common currency precludes a participating country
from adopting a separate monetary policy to address its specific needs. While
there are always concerns with changes of this magnitude, we believe the
benefits far outweigh the risks.
Q
YOU BELIEVE THAT SMALL EUROPEAN COMPANIES WILL HAVE SOME ADVANTAGES IN
THIS ENVIRONMENT. WHAT IS DIFFERENT ABOUT SMALL COMPANIES IN EUROPE?
A
We think that the experience of the United States will be replicated.
Small companies have been responsible for virtually all employment growth in the
United States over the last decade. We think that European governments will
increasingly take steps to foster an environment more favorable to
entrepreneurs, thereby encouraging the formation of small companies. We have
already seen some steps in this direction with the establishment of several new
stock exchanges including the Neuer Markt in Germany and the Nouveau Marche in
France.
Q
IRELAND IS ONE OF THE FUND'S LARGEST COUNTRY POSITIONS AMONG ITS EUROPEAN
HOLDINGS AND WAS THE LARGEST EUROPEAN CONTRIBUTOR TO THE SHARES' PERFORMANCE.
WHAT IS SPECIAL ABOUT IRELAND?
A
The fund's holdings in Ireland have been excellent performers, with
one-quarter of the shares' gains over the six months coming from this tiny
country alone. Ireland has been a favorite among U.S. multinationals as a
springboard for selling into Europe. For example, over 60 percent of the
software imported into Europe comes through Ireland. It is still cost
competitive versus other countries in Europe and has directed its educational
system to produce high level employees that are sought by U.S. technology and
pharmaceutical companies. As English is clearly the global language of business,
Ireland stands out as the only English-speaking country in the EMU. Already a
number of companies such as Citibank have established significant operations
there. As a "peripheral" country, interest rates have already declined in
Ireland, thereby further stimulating the local economy. Fund holdings Bank of
Ireland and Irish Life have benefited significantly as a result. Finally, with a
significantly younger population than their European neighbors and without the
heavy burden of excessive promises made to an aging population, the stage has
been set in Ireland for future productivity gains.
One theme that we have been capitalizing on throughout the portfolio is
Europeans' propensity for cellular phones. We hold ESAT Telecom, an Irish
cellular phone company that was among the fund's top ten contributors to
performance over the six-month period. Europeans have a much higher comfort and
usage level of cellular phones than Americans. This theme carries over into
Portugal where we held shares of Telecel-Comunicacoes Pessoais, which is also
benefiting from the growth of the telecommunications industry in Europe.
Q
WHAT ABOUT THE TREND OF AGING BABY BOOMERS? DO YOU HAVE ANY HOLDINGS THAT
ARE A PLAY ON THIS GROUP?
A
We have several holdings that should benefit from the aging world
population, including shares of two vision care companies: Sola International
and Wesley Jessen VisionCare, both U.S. companies. Sola is an eyeglass lens
manufacturer. The company has a global platform for distribution and has
developed more expensive, high-tech trifocal lenses that are much lighter than
traditional lenses. We think as the population ages, many more people will need
them, boding well for expansion.
Wesley Jessen VisionCare makes soft contact lenses that are available in
different colors, allowing customers to change the color of their eyes. The
company also makes hard toric lenses for astigmatism and lenses that provide UV
protection. We think people are more willing to pay up for eyewear, and with
Wesley's leadership position in this field, we believe the company is well
positioned to benefit.
Continuing with the aging population theme, we also held shares in Total Renal
Care in the United States. As people live longer, there is going to be an
increasing demand for kidney dialysis treatments. Like Fresenius in Germany and
Gambro in Sweden, this business has gone global. Dialysis is an expensive
service funded by the government with 7-8 percent annual growth in demand
because of the high growth in the older age group. We like the business because
a significant share of the company's revenues are repeat revenues. Companies
generating repeat or "annuity-type" revenues help to mitigate investment risk.
Q
MILLICOM INTERNATIONAL CELLULAR WAS THE ONLY HOLDING IN THE TOP TEN THAT
DIDN'T MAKE A POSITIVE CONTRIBUTION TO PERFORMANCE. WHY?
A
The company announced a break-up that has not been well understood by
investors. Because the company has operations in Latin America, Europe, and
Asia, investors have been unsure about how to value the company's various
components. In addition, the stock has also been negatively affected by the
Asian crisis. We think the business
7
PERFORMANCE Update
<PAGE> 8
is very attractive and that the stock was significantly undervalued at the end
of the period. As a result, we have held on to this position.
Q
YOU HAVE NOT MENTIONED ANY COMPANIES IN THE UNITED KINGDOM. ARE THERE ANY
SUCCESS STORIES THERE?
A
There are a number. Serco Group, which is one of our UK holdings, keeps
rolling along. The company is a leading example of the global trend toward
outsourcing. Serco has been taking over the operation of public water services,
maintenance of military areas, and -- in cooperation with Wackenhut of the
U.S. -- prisons. Serco Group has been successful exporting services abroad,
especially to Australia.
Q
WHERE DO WE GO FROM HERE?
A
As an "equity culture" develops in Europe (traditionally investors have
preferred bonds and interest bearing investments offered by banks), we think
there will be tremendous opportunity for small company investing. Companies in
Germany especially have a considerable way to go to integrate equity investment
into the corporate financing system. We also think Eastern Europe presents some
attractive investment possibilities. With U.S. market valuations relatively high
and the economic cycle extended, we expect to find more attractive opportunities
abroad. Asia has some promising companies, but we believe the region is not out
of the woods yet, and risk exceeds opportunity at this juncture. As events
unfold in the United States, Europe, and Asia in the months ahead, we intend to
continue with our individual stock selection approach which has served the fund
well to-date.
8
Performance UPDATE
<PAGE> 9
COUNTRY CONCENTRATIONS
GEOGRAPHIC COMPOSITION OF KEMPER GLOBAL DISCOVERY FUND
Based on total common stocks as of April 30, 1998
[GEOGRAPHIC COMPOSITION BAR GRAPH]
<TABLE>
<S> <C>
UNITED STATES 40.43%
UNITED KINGDOM 10.92%
IRELAND 10.68%
PORTUGAL 5.70%
ITALY 4.66%
MISCELLANEOUS 4.05%
GERMANY 3.21%
JAPAN 3.04%
NETHERLANDS 2.85%
SWITZERLAND 2.85%
LUXEMBOURG 2.46%
FRANCE 2.19%
CZECH REPUBLIC 1.89%
SWEDEN 1.43%
HUNGARY 1.29%
SPAIN 1.19%
AUSTRIA 1.16%
</TABLE>
9
<PAGE> 10
KEMPER GLOBAL DISCOVERY FUND'S TOP 20 HOLDINGS*
Representing 53.26 percent of the fund's total common stock holdings on April
30, 1998
<TABLE>
<CAPTION>
HOLDING COUNTRY PERCENT
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
1. BANK OF IRELAND PLC Ireland 4.65%
- -----------------------------------------------------------------------------------------------------
2. NETWORK APPLIANCE, INC. United States 3.97%
- -----------------------------------------------------------------------------------------------------
3. SERCO GROUP PLC United Kingdom 3.66%
- -----------------------------------------------------------------------------------------------------
4. JERONIMO MARTINS S.A. Portugal 3.61%
- -----------------------------------------------------------------------------------------------------
5. BILLING CONCEPTS United States 3.54%
- -----------------------------------------------------------------------------------------------------
6. STERLING COMMERCE, INC. United States 3.44%
- -----------------------------------------------------------------------------------------------------
7. SOLA INTERNATIONAL, INC. United States 3.24%
- -----------------------------------------------------------------------------------------------------
8. PROVIDENT FINANCIAL PLC United Kingdom 2.46%
- -----------------------------------------------------------------------------------------------------
9. MILLICOM INTERNATIONAL CELLULAR S.A. Luxembourg 2.46%
- -----------------------------------------------------------------------------------------------------
10. VITESSE SEMICONDUCTOR CORP. United States 2.42%
- -----------------------------------------------------------------------------------------------------
11. KUONI REISEN AG Switzerland 2.35%
- -----------------------------------------------------------------------------------------------------
12. SHOHKOH FUND & CO., LTD. Japan 2.34%
- -----------------------------------------------------------------------------------------------------
13. TELECEL-COMUNICACOES PESSOAIS, S.A. Portugal 2.09%
- -----------------------------------------------------------------------------------------------------
14. FISERV INC. United States 2.07%
- -----------------------------------------------------------------------------------------------------
15. IRISH LIFE PLC Ireland 1.98%
- -----------------------------------------------------------------------------------------------------
16. IHC CALAND NV Netherlands 1.97%
- -----------------------------------------------------------------------------------------------------
17. MARSCHOLLEK LAUTENSCHLAEGER UND PARTNER AG Germany 1.96%
- -----------------------------------------------------------------------------------------------------
18. CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. Czech Republic 1.89%
- -----------------------------------------------------------------------------------------------------
19. AXOGEN LTD. United States 1.60%
- -----------------------------------------------------------------------------------------------------
20. AEROPORTI DI ROMA SPA Italy 1.56%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*Portfolio holdings are subject to change.
10
Largest HOLDINGS
<PAGE> 11
KEMPER GLOBAL DISCOVERY FUND
Portfolio of Investments at April 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENTS--5.2% AMOUNT MARKET VALUE
<S> <C> <C> <C> <C> <C>
Repurchase Agreement with Donaldson, Lufkin
& Jenrette dated 4/30/98 at 5.5%, to be
repurchased at $20,923,196 on 5/1/98,
collateralized by a $17,070,000 U.S.
Treasury Bond, 7.875%, 2/15/21 (Cost
$20,920,000) $20,920,000 $20,920,000
COMMON STOCKS--94.8% SHARES MARKET VALUE
ARGENTINA--0.7% Siderca SA
(STEEL PRODUCER) 1,201,163 2,895,223
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--0.1% CI Technologies Group Ltd.
(DEVELOPER OF PROCESS MONITORING AND
INDUSTRIAL AUTOMATION SOFTWARE) 206,600 363,838
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AUSTRIA--1.1% Schoeller Bleckmann Oilfield Equipment AG
(MANUFACTURER OF COMPONENTS FOR OIL AND
GAS DRILLING EQUIPMENT) 17,000 2,127,272
Topcall International AG
(MANUFACTURER OF ELECTRONIC MESSAGING
SYSTEMS) 500 542,510
VAE Eisenbahnsysteme (Bearer) AG
(MANUFACTURER OF ELECTRONIC RAILROAD
CONTROL SYSTEMS) 18,000 1,734,923
---------------------------------------------------------------------------
4,404,705
- ------------------------------------------------------------------------------------------------------------------------
CANADA--0.6% Canadian 88 Energy Corp.*
(OIL AND NATURAL GAS EXPLORATION AND
PRODUCTION) 384,500 1,881,707
StressGen Biotechnologies Corp. "A"*
(DEVELOPER OF PRODUCTS FOR TREATMENT OF
CANCER AND CERTAIN INFECTIOUS DISEASES) 205,000 444,297
---------------------------------------------------------------------------
2,326,004
- ------------------------------------------------------------------------------------------------------------------------
CHILE--0.4% Linea Aerea Nacional de Chile* (ADR)
(PROVIDER OF DOMESTIC AND INTERNATIONAL
PASSENGER AND CARGO AIR SERVICES) 114,050 1,553,931
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
CROATIA--0.2% Pliva D.D. (GDR)
(PHARMACEUTICAL COMPANY) 45,600 825,360
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC--1.8% Central European Media Enterprises Ltd.
"A"*
(OWNER AND OPERATOR OF NATIONAL AND
REGIONAL PRIVATE COMMERCIAL TELEVISION
STATIONS IN CENTRAL EUROPE AND GERMANY) 257,700 7,199,494
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
FINLAND--0.1% KCI Konecranes International "B"
(MANUFACTURER OF ELEVATORS) 9,500 453,973
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
PORTFOLIO OF Investments
<PAGE> 12
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C> <C> <C> <C>
FRANCE--2.1% Alliance et Gestion Commerciale
(MANUFACTURER AND RENTER OF MODULAR
BUILDINGS) 4,942 $ 509,739
Altran Technologies, SA
(ENGINEERING AND CONSULTING SERVICES FOR
AEROSPACE, TELECOMMUNICATIONS AND
ELECTRONICS FIELDS) 33,516 5,347,171
Dassault Systemes SA
(COMPUTER AIDED DESIGN, MANUFACTURING AND
ENGINEERING SOFTWARE PRODUCTS) 42,691 1,676,106
Leon de Bruxelles SA*
(OPERATOR OF LOW COST FAMILY RESTAURANTS) 3,816 403,121
Penauille Polyservices SA
(INDUSTRIAL CLEANING AND SECURITY
SERVICES) 1,460 414,124
---------------------------------------------------------------------------
8,350,261
- ------------------------------------------------------------------------------------------------------------------------
GERMANY--3.0% Beta Systems Software AG*
(DEVELOPER OF PROCESSING AUTOMATION
SOFTWARE) 26,653 2,103,598
Kamps AG*
(PRODUCER AND DISTRIBUTOR OF BAKED GOODS) 17,256 485,719
Marschollek Lautenschlaeger und Partner AG (pfd.)
(LEADING INDEPENDENT LIFE INSURANCE
COMPANY) 19,100 7,446,881
Pfeifer Vacuum Technology AG (ADR)*
(MANUFACTURER OF VARIOUS PUMPS AND VACUUM
SYSTEMS) 30,800 2,182,950
---------------------------------------------------------------------------
12,219,148
- ------------------------------------------------------------------------------------------------------------------------
HUNGARY--1.2% Richter Gedeon Rt
(PHARMACEUTICAL COMPANY) 26,200 2,806,721
Richter Gedeon Rt (GDR) 19,800 2,108,700
---------------------------------------------------------------------------
4,915,421
- ------------------------------------------------------------------------------------------------------------------------
IRELAND--10.1% Bank of Ireland PLC
(BANK) 873,768 17,723,074
ESAT Telecom Group PLC* (ADR)
(PROVIDER OF TELECOMMUNICATION SERVICES
IN THE REPUBLIC OF IRELAND) 111,800 3,577,600
Irish Continental Group PLC
(TRANSPORT OF PASSENGERS, FREIGHT AND
CONTAINERS BETWEEN IRELAND, THE U.K. AND
THE CONTINENT) 184,505 3,315,067
Irish Life PLC
(PROVIDER OF LIFE AND DISABILITY
INSURANCE AND PENSIONS) 814,550 7,557,766
Irish Permanent PLC
(RETAIL FINANCIAL SERVICES GROUP) 182,152 2,454,593
Jury's Hotel Group PLC
(HOTEL OPERATOR) 501,255 4,362,392
Ryan Hotels PLC
(OWNER AND OPERATOR OF HOTEL CHAIN) 1,213,200 1,668,909
---------------------------------------------------------------------------
40,659,401
- ------------------------------------------------------------------------------------------------------------------------
ISRAEL--0.4% ESC Medical Systems Ltd.*
(PRODUCER OF DEVICES FOR NON-INVASIVE
TREATMENT OF BENIGN VASCULAR LESIONS) 44,100 1,433,250
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
Portfolio of INVESTMENTS
<PAGE> 13
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C> <C> <C> <C>
ITALY--4.4% Aeroporti di Roma SpA
(MANAGEMENT OF FIUMICINO AND CIAMPINO
AIRPORTS) 425,500 $ 5,957,264
Bulgari SpA
(MANUFACTURER AND RETAILER OF FINE
JEWELRY, LUXURY WATCHES AND PERFUMES) 444,800 2,714,477
Saes Getters SpA di Risparmio
(MANUFACTURER OF GETTERS, REFINED
CHEMICALS USED IN CATHODE-RAY TUBES AND
OTHER MONITORS) 208,300 2,487,112
Safilo SpA
(MANUFACTURER OF FRAMES FOR GLASSES) 66,400 2,275,372
Saipem SpA
(INTERNATIONAL CONTRACTOR IN OIL AND GAS
EXPLORATION AND DRILLING, CONSTRUCTION OF
REFINERIES AND PIPELINES) 748,000 4,303,001
---------------------------------------------------------------------------
17,737,226
- ------------------------------------------------------------------------------------------------------------------------
JAPAN--2.9% Riso Kagaku Corp.
(MANUFACTURER OF COPYING MACHINES) 50,900 2,655,686
Shohkoh Fund & Co., Ltd.
(FINANCE COMPANY FOR SMALL- AND MEDIUM-
SIZED FIRMS) 28,000 8,900,634
---------------------------------------------------------------------------
11,556,320
- ------------------------------------------------------------------------------------------------------------------------
LUXEMBOURG--2.3% Millicom International Cellular SA*
(DEVELOPER AND OPERATOR OF CELLULAR
TELEPHONE NETWORKS) 239,000 9,350,875
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
MEXICO--0.4% TV Azteca, SA de C.V. (ADR)
(OWNER AND OPERATOR OF NATIONAL
TELEVISION NETWORKS) 92,700 1,726,538
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NETHERLANDS--2.7% De Telegraaf Holding NV
(LEADING PUBLISHER OF NEWSPAPERS,
MAGAZINES AND BOOKS) 69,600 1,615,880
IHC Caland NV
(DREDGING AND OFFSHORE SERVICES) 129,000 7,509,727
Koninklijke Nedlloyd Groep NV
(CONTAINER SHIPPING AND TRANSPORTATION) 71,400 1,714,222
---------------------------------------------------------------------------
10,839,829
- ------------------------------------------------------------------------------------------------------------------------
PHILIPPINES--0.2% International Container Terminal Services,
Inc.*
(CONTAINERIZED CARGO HANDLING FIRM) 4,909,800 648,118
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
POLAND--0.8% Debica SA "A"
(TIRE MANUFACTURER) 74,100 1,887,134
Pioneer Poland Fund
(CLOSED-END INVESTMENT COMPANY)(B)(C) 3 1,361,061
---------------------------------------------------------------------------
3,248,195
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
PORTFOLIO OF Investments
<PAGE> 14
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C> <C> <C> <C>
PORTUGAL--5.4% Jeronimo Martins SA
(FOOD PRODUCER AND RETAILER) 293,675 $13,732,085
Telecel-Comunicacoes Pessoais, S.A.*
(CELLULAR COMMUNICATION SERVICES) 44,366 7,960,407
---------------------------------------------------------------------------
21,692,492
- ------------------------------------------------------------------------------------------------------------------------
SPAIN--1.1% Aldeasa SA
(OPERATOR OF AIRPORT DUTY-FREE SHOPS) 49,500 1,787,590
Tele Pizza, SA*
(OPERATOR OF FAST-FOOD PIZZA RESTAURANTS
IN SPAIN, PORTUGAL, POLAND, MEXICO AND
CHILE) 19,200 2,760,867
---------------------------------------------------------------------------
4,548,457
- ------------------------------------------------------------------------------------------------------------------------
SWEDEN--1.4% OM Gruppen AB (Free)
(OPERATOR OF FINANCIAL EXCHANGES AND
CLEARING ORGANIZATIONS) 230,400 4,597,882
TV 4 AB
(BROADCASTER OF NEWS, SPORTS,
DOCUMENTARIES, ENTERTAINMENT; PROGRAM
PRODUCER) 44,200 856,368
---------------------------------------------------------------------------
5,454,250
- ------------------------------------------------------------------------------------------------------------------------
SWITZERLAND--2.7% Kuoni Reisen AG (Registered)
(TRAVEL AGENCY) 1,670 8,959,347
Phoenix Mecano AG (Bearer)
(MANUFACTURER OF HOUSINGS AND COMPONENTS
FOR COMPUTERS) 3,537 1,897,557
---------------------------------------------------------------------------
10,856,904
- ------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--10.4% ARM Holdings PLC*
(PRODUCER OF RISC MICROPROCESSORS,
TECHNOLOGY AND SOFTWARE) 30,600 424,832
Aegis Group PLC
(LEADING INDEPENDENT MEDIA SERVICES
GROUP) 532,187 818,974
Avis Europe PLC
(CAR RENTAL SERVICES) 109,400 422,715
Corporate Services Group PLC
(EMPLOYMENT SERVICES AND TRAINING) 1,372,500 5,532,830
Expro International Group PLC
(PROVIDER OF OILFIELD SERVICES) 438,900 3,722,129
Games Workshop Group PLC
(MANUFACTURER OF TABLE TOP WAR GAME
SYSTEMS AND MINIATURES) 163,000 2,194,833
Provident Financial PLC
(PERSONAL FINANCE GROUP) 561,192 9,377,669
RM PLC
(INFORMATION TECHNOLOGY SOLUTIONS FOR
EDUCATIONAL MARKETS) 135,500 3,003,123
Regent Inns PLC
(OWNER AND OPERATOR OF HOTELS AND
RESTAURANTS) 340,900 2,166,848
Serco Group PLC
(FACILITIES MANAGEMENT COMPANY) 703,700 13,924,841
---------------------------------------------------------------------------
41,588,794
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES--38.3% Access Health, Inc.*
(PERSONAL HEALTH MANAGEMENT SERVICES) 48,500 1,636,875
Aptargroup, Inc.
(MANUFACTURER OF PACKAGING EQUIPMENT
COMPONENTS) 59,100 3,693,750
</TABLE>
14
Portfolio of INVESTMENTS
<PAGE> 15
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C> <C> <C> <C>
Axogen Ltd. (ADR)*
(FUTURE DEVELOPMENT OF THERAPEUTIC
PRODUCTS FOR TREATMENT OF NEUROLOGICAL
DISORDERS) 106,100 $ 6,100,750
BE Aerospace, Inc.*
(AIRLINE AUDIO/VIDEO CONTROL SYSTEMS) 84,400 2,632,225
Barrett Resources Corp.*
(OIL AND GAS EXPLORATION AND PRODUCTION) 64,600 2,398,275
Benton Oil & Gas Co.*
(OIL AND GAS EXPLORATION, DEVELOPMENT AND
PRODUCTION) 200,000 2,437,500
Billing Concepts Corp.*
(BILLING AND INFORMATION MANAGEMENT
SERVICES) 481,000 13,468,000
Black Box Corp.*
(MANUFACTURER OF WIDE AREA NETWORKING
PRODUCTS, DIRECT MARKETING OF COMPUTER
PRODUCTS) 23,300 774,725
Cintas Corp.
(UNIFORM RENTALS) 62,200 2,962,275
Computer Motion, Inc.*
(DEVELOPS AND MARKETS PROPRIETARY ROBOTIC
AND COMPUTERIZED SURGICAL SYSTEMS) 4,700 60,513
Concentra Managed Care, Inc.*
(PROVIDER OF INTEGRATED NONRISK-BEARING
WORKERS' COMPENSATION MANAGED CARE) 148,100 4,609,613
Dallas Semiconductor Corp.
(MANUFACTURER OF SILICON INTEGRATED
CIRCUITS AND SUBSYSTEMS) 36,400 1,403,675
Eagle USA Airfreight, Inc.*
(AIRFREIGHT FORWARDING SERVICES) 14,500 476,688
Fiserv Inc.*
(DATA PROCESSING SERVICES) 120,775 7,895,666
G & K Services, Inc. "A"
(UNIFORM RENTALS) 52,100 2,097,025
General Communication, Inc. "A"*
(TELECOMMUNICATION SERVICES) 332,200 2,346,163
Harveys Casino Resorts
(OWNER AND OPERATOR OF HOTEL/CASINO
PROPERTIES) 115,300 3,127,513
Healthcare Recoveries, Inc.*
(PROVIDER OF RECOVERY SERVICES FOR
PRIVATE HEALTHCARE PAYORS) 17,300 413,038
IDX Systems Corp.*
(PROVIDER OF HEALTH CARE INFORMATION
SYSTEMS TO PHYSICIAN GROUPS AND ACADEMIC
MEDICAL CENTERS) 109,500 4,770,094
JLK Direct Distribution Inc. "A"*
(MANUFACTURER OF METALWORKING TOOLS) 20,700 677,925
MBIA, Inc.
(INSURER OF MUNICIPAL BONDS) 43,852 3,272,456
Network Appliance, Inc.*
(DESIGNER AND MANUFACTURER OF NETWORK
DATA STORAGE DEVICES) 418,800 15,102,969
North Fork Bancorporation, Inc.
(COMMERCIAL AND SAVINGS BANK HOLDING
COMPANY) 10,600 393,525
Samsonite Corp.*
(LUGGAGE MANUFACTURER) 85,200 2,449,500
</TABLE>
15
PORTFOLIO OF Investments
<PAGE> 16
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C> <C> <C> <C>
Security Dynamics Technologies, Inc.*
(DESIGNER, DEVELOPER AND SUPPORTER OF A
FAMILY OF SECURITY PRODUCTS USED TO
MANAGE ACCESS TO COMPUTER-BASED
INFORMATION RESOURCES) 53,100 $ 1,281,038
Sepracor, Inc.*
(DEVELOPER OF ENHANCED FORMS OF EXISTING
PHARMACEUTICALS) 64,700 2,992,375
Sola International, Inc.*
(MANUFACTURER OF PLASTIC EYEGLASS LENSES) 290,200 12,333,500
Sterling Commerce, Inc.*
(PRODUCER OF ELECTRONIC DATA INTERCHANGE
PRODUCTS AND SERVICES) 307,934 13,106,441
Suiza Foods Corp.*
(FOOD DISTRIBUTOR) 71,400 4,230,450
Symbol Technologies Inc.
(MANUFACTURER OF BAR CODE LASER SCANNERS) 111,600 4,296,600
TCI Satellite Entertainment, Inc.*
(TELEVISION PROGRAMMING VIA DIGITAL
SATELLITE) 568,500 4,476,938
Tiffany & Co.
(RETAILER OF JEWELRY AND GIFT ITEMS) 125,400 5,705,700
Total Renal Care Holdings, Inc.*
(DIALYSIS SERVICES FOR TREATMENT OF
CHRONIC KIDNEY FAILURE) 128,499 4,256,529
Tower Realty Trust, Inc. (REIT)
(DEVELOPER AND MANAGER OF OFFICE
PROPERTIES) 55,200 1,304,100
Vantive Corp.*
(PROVIDER OF CUSTOMER INTERACTION
APPLICATIONS SOFTWARE) 12,900 412,800
Vincam Group, Inc.*
(PROVIDER OF SOLUTIONS TO COMPLEXITIES
AND COSTS OF EMPLOYMENT AND PERSONNEL) 30,000 813,750
Vitesse Semiconductor Corp.*
(MANUFACTURER OF DIGITAL INTEGRATED
CIRCUITS) 159,500 9,201,156
Wackenhut Corrections Corp.*
(MANAGER OF PRIVATIZED CORRECTIONAL AND
DETENTION FACILITIES) 89,800 2,346,025
Wesley Jessen VisionCare, Inc.*
(MANUFACTURER OF SOFT CONTACT LENSES) 65,300 2,016,138
---------------------------------------------------------------------------
153,974,278
---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $224,700,292) 380,822,285
---------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $245,620,292) (a) $401,742,285
---------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost for federal income tax purposes was $251,363,819. At April 30,
1998, net unrealized appreciation for all securities based on tax cost was
$150,378,466. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$157,851,623 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $7,473,157.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $1,361,061 (.34% of net assets). Their
values have been estimated by the Valuation Committee 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 April 30, 1998 aggregated $1,477,500.
(c) Market value and cost reflect full payment. The remaining installments which
total $369,375 will be payable upon thirty days prior notice from Pioneering
Management Limited.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
16
Portfolio of INVESTMENTS
<PAGE> 17
THE BOARD OF DIRECTORS OF GLOBAL/INTERNATIONAL FUND, INC.
AND TO THE SHAREHOLDERS OF GLOBAL DISCOVERY FUND
We have audited the accompanying statement of assets and liabilities of Global
Discovery Fund (formerly Scudder Global Discovery Fund) including the investment
portfolio, as of April 30, 1998, and the related statement of operations for the
six months then ended, the statements of changes in net assets for the six
months then ended and for the year ended October 31, 1997, and the financial
highlights for each of the periods indicated therein. 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 April
30, 1998 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 Global
Discovery Fund as of April 30, 1998, the results of its operations for the six
months then ended, the changes in its net assets for the six months then ended
and for the year ended October 31, 1997, and the financial highlights for each
of the periods indicated therein in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND LLP
Boston, Massachusetts
June 18, 1998
17
REPORT OF Independent Accountants
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES
as of April 30, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at market (identified cost $245,620,292) $401,742,285
- ----------------------------------------------------------------------------
Cash 441
- ----------------------------------------------------------------------------
Receivable for investments sold 90,510
- ----------------------------------------------------------------------------
Receivable for Fund shares sold 148,808
- ----------------------------------------------------------------------------
Dividends and interest receivable 710,260
- ----------------------------------------------------------------------------
Foreign taxes recoverable 44,418
- ----------------------------------------------------------------------------
Other assets 3,964
- ----------------------------------------------------------------------------
TOTAL ASSETS 402,740,686
- ----------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 724,436
- ----------------------------------------------------------------------------
Accrued management fee 363,935
- ----------------------------------------------------------------------------
Other payables and accrued expenses 611,758
- ----------------------------------------------------------------------------
Total liabilities 1,700,129
- ----------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $401,040,557
- ----------------------------------------------------------------------------
NET ASSETS
Accumulated distributions in excess of net investment income (10,802,086)
- ----------------------------------------------------------------------------
Unrealized appreciation (depreciation) on:
Investments 156,121,993
- ----------------------------------------------------------------------------
Foreign currency related transactions 3,494
- ----------------------------------------------------------------------------
Accumulated net realized gain (loss) (1,111,741)
- ----------------------------------------------------------------------------
Paid-in capital 256,828,897
- ----------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $401,040,557
- ----------------------------------------------------------------------------
NET ASSET VALUE
CLASS A SHARES
Net asset value and redemption price per share
($633,232 / 26,908 shares of capital stock outstanding) $23.53
- ----------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $24.97
- ----------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($154,157 / 6,547 shares of capital stock outstanding) $23.55
- ----------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($19,935 / 847 shares of capital stock outstanding) $23.54
- ----------------------------------------------------------------------------
CLASS S SHARES
Net asset value, offering and redemption price per share
($400,233,233 / 16,997,442 shares of capital stock
outstanding) $23.55
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
Financial STATEMENTS
<PAGE> 19
STATEMENT OF OPERATIONS
Six months ended April 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $87,798) $ 1,396,302
- ---------------------------------------------------------------------------
Interest 611,742
- ---------------------------------------------------------------------------
2,008,044
- ---------------------------------------------------------------------------
Expenses:
Management fee 1,944,544
- ---------------------------------------------------------------------------
Services to shareholders 546,020
- ---------------------------------------------------------------------------
Custodian and accounting fees 221,838
- ---------------------------------------------------------------------------
Directors' fees and expenses 21,047
- ---------------------------------------------------------------------------
Reports to shareholders 53,326
- ---------------------------------------------------------------------------
Auditing 40,959
- ---------------------------------------------------------------------------
Legal 10,557
- ---------------------------------------------------------------------------
Registration fees 21,484
- ---------------------------------------------------------------------------
Other 21,078
- ---------------------------------------------------------------------------
2,880,853
- ---------------------------------------------------------------------------
NET INVESTMENT LOSS (872,809)
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments (1,078,184)
- ---------------------------------------------------------------------------
Foreign currency related transactions 13,365
- ---------------------------------------------------------------------------
(1,064,819)
- ---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments 68,620,790
- ---------------------------------------------------------------------------
Foreign currency related transactions 16,649
- ---------------------------------------------------------------------------
68,637,439
- ---------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENT TRANSACTIONS 67,572,620
- ---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $66,699,811
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
FINANCIAL Statements
<PAGE> 20
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (872,809) $ (2,090,766)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment transactions (1,064,819) 26,874,290
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 68,637,439 12,247,359
- ------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 66,699,811 37,030,883
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (Class S) (9,815,437) (2,252,537)
- ------------------------------------------------------------------------------------------------------
Net realized gains (Class S) (21,794,909) (14,901,393)
- ------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 92,475,119 129,503,033
- ------------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
reinvestment of distributions 29,399,080 16,335,810
- ------------------------------------------------------------------------------------------------------
Cost of shares redeemed (105,045,061) (167,423,822)
- ------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS 16,829,138 (21,584,979)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 51,918,603 (1,708,026)
- ------------------------------------------------------------------------------------------------------
Net assets at beginning of period 349,121,954 350,829,980
- ------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including accumulated
distributions in excess of net investment income of
$10,802,086 and $113,840, respectively) $ 401,040,557 $ 349,121,954
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
Financial STATEMENTS
<PAGE> 21
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
For the Period April 16, 1998 (commencement of sale of Class A, B and C shares)
to April 30, 1998
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Net asset value, beginning of period $23.98 $23.98 $23.98
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .00 .00 .00
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions (.45) (.43) (.44)
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations (.45) (.43) (.44)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.53 $23.55 $23.54
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (A) (1.88)** (1.79)** (1.83)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) .6 .2 .02
- ---------------------------------------------------------------------------------------------------------------
Ratio of operating expenses, net to average daily net assets
(%) 1.95* 2.83* 2.80*
- ---------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net
assets (%) .92* .04* .07*
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 36.2* 36.2* 36.2*
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
21
FINANCIAL Highlights
<PAGE> 22
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS S(B)
FOR THE
PERIOD
SEPTEMBER 10,
1991
(COMMENCEMENT
OF
SIX MONTHS OPERATIONS)
ENDED YEARS ENDED OCTOBER 31, TO OCTOBER
APRIL 30, ----------------------------------------------------- 31,
1998(A)(B) 1997(A) 1996(A) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.64 $20.45 $17.54 $16.27 $16.14 $12.05 $11.92 $12.00
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.05) (.12) (.04) (.03) (.02) .04 .07 .01
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 4.01 2.30 3.59 1.38 .48 4.24 .08 (.09)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.96 2.18 3.55 1.35 .46 4.28 .15 (.08)
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.64) (.13) (.20) -- -- (.07) (.02) --
- --------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- -- (.18) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
From net realized gains on investment
transactions (1.41) (.86) (.44) (.08) (.15) (.12) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (2.05) (.99) (.64) (.08) (.33) (.19) (.02) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.55 $21.64 $20.45 $17.54 $16.27 $16.14 $12.05 $11.92
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 20.29** 11.14 20.97 8.32 2.80(C) 36.04(C) 1.26(C) (.67)(C)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 400 349 351 255 256 198 55 9
- --------------------------------------------------------------------------------------------------------------------------
Ratio of operating expenses, net to
average daily net assets (%) 1.63* 1.63 1.60 1.69 1.70 1.50 1.50 1.50*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average daily
net assets (%) 1.63* 1.63 1.60 1.69 1.76 2.01 2.53 15.34*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (%) (.49)* (.58) (.20) (.12) (.28) .53 .78 2.47*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 36.2* 60.5 63.0 43.7 45.8 54.6 23.4 --
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On April 16, 1998 existing shares of the Fund were designated as Class S
shares and are generally not available to new investors.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
22
Financial HIGHLIGHTS
<PAGE> 23
- --------------------------------------------------------------------------------
1
SIGNIFICANT
ACCOUNTING POLICIES Global Discovery Fund (the "Fund") is a diversified
series of Global/International Fund, Inc. (formally
known as Scudder Global Fund, Inc.), a Maryland
corporation registered under the Investment Company
Act of 1940, as amended, as an open-end management
investment company.
Effective April 16, 1998, the Fund changed its name
from Scudder Global Discovery Fund to Global
Discovery Fund and an additional three classes of
shares were offered, namely Classes A, B and C.
Existing shares of Global Discovery Fund
outstanding on that date were redesignated Scudder
Shares ("Class S"). Class A shares are sold to
investors subject to an initial sales charge. Class
B shares are sold without an initial sales charge
but are subject to higher ongoing expenses than
Class A and Class S and a contingent deferred sales
charge payable upon certain redemptions. Class B
shares automatically convert to Class A shares six
years after issuance. Class C shares are sold
without an initial sales charge but are subject to
higher ongoing expenses than Class A and Class S
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class S is generally not available
to new investors and is not subject to initial or
contingent deferred sales charges. Although
shareholders of different classes of the Fund have
an interest in the same portfolio of assets,
shareholders of different classes may bear
different expenses in connection with different
methods of distribution. Differences in class
expenses will result in the payment of different
per share income dividends by class. All shares of
the Fund have equal rights with respect to voting,
dividends and assets, subject to class specific
preferences.
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 securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported on such system. If there are no such
sales, the value is the most recent bid quotation.
Securities which are not quoted on the Nasdaq
System but are traded in another over-the-counter
market are valued at the most recent sale price on
such market. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities other than money market
instruments with an original maturity over sixty
days are valued by pricing agents approved by the
officers of the 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 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.
23
NOTES TO Financial Statements
<PAGE> 24
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,
dividend and interest income and certain expenses
at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and
losses on investments which is due to changes in
foreign exchange rates from that which is due to
changes in market prices of the investments. Such
fluctuations are included with the net realized and
unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from
foreign currency related transactions includes
gains and losses between trade and settlement dates
on securities transactions, gains and losses
arising from the sales of foreign currency, and
gains and losses between the ex and payment dates
on dividends, 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.
Forward contracts are valued at the prevailing
forward exchange rate of the underlying currencies
and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and
broker are offset and any gain (loss) is realized
on the date of offset; otherwise, gain (loss) is
realized on settlement date. Realized and
unrealized gains and losses which represent the
difference between the value of the forward
contract to buy and the forward contract to sell
are included in net realized 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.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income are made annually. During any
particular year net realized gains from investment
24
Notes
to FINANCIAL STATEMENTS
<PAGE> 25
transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not
distributed and, therefore, will be distributed to
shareholders annually. 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 primarily relate to
investments in forward contracts, passive foreign
investment companies, and certain securities sold
at a loss. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
The Fund uses the identified cost method for
determining realized gain or loss on investments
for both financial and federal income tax reporting
purposes.
OTHER. Investment security transactions are
accounted for on a trade-date basis. Dividend
income and distributions to shareholders are
recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
- --------------------------------------------------------------------------------
2
CAPITAL SHARE
TRANSACTIONS The following table summarizes capital share and
dollar activity in the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 47,553 $ 1,121,086 -- $ --
-------------------------------------------------------------------------------------------
Class B 6,547 152,537 -- --
-------------------------------------------------------------------------------------------
Class C 847 20,075 -- --
-------------------------------------------------------------------------------------------
Class S 4,269,052 91,181,421 6,176,506 129,503,033
-------------------------------------------------------------------------------------------
4,323,999 92,475,119 6,176,506 129,503,033
SHARES ISSUED TO SHAREHOLDERS IN REINVESTMENT OF DISTRIBUTIONS
Class A -- $ -- -- $ --
-------------------------------------------------------------------------------------------
Class B -- -- -- --
-------------------------------------------------------------------------------------------
Class C -- -- -- --
-------------------------------------------------------------------------------------------
Class S 1,514,636 29,399,080 829,650 16,335,810
-------------------------------------------------------------------------------------------
1,514,636 29,399,080 829,650 16,335,810
SHARES REDEEMED
Class A (20,645) $ (499,608) -- $ --
-------------------------------------------------------------------------------------------
Class B -- -- -- --
-------------------------------------------------------------------------------------------
Class C -- -- -- --
-------------------------------------------------------------------------------------------
Class S (4,921,154) (104,545,453) (8,023,612) (167,423,822)
-------------------------------------------------------------------------------------------
(4,941,799) (105,045,061) (8,023,612) (167,423,822)
NET INCREASE (DECREASE)
Class A 26,908 $ 621,478 -- $ --
-------------------------------------------------------------------------------------------
Class B 6,547 152,537 -- --
-------------------------------------------------------------------------------------------
Class C 847 20,075 -- --
-------------------------------------------------------------------------------------------
Class S 862,534 16,035,048 (1,017,456) (21,584,979)
-------------------------------------------------------------------------------------------
896,836 16,829,138 (1,017,456) (21,584,979)
</TABLE>
25
NOTES TO Financial Statements
<PAGE> 26
- --------------------------------------------------------------------------------
3
PURCHASES AND
SALES OF SECURITIES During the six months ended April 30, 1998,
purchases and sales of investment securities
(excluding short-term investments) aggregated
$61,550,436 and $82,003,977, respectively.
- --------------------------------------------------------------------------------
4
RELATED
PARTIES Effective December 31, 1997, Scudder, Stevens &
Clark, Inc. ("Scudder") and The Zurich Insurance
Company ("Zurich"), an international insurance and
financial services organization, formed a new
global investment organization by combining
Scudder's business with that of Zurich's
subsidiary, Zurich Kemper Investments, Inc. As a
result of the transaction, Scudder changed its name
to Scudder Kemper Investments, Inc. ("Scudder
Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of
the Fund's Investment Management Agreement with
Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the
Fund and Scudder Kemper was approved by the Fund's
Board of Directors and by the Fund's Shareholders.
The Management Agreement, which was effective
December 31, 1997, is the same in all material
respects as the corresponding previous Investment
Management Agreement, except that Scudder Kemper is
the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper,
the Fund has agreed to pay to the Adviser a fee
equal to an annual rate of 1.10% of the Fund's
average daily net assets, computed and accrued
daily and payable monthly. As manager of the assets
of the Fund, 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 Management Agreement. For the six months ended
April 30, 1998, the fee pursuant to these
agreements amounted to $1,944,544, of which
$357,191 is unpaid at April 30, 1998.
Kemper Distributors, Inc. ("KDI"), a subsidiary of
the Adviser, is the principal underwriter for
Classes A, B and C. Underwriting commissions paid
in connection with the distribution of Class A
shares for the period beginning April 16, 1998
through April 30, 1998 aggregated $613, of which $6
was retained by KDI and $607 was paid to all other
firms including affiliates. For services under the
distribution services agreement, KDI receives a fee
of .75% of average daily net assets of Classes B
and C. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and C shares.
In addition, KDI receives any contingent deferred
sales charge (CDSC) from redemptions of Classes B
and C shares. Distribution fees and commissions
paid to KDI in connection with the sale of Classes
B and C shares, and the CDSC received in connection
with the redemption of such shares for the period
beginning April 16, 1998 through April 30, 1998
aggregated $14, all of which is unpaid.
KDI provides information and administrative
services to Classes A, B and C shareholders at an
annual rate of up to .25% of average daily net
assets for each such class. KDI in turn has various
agreements with financial services firms that
provide these services and pays these firms based
on assets of shareholder accounts the firms
service. For the period beginning April 16, 1998
through
26
Notes
to FINANCIAL STATEMENTS
<PAGE> 27
April 30, 1998, the amount of administrative
services fees aggregated $25, all of which is
unpaid.
Kemper Service Company ("KSC"), an affiliate of the
Adviser, is the transfer, dividend-paying and
shareholder service agent for the Fund's Classes A,
B and C shares. For the period beginning April 16,
1998 through April 30, 1998, the amount charged to
the relevant classes by KSC aggregated $155, all of
which is unpaid. Scudder Service Corporation
("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service
agent for Class S. Included in services to
shareholders is $372,813 charged to Class S by SSC
for the six months ended April 30, 1998, of which
$63,332 is unpaid at April 30, 1998.
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 Class S. For the six
months ended April 30, 1998, the amount charged to
Class S by STC aggregated $97,610, of which $16,553
is unpaid at April 30, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for
determining the daily net asset value per share and
maintaining the portfolio and general accounting
records of the Fund. For the six months ended April
30, 1998, the amount charged to the Fund by SFAC
aggregated $109,104, of which $25,761 is unpaid at
April 30, 1998.
The Fund pays each Director not affiliated with the
Adviser an annual retainer, plus specified amounts
for attended board and committee meetings. For the
six months ended April 30, 1998, Directors' fees
and expenses aggregated $21,047.
- --------------------------------------------------------------------------------
5
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 33 1/3 percent of its net assets under the
agreement. In addition, the Fund also maintains an
uncommitted line of credit.
27
NOTES TO Financial Statements
<PAGE> 28
DIRECTORS
OFFICERS
DANIEL PIERCE
Director and Vice President
NICHOLAS BRATT
President
PAUL BANCROFT III
Director
SHERYLE J. BOLTON
Director
WILLIAM T. BURGIN
Director
THOMAS J. DEVINE
Director
KEITH R. FOX
Director
WILLIAM H. GLEYSTEEN, JR.
Director
WILLIAM H. LUERS
Director
KATHRYN L. QUIRK
Director, Vice President
and Assistant Secretary
ROBERT W. LEAR
Honorary Director
ROBERT G. STONE, JR.
Honorary Director
SUSAN E. DAHL
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
THOMAS F. MCDONOUGH
Vice President, Secretary
and Treasurer
JOHN R. HEBBLE
Assistant Treasurer
CAROLINE PEARSON
Assistant Secretary
<TABLE>
<S> <C>
..........................................................................................................
LEGAL COUNSEL DECHERT PRICE & RHOADS
Ten Post Office Square South
Boston, MA 02109
..........................................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
..........................................................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
..........................................................................................................
INDEPENDENT COOPERS & LYBRAND L.L.P.
AUDITORS 1 Post Office Square
Boston, MA 02109
..........................................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
</TABLE>
KEMPER LOGO
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Global Discovery Fund prospectus.
KGDF - 3 (6/98) 1048420
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
DIRECTORS&OFFICERS
