SCUDDER
INVESTMENTS(SM)
[LOGO]
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EQUITY/GLOBAL
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Scudder Global
Discovery Fund
Fund #010
Annual Report
October 31, 1999
The fund seeks to provide above-average capital appreciation over the long term.
Scudder Global Discovery Fund is properly known as Global Discovery Fund.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
17 Glossary of Investment Terms
18 Investment Portfolio
26 Financial Statements
27 Financial Highlights
30 Notes to Financial Statements
37 Report of Independent Accountants
38 Tax Information
39 Officers and Directors
40 Investment Products and Services
42 Scudder Solutions
2 SCUDDER GLOBAL DISCOVERY FUND
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Scudder Global Discovery Fund
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ticker symbol SGSCX fund number 010
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Date of Inception:
9/10/91
o The 41.95% return of Scudder Global Discovery Fund
-- Scudder Shares surpassed by a wide margin the
17.45% return of the unmanaged Salomon Brothers
World Equity Extended Market Index for the
12-month period ended October 31, 1999.
Total Net Assets of Scudder Shares
as of 10/31/99: $404 million
o The fund's emphasis on selecting a few stocks from
its global universe of small- and mid-cap growth
stocks, especially those in the technology and
health care areas, were important contributors to
its outperformance.
o This return added to the solid longer-term
performance of Scudder Shares as indicated by its
overall five-star Morningstar Rating(TM) for its
risk-adjusted performance among 1,053
international equity funds as of October 31,
1999.(1)
(1) Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 10/31/99. 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 its
broad asset class, the top 10% of funds receive 5 stars and the next 22.5%
receive 4 stars. In the international equity category, the fund's Scudder
Shares received a 4-star rating for the three-year period and a 5-star
rating for the five-year period among 1,035 and 597 funds, respectively. The
fund's Scudder Shares were not rated for the ten-year period because the
fund commenced operations on September 10, 1991. Past performance is no
guarantee of future results.
SCUDDER GLOBAL DISCOVERY FUND 3
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Letter from the Fund's President
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[PHOTO]
Nicholas Bratt,
President,
Scudder Global
Discovery Fund
Dear Shareholders,
Global investors have enjoyed the best of both worlds as a robust U.S. stock
market has been complemented by rebounding performance abroad. The biggest
gainers during the period were primarily a handful of large-cap growth stocks,
especially U.S. technology stocks. However, the market's narrow focus did not
preclude the Scudder Global Discovery Fund from benefiting. In fact, the fund's
demonstrated ability to select outperforming small- and mid-cap stocks around
the globe was evident during the 12-month period.
In the following pages, portfolio managers Gerald J. Moran, Sewall Hodges, and
Steven T. Stokes describe the market environment and their investment process
that has contributed to the fund's impressive long-term results. We encourage
you to read it.
For current information on your fund and your account visit our Internet Web
site at www.scudder.com. There you'll find a wealth of information, including
the most recent fund performance, the latest news on Scudder products and
services, and the opportunity to perform account transactions. You can also
speak with one of our representatives by calling 1-800-SCUDDER (1-800-728-3337).
In closing, I would like to inform you that Daniel Pierce, president of the
fund, retired in June. At that time I assumed his role and responsibilities. We
are fortunate that Dan's long-standing
4 SCUDDER GLOBAL DISCOVERY FUND
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affiliation with Scudder is ongoing, and that we will continue to benefit from
his counsel. I am pleased to join the fund's team in this capacity, and look
forward to serving your interests.
Thank you for your continued investment in Scudder Global Discovery Fund.
Sincerely,
/s/ Nicholas Bratt
Nicholas Bratt
President,
Scudder Global Discovery Fund
SCUDDER GLOBAL DISCOVERY FUND 5
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Performance Update
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October 31, 1999
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Global Discovery Fund -- Salomon Brothers World
Scudder Shares Equity EMI*
9/91** 10000 10000
'91 9770 10148
'92 9894 9705
'93 13459 12714
'94 13837 13493
'95 14988 14422
'96 18131 16569
'97 20151 18779
'98 20390 17934
'99 28944 21064
Yearly periods ended October 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 10/31/1999 $10,000 Cumulative Annual
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Global Discovery Fund -- Scudder Shares
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1 year $ 14,195 41.95% 41.95%
5 year $ 20,918 109.18% 15.91%
Life of Class** $ 29,426 194.26% 14.18%
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Salomon Brothers World Equity EMI*
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1 year $ 11,745 17.45% 17.45%
5 year $ 15,610 56.10% 9.31%
Life of Class** $ 21,063 110.63% 9.65%
* 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 Fund commenced operation on September 10, 1991. Index comparisons
begin September 30, 1991.
6 SCUDDER GLOBAL DISCOVERY FUND
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Returns and Per Share Information
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Yearly periods ended October 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE GLOBAL DISCOVERY
FUND -- SCUDDER SHARES CLASS TOTAL RETURN (%) AND SALOMON BROTHERS WORLD EQUITY
EXTENDED MARKET INDEX* TOTAL RETURN (%)
<TABLE>
<CAPTION>
1991** 1992 1993 1994 1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class Total Return (%) -.67 1.26 36.04 2.80 8.32 20.97 11.14 1.19 41.95
Index Total Return (%)*** 1.48 -4.37 31.01 6.13 6.88 14.89 13.34 -4.50 17.45
Net Asset Value ($) 11.92 12.05 16.14 16.27 17.54 20.45 21.64 19.81 28.17
Income Dividends ($) -- .02 .07 .18 -- .20 .13 .64 --
Capital Gains
Distributions ($) -- -- .12 .15 .08 .44 .86 1.41 --
</TABLE>
* 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 Fund commenced operation on September 10, 1991. Index comparisons
begin September 30, 1991.
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. Performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained expenses, the total returns for the one year, five year, and
life of Class periods would have been lower.
*** Prior to April 30, 1997, the Morgan Stanley Capital International World
Index was used as a comparative index.
SCUDDER GLOBAL DISCOVERY FUND 7
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Portfolio Summary
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October 31, 1999
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Geographical
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 13% Cash Equivalents) Holdings in Japan were increased
U.S. & Canada 44% significantly, funded primarily
Europe 41% by reductions in European
Japan 11% telecommunications stocks.
Pacific Basin 2%
Other 2%
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100%
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Sectors
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 13% Cash Equivalents)
Technology 27% The fund's significant
Service Industries 24% weightings in the technology and
Consumer Discretionary 11% health care sectors benefited
Financial 10% from the strong performance of
Health 8% these sectors.
Consumer Staples 4%
Energy 4%
Transportation 3%
Manufacturing 3%
Other 6%
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100%
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8 SCUDDER GLOBAL DISCOVERY FUND
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Ten Largest Equity Holdings
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<TABLE>
<CAPTION>
<S> <C>
(31% of Portfolio) While the fund tends to hold
significant individual
1. Network Appliance, Inc. positions, management pursues a
Designer and manufacturer of network data storage devices diversified approach and
in the United States emphasizes companies that have a
low correlation to each other.
2. Serco Group plc
Facilities management company in the United Kingdom
3. Tiffany & Co.
Retailer of jewelry and gift items in the United States
4. Symbol Technologies Inc.
Manufacturer of bar code laser scanners in the United States
5. Altran Technologies S.A.
Provider of engineering and consulting services in France
6. Vitesse Semiconductor Corp.
Manufacturer of digital integrated circuits in the United States
7. ARM Holdings plc
Designer of RISC microprocessors and related technology in the United
Kingdom
8. Benesse Corp.
Provider of educational services in Japan
9. VISX Inc.
Developer of laser technologies and systems for vision correction in the
United States
10. Anglo Irish Bank Corp.
Provider of financial services for business and private sectors in Ireland
</TABLE>
For more complete details about the Fund's investment portfolio, see page 18. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
SCUDDER GLOBAL DISCOVERY FUND 9
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Portfolio Management Discussion
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October 31, 1999
In the following interview, portfolio managers Gerald J. Moran, Sewall Hodges,
and Steven T. Stokes discuss the market environment and their approach to
managing the fund.
Q: How did the fund's Scudder Shares perform for the 12-month period
that ended October 31, 1999?
A: Clearly, this has been a good period for the fund. The 41.95%
return of the fund's Scudder Shares surpassed the 17.45% return of
its benchmark, the unmanaged Salomon Brothers World Equity
Index-Extended Market Index (EMI). We are pleased with this return,
which was achieved during a difficult period when smaller-cap stocks
generally did not perform as well as the 25.58% return of the
large-cap Salomon Brothers World Equity Index-Primary Market Index
(PMI). Scudder Shares also surpassed the 14.86% return of U.S.
small-cap stocks as measured by the Russell 2000 Index and the
25.68% of the large-cap S&P 500 Index. Longer term and on a
risk-adjusted basis, the fund's Scudder Shares also earned it an
overall five-star Morningstar Rating(TM) for its risk-adjusted
performance among 1,053 international equity funds as of October 31,
1999.(1)
Q: What was responsible for the fund's strong performance?
A: We continued to place our bets on relatively few well run,
rapidly growing companies in diverse markets and industries. This
approach led us to focus on companies in the United States, the
United Kingdom, and Japan. Holdings in Israel and France also were
important contributors to performance, while detractors were mainly
in the peripheral European countries.
(1) Morningstar proprietary ratings reflect historical risk-adjusted
performance as of 10/31/99. 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 its broad asset class, the top 10% of funds receive 5
stars and the next 22.5% receive 4 stars. In the international equity
category, the fund's Scudder Shares received a 4-star rating for the
three-year period and a 5-star rating for the five-year period among 1,035
and 597 funds, respectively. The fund's Scudder Shares were not rated for
the ten-year period because the fund commenced operations on September 10,
1991. Past performance is no guarantee of future results.
10 SCUDDER GLOBAL DISCOVERY FUND
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Q: How did you position the portfolio?
A: In the first six months of the period, we maintained and added to
our positions in a few well run domestic companies with exceptional
prospects. In the second half of the period, we sharply increased
holdings in Japan (from 2% to 10% of assets) in an effort to
capitalize on the improving environment. The shift was funded
primarily by reducing the fund's U.S. holdings. While our increase
in Japan was the most notable allocation change over the period, the
portfolio's overall country diversification has been broadened,
reflecting improved prospects in many parts of the world and our
identification of a greater number of attractive small- and
mid-sized companies outside the United States.
Q: What are some of the names that make up your larger Japanese
weighting?
A: We added a number of positions in a variety of industries, but
Benesse is our largest holding in Japan. It is up strongly since it
was added to the portfolio in July. Benesse is Japan's largest
provider of correspondence education programs aimed at a wide range
of students from one-year-old to high school age. With more than
four million enrolled students, the company dominates the
correspondence education market in Japan. We like the company
because Internet market growth and health care deregulation are
among the major structural changes expected to unfold over the next
three to five years, and Benesse is one of the few companies that
should benefit from both of these changes.
Q: In searching for good growth companies, the fund historically has
had significant weightings in high growth sectors such as technology
and health care. Tell us about your approach in the technology
sector.
A: In the technology sector (which constituted 27% of assets at the
end of the period), we believe that there is no such thing as a
domestic technology company. Successful firms must be global, or
they will likely fail. Our most
SCUDDER GLOBAL DISCOVERY FUND 11
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successful tech holdings over the 12 months illustrate this point.
These included Network Appliance (U.S.), Fujitsu Support and Service
(Japan), Checkpoint Software Technologies, Ltd. (Israel), and Altran
Technologies (France). The geographical diversification of these
companies reflects one of the benefits of investing in a global fund
-- we are not constrained by national borders.
Q: What about health care? This sector has been somewhat of a mixed
bag for U.S. companies.
A: We've had a number of successful holdings in this sector, but
VISX continued to provide remarkable performance. VISX is a
U.S.-based company that manufactures the lasers used in vision
correction surgery. For many individuals with less than perfect
vision, the company's patented treatment permits the elimination of
eyeglasses. VISX collects a royalty per eyeball corrected and, with
only one million operations completed in a market with a potential
for 30 million operations, this potential has translated into
exceptional performance for the stock. We sold a portion of our
shares, which had more than tripled over the 12 months, to lock in
some of the gains. As one of the fund's top holdings for most of the
period, VISX made a significant contribution to performance.
Q: The convergence of telecommunications and technology has
frequently been in the headlines. Has the fund participated in this
area?
A: We are big proponents of the potential for the telecommunications
sector over the long term. Recently we have moved away from service
providers to focus on suppliers. Two key fund holdings in this area
are JOT Automation (Finland), a major manufacturing systems supplier
to Nokia, the cellular phone maker, and Arm Holdings PLC (U.K.), one
of the most successful designers of high performance low-cost,
power-efficient RISC microprocessors and related technology and
software.
12 SCUDDER GLOBAL DISCOVERY FUND
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Q: You mentioned earlier that you have taken steps to broaden the
portfolio's diversification. Please explain.
A: In addition to expanding the portfolio's country exposure, we
have made a deliberate effort to construct more of an "all-weather"
portfolio. The strong gains of certain market sectors, such as U.S.
technology stocks, are leading us to look for growing companies in
other areas that have more reasonable valuations. One example is the
energy sector where we have built an above-average position. Energy
typically is not a high growth area, but the price of oil has
essentially doubled from year ago levels. In this area we added
Petroleum Geo-Services, (Norway), which markets seismic data, and
provides reservoir monitoring, consulting services, data management
solutions, and other specialized geophysical services on a worldwide
basis. While many energy services companies have had poor earnings
prior to this summer, we expect the higher price levels will be
maintained for the near term, which should benefit these companies.
Q: What detracted from performance?
A: Our significant holdings in Europe were hurt by the 11% decline
of the euro versus the dollar. On an individual security basis,
TelePizza (pizza chain) in Spain and Jeronimo Martin (supermarkets)
and Telecel Comunicacoes Pessoais (cellular phone service) in
Portugal did not live up to expectations. We exited these positions
during the period, with the exception of Jeronimo Martin where we
expect a recovery in its operations in Brazil and Poland.
Q: How do you select stocks for the portfolio?
A: To arrive at the roughly 150 names that make up the portfolio, we
filter the global small-cap universe by reviewing seven key business
attributes such as competitive position, prospects for repeat
revenues, and the quality of company management. Following this
initial review, 93% of the researched companies are eliminated. The
remaining seven percent are then subjected to further detailed
SCUDDER GLOBAL DISCOVERY FUND 13
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analysis including a review of the industry and market. The
portfolio is very concentrated with the top ten holdings accounting
for roughly 31% of assets while the top 50 stocks constitute nearly
90% of assets. To attempt to minimize risk, we then diversify among
these names by country, industry, and market sector.
Q: What is your outlook?
A: We think that the predominance of U.S. growth will have to be
shared with the rest of the world. With market valuations high in
many sectors of the U.S. market -- especially for IPOs (initial
public offerings of stock), we believe there will be greater upside
potential abroad. As such, over half of the portfolio is invested in
stocks of companies domiciled overseas. Already we have begun to see
signs that investors are broadening their horizons as the Japanese
and selected Asian stock markets are looking better.
14 SCUDDER GLOBAL DISCOVERY FUND
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Stock Market and Currency Performance
For the 12 months ended October 31, 1999
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
Stock Market Index Currency Return Relative
Return (Local) to U.S. Dollar
Korea 140.81% 10.00%
Brazil 76.66% -38.76%
Singapore 61.43% -2.14%
Japan 42.09% 11.66%
France 40.08% -10.96%
Israel 33.69% 0.72%
Mexico 31.97% 4.92%
Hong Kong 27.63% -0.30%
Netherlands 26.75% -10.92%
U.S. 26.69% 0.00%
Taiwan 26.19% 2.28%
Germany 21.26% -11.00%
Argentina 20.29% 0.02%
Philippines 8.98% 0.50%
U.K. 15.58% -2.02%
Italy 14.70% -11.07%
Spain 13.60% -10.86%
Ireland 11.29% -11.18%
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Source: Morgan Stanley Capital International indices from Factset; all
indices are unmanaged.
SCUDDER GLOBAL DISCOVERY FUND 15
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Scudder Global Discovery Fund:
A Team Approach to Investing
Scudder Global Discovery Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an important
role in the fund's management process. Team members work together to develop
investment strategies and select securities for the fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits fund investors
by bringing together many disciplines and leveraging our extensive resources.
[PHOTO]
Gerald J. Moran
Lead portfolio manager Gerald J. Moran has set Scudder Global Discovery Fund's
investment strategy and overseen its daily operation since the fund was
introduced in 1991. Mr. Moran joined Scudder's equity research and management
area in 1968 and has been a portfolio manager since 1985.
[PHOTO]
Sewall Hodges
Portfolio manager Sewall Hodges joined the Adviser in 1995 and the team in 1996.
Mr. Hodges, who has 11 years' experience in global analysis and portfolio
management, focuses on stock selection and research.
[PHOTO]
Steven T. Stokes
Portfolio manager Steven T. Stokes joined the Adviser in 1996 and the team in
1999. Mr. Stokes has 13 years of experience as an equity analyst.
16 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Glossary of Investment Terms
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Currency Devaluation
A significant decline of a currency's value relative to other currencies, such
as the U.S. dollar. Trading or central bank intervention (or the lack of
intervention) may prompt this 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.
Fundamental Research
Analysis of companies based on the projected impact of management, products,
sales, and earnings on balance sheets and income statements. Distinct from
technical analysis, which evaluates the attractiveness of a stock, based on
historical price and trading volume movements, rather than the financial results
of the underlying company.
Growth Stock
Stock of a company that has displayed above-average earnings growth and is
expected to continue to increase profits rapidly going forward. Stocks of such
companies usually trade at higher price earnings multiples (see price/earnings
ratio) and experience more price volatility than the market as a whole. Distinct
from value stock.
Liquidity
A characteristic of an investment or an asset referring to the ease of
convertibility into cash within a reasonably short period of time.
Market Capitalization
The value of a company's outstanding shares of common stock, determined by
multiplying the number of shares outstanding by the share price (shares x price
= market capitalization). The universe of publicly traded companies is
frequently divided into large-, mid-, and small-capitalizations.
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.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms) Additional glossary terms are located at our Internet Web site
- -- www.scudder.com.
SCUDDER GLOBAL DISCOVERY FUND 17
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Investment Portfolio as of October 31, 1999
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<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
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Repurchase Agreement 3.6%
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<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 10/29/1999 at 5.2%, to be repurchased at
$18,484,006 on 11/1/1999, collateralized by a
$18,494,000 U.S. Treasury Note Inflationary Index,
3.625%, 1/15/2008 (Cost $18,476,000) .............................................. 18,476,000 18,476,000
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Short Term Notes 9.8%
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Federal Home Loan Mortgage Corp., 5.16%**, 11/1/1999
(Cost $50,000,000) ................................................................ 50,000,000 50,000,000
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stocks 86.6%
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<S> <C> <C>
Australia 0.3%
Austar United Communications Limited*
(Provider of cable television services) ........................................... 236,800 769,171
CI Technologies Group, Ltd. (Developer of process
monitoring and industrial automation software) .................................... 219,700 951,503
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1,720,674
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Austria 0.2%
Schoeller-Bleckmann Oilfield Equipment AG
(Manufacturer of parts for drilling equipment) .................................... 136,000 910,493
Topcall International AG* (Developer, marketer, and
supporter of high-end unified messaging systems) .................................. 20,150 308,040
-----------
1,218,533
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Canada 1.3%
Creo Products Inc.* (Manufacturer of printing
related products) ................................................................. 33,300 849,150
QLT Phototherapeutics Inc.* (Developer of
pharmaceutical products) .......................................................... 138,100 5,828,866
-----------
6,678,016
-----------
Croatia 0.1%
Pliva D.D. (GDR) (Pharmaceutical company) ............................................ 26,900 293,210
-----------
Finland 1.3%
JOT Automation Group Oyj (Developer of production
automation systems) ............................................................... 1,102,900 5,697,657
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
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<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Perlos Oyj* (Manufacturer of injection moulded,
thermoplastic components) ......................................................... 42,900 705,579
-----------
6,403,236
-----------
France 4.4%
Altran Technologies S.A. (Provider of engineering and
consulting services) .............................................................. 47,773 16,414,623
Dassault Systemes S.A. (Computer aided design,
manufacturing and engineering software) ........................................... 42,691 1,774,709
GFI Informatique (Provider of computer consulting
and systems integration services) ................................................. 8,052 721,584
Leon de Bruxelles S.A. (Operator of low cost
family restaurants) ............................................................... 25,605 658,686
Transiciel S.A. (Developer of software for public services,
finance and industry) ............................................................. 51,384 2,974,160
-----------
22,543,762
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Germany 2.8%
ADVA AG Optical Networking* (Manufacturer of optical
networking products) .............................................................. 2,200 236,585
Epcos AG* (Producer of electronic components and
integrated circuits) .............................................................. 57,601 2,367,205
Hawesko Holding AG (Marketer of wines and liqueurs and
related products) ................................................................. 43,424 1,373,457
Marschollek, Lautenschlaeger und Partner AG (pfd.)
(Insurance company) ............................................................... 28,200 5,961,115
Medion AG (Marketer and distributor of multimedia
products and various consumer appliances) ......................................... 2,218 596,301
Pfeiffer Vacuum Technology AG (ADR) (Manufacturer of
various pumps and vacuum systems) ................................................. 64,300 2,443,400
Trintech Group PLC* (Developer of electronic point
of sale systems) .................................................................. 34,900 615,113
W.E.T. Automotive Systems AG* (Manufacturer of
heating, wiring, and cable components) ............................................ 17,945 743,533
-----------
14,336,709
-----------
Greece 0.3%
STET Hellas Telecommunications S.A. (ADR)*
(Mobile telecommunication services) ............................................... 58,221 1,251,752
-----------
Hong Kong 0.5%
Li & Fung Ltd. (Investment holding company) .......................................... 1,294,000 2,265,499
-----------
Hungary 0.2%
OTP Bank Rt (GDR) (Savings and commercial bank) ...................................... 23,300 1,042,675
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER GLOBAL DISCOVERY FUND 19
<PAGE>
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<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Indonesia 0.0%
PT Steady Safe Transportation Service Tbk* (Operator of
taxis and buses in Jakarta) ....................................................... 444 16
-----------
Ireland 6.3%
Anglo Irish Bank Corp. PLC (Provider of financial
services for business and private sectors) ........................................ 4,105,821 9,653,147
ESAT Telecom Group PLC (ADR)* (Provider of
telecommunication services) ....................................................... 111,800 5,003,050
Elan Corp. "A"* (Warrants) expires 12/31/2001
(Developer of controlled-absorption drug
delivery systems) ................................................................. 156,100 4,136,650
Green Property PLC (Conducts operations in property
development, investment and trading) .............................................. 354,880 2,086,750
Irish Continental Group PLC (Transporter of passengers,
freight and containers between Ireland the
U.K. and the continent) ........................................................... 211,555 2,219,271
Irish Permanent PLC (Retail financial services group) ................................ 185,662 1,898,711
Jury's Hotel Group PLC (Hotel operator) .............................................. 616,435 5,329,239
Ryan Hotels PLC (Owner and operator of hotel chain) .................................. 1,926,080 1,766,679
-----------
32,093,497
-----------
Israel 1.7%
Check Point Software Technologies Ltd.* (Developer,
marketer and supporter of management solutions for
active networks) .................................................................. 71,600 8,283,225
Sapiens International Corp. N.V.* (Provider of software
applications) ..................................................................... 46,800 432,900
-----------
8,716,125
-----------
Italy 1.4%
Bulgari SpA (Manufacturer and retailer of fine jewelry,
luxury watches and perfumes) ...................................................... 444,800 3,141,981
Safilo SpA (Manufacturer of frames for glasses) ...................................... 518,000 3,817,429
-----------
6,959,410
-----------
Jamaica 0.3%
Kyorin Pharmaceutical Co., Ltd. (Seller of prescription
medicines) ........................................................................ 40,000 1,455,313
-----------
Japan 9.6%
Benesse Corp. (Provider of educational services) ..................................... 64,000 13,700,682
Chugai Pharmaceutical Co., Ltd. (Pharmaceutical company) ............................. 188,000 2,237,880
FamilyMart Co., Ltd. (Convenience store chain) ....................................... 66,000 4,593,453
Fujitsu Support and Service Inc. (Provider of information
services) ......................................................................... 21,500 6,047,326
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gunze, Ltd. (Leading manufacturer of underwear and
sportswear) ....................................................................... 173,000 423,490
Internet Initiative Japan Inc. (ADR)*
(Provider of Internet services) ................................................... 34,700 1,865,125
Jafco Co., Ltd. (Venture capital company) ............................................ 37,000 4,155,707
Rock Field Co., Ltd. (Marketer of delicatessen food) ................................. 18,000 891,619
Uni-Charm Co. (Manufacturer of sanitary napkins, diapers,
and body care goods) .............................................................. 152,000 8,886,244
Wako Securities Co., Ltd.* (Securities firm) ......................................... 1,269,000 3,849,515
York-Benimaru Co., Ltd. (Operator of supermarket chain) .............................. 53,700 2,216,665
-----------
48,867,706
-----------
Luxembourg 0.8%
Millicom International Cellular S.A.* (Developer and
operator of cellular telephone networks) .......................................... 127,400 4,299,750
-----------
Netherlands 1.7%
IHC Caland NV (Supplier of materials for offshore oilfields) ......................... 178,580 7,766,419
Versatel Telecom International NV* (Telecommunication
services) ......................................................................... 66,360 825,567
-----------
8,591,986
-----------
Norway 0.5%
Petroleum Geo-Services (ADR)* (Provider of oilfield services) ........................ 183,300 2,680,763
-----------
Philippines 0.3%
International Container Terminal Services, Inc.
(Containerized cargo handling firm) ............................................... 15,415,650 1,480,056
-----------
Poland 0.2%
Pioneer Poland Fund (b) (Closed-end investment company) .............................. 3 1,190,375
-----------
Portugal 1.1%
Jeronimo Martins SGPS, S.A. (Food producer and retailer) ............................. 150,925 4,223,049
SIVA SGPS SA (Importer of automobiles) ............................................... 37,150 500,949
Semapa-Sociedade de Investimento e Gestao,
SPGS SA (Cement producer) ......................................................... 27,650 499,072
UNICER-Uniao Cervejaria, SA (Bottler of beer, softdrinks,
juices and water) ................................................................. 22,750 431,736
-----------
5,654,806
-----------
Singapore 0.4%
Chartered Semiconductor (ADR)* (Manufacturer of
semiconductors) ................................................................... 60,400 2,004,525
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER GLOBAL DISCOVERY FUND 21
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Spain 0.4%
Sogecable, S.A.* (Provider of cable television) ...................................... 41,793 1,150,468
Telefonica Publicidad e Informacion, S.A.* (Publisher of
telephone directories) ............................................................ 38,717 846,184
-----------
1,996,652
-----------
Sweden 0.7%
Framtidsfabriken AB* (Internet consulting company) ................................... 7,500 302,607
Kinnevik AB "B" (Diversified holding company) ........................................ 53,200 1,057,035
Modern Times Group MTG "B"* (Group of
media companies) .................................................................. 72,900 2,363,738
-----------
3,723,380
-----------
Switzerland 0.6%
Fantastic Corp.* (Provider of multimedia related
software solutions) ............................................................... 11,457 809,300
Kuoni Reisen AG (Registered) (Travel agency) ......................................... 511 2,181,323
-----------
2,990,623
-----------
United Kingdom 12.7%
ARM Holdings PLC* (Designer of RISC microprocessors
and related technology) ........................................................... 488,100 13,800,586
Aegis Group PLC (Independent media services group) ................................... 1,463,854 3,852,393
Baltimore Technologies PLC* (Manufacturer of computer
related software) ................................................................. 52,990 1,638,569
Bodycote International PLC (Diversified holding company) ............................. 610,570 2,490,577
Expro International Group PLC (Provider of oilfield services) ........................ 438,900 2,537,487
Games Workshop Group PLC (Manufacturer of table
top war game systems and miniatures) .............................................. 163,000 1,260,081
Guardian IT PLC (Provider of business continuity and
disaster recovery services) ....................................................... 84,016 907,905
JSB Software Technologies* (Developer of networking
and connectivity software) ........................................................ 100 526
Matalan PLC (Clothing retailer) ...................................................... 256,786 5,828,587
PizzaExpress PLC (Operator of pizza restaurants) ..................................... 270,092 3,587,295
RM PLC (Information technology solutions to
educational markets) .............................................................. 677,500 6,942,409
Regent Inns PLC (Owner and operator of hotels
and restaurants) .................................................................. 190,992 552,892
Serco Group PLC (Facilities management company) ...................................... 703,700 20,255,289
Taylor Nelson Sofres PLC (Market research company) ................................... 300,062 905,649
-----------
64,560,245
-----------
United States 36.5%
AMCOL International Corp. (Producer and distributor of
polymers) ......................................................................... 28,600 350,350
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advance Paradigm, Inc.* (Provider of health benefit
management services) .............................................................. 6,400 272,795
Alexion Pharmaceuticals, Inc.* (Developer of
immunoregulatory compounds) ....................................................... 79,500 1,063,313
Alpharma Inc. (Manufacturer and marketer of human
pharmaceutical and animal health products) ........................................ 68,800 2,420,900
America West Holdings Corp. "B"* (Passenger airline) ................................. 203,200 4,203,700
American Axle & Manufacturing Holdings, Inc.* (Designer
and manufacturer of automobile parts) ............................................. 29,400 409,763
American Italian Pasta Co. "A"* (Producer and marketer of
dry pasta) ........................................................................ 15,200 381,900
Anadarko Petroleum Corp. (Oil and gas exploration
and production) ................................................................... 56,100 1,728,581
Aptargroup, Inc. (Manufacturer of packaging equipment
components) ....................................................................... 118,200 3,176,625
ArthroCare Corp.* (Manufacturer of orthopedic surgical
equipment) ........................................................................ 22,300 1,616,750
Audiovox Corp. "A"* (Supplier of automotive accessories) ............................. 28,000 570,500
Axogen Ltd.* (Developer of therapeutic products for
neurological disorders) ........................................................... 106,100 3,408,463
Barrett Resources Corp.* (Oil and gas exploration
and production) ................................................................... 67,100 2,252,044
Basin Exploration, Inc.* (Explorer and developer of oil
and natural gas) .................................................................. 100 1,644
Beringer Wine Estates Holdings, Inc. "B"* (Producer of
table wines) ...................................................................... 100 3,975
Biomatrix, Inc.* (Developer, manufacturer and marketer
of visco-elastic products) ........................................................ 100 2,269
Black Box Corp.* (Manufacturer of wide area networking
products) ......................................................................... 39,000 1,979,250
Buckeye Technologies, Inc.* (Manufacturer and marketer
of specialty cellulose and absorbent products) .................................... 100 1,513
CNF Transportation, Inc. (Trucking, air freight) ..................................... 95,700 3,164,081
Columbia Sportswear Co.* (Manufacturer of active
outdoor apparel) .................................................................. 24,600 498,150
Complete Business Solutions, Inc.* (Provider of information
technology services to organizations) ............................................. 22,300 323,350
Concord EFS, Inc.* (Electronic transaction authorization,
processing, settlement and transfer services) ..................................... 338,750 9,167,422
Copart, Inc.* (Auctioneer of damaged vehicles for
insurance companies) .............................................................. 100 2,300
Cumulus Media Inc. "A"* (Radio broadcasting company) ................................. 21,200 760,550
Cybex Computer Products Corp.* (Producer of computer
parts and equipment) .............................................................. 100 3,906
Daisytek International Corp.* (Distributor of computer and
office automation supplies) ....................................................... 7,100 118,037
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER GLOBAL DISCOVERY FUND 23
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dave & Buster's, Inc.* (Operator of restaurant/entertainment
complexes) ........................................................................ 16,900 163,719
Diamond Offshore Drilling, Inc. (Offshore oil and gas
well drilling) .................................................................... 106,100 3,368,675
El Paso Electric Co.* (Electric utility company) ..................................... 45,400 414,275
Elcor Corp. (Manufacturer of roofing and other
industrial products) .............................................................. 18,100 445,713
Fiserv Inc.* (Provider of data processing services) .................................. 280,743 8,983,776
G & K Services, Inc. "A" (Uniform rentals) ........................................... 52,100 1,957,006
Hain Food Group, Inc.* (Manufacturer of specialty
food products) .................................................................... 20,200 506,263
Inter-Tel, Inc. (Manufacturer of business communications
software and systems) ............................................................. 100 1,588
Keane, Inc.* (Provider of computer software project
management and design development services) ....................................... 98,900 2,324,150
Korn/Ferry International* (A global executive search firm) ........................... 30,200 671,950
MIH Ltd.* (Provider of pay-TV services) ................................................ 66,400 2,971,400
Mercury Computer Systems, Inc.* (Manufacturer of digital
signal processing computer systems) ................................................. 16,100 722,488
NICE Systems Ltd. (ADR)* (Developer of telephone and video
recording equipment) ................................................................ 100 2,900
Nabors Industries, Inc.* (Land drilling contractor) .................................... 178,200 4,042,913
Network Appliance, Inc.* (Designer and manufacturer of
network data storage devices) ....................................................... 308,200 22,806,800
Newpark Resources, Inc.* (Environmental management
and oilfield construction services) ................................................. 40,100 258,144
PSINet, Inc.* (Provider of Internet access services) ................................... 155,900 5,612,400
Parametric Technology Corp.* (Developer of integrated
product development and lifecycle management
solutions) .......................................................................... 257,000 4,899,063
Penton Media, Inc. (Publisher of magazines and
electronic information products) .................................................... 100 1,850
Performance Food Group Co.* (Food distributor) ......................................... 15,100 409,588
Radio Unica Corp.* (Operator of a Spanish-language
national radio network) ............................................................. 17,100 489,488
Rational Software Corp.* (Developer of software
development tools and services) ..................................................... 111,300 4,758,075
S & P Mid-Cap 400 Depository Receipts (Security that
represents ownership in the Mid-Cap SPDR Trust) ..................................... 121,700 9,165,531
Shaw Group, Inc.* (Manufacturer of piping systems) ..................................... 100 2,275
Simpson Manufacturing Co., Inc.* (Manufacturer of wood-to-wood,
wood-to-concrete and wood-to-masonry connectors) .................................... 8,000 324,500
Symbol Technologies Inc. (Manufacturer of bar code laser
scanners) ........................................................................... 418,200 16,623,450
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Systems & Computer Technology Corp.* (Provider of
client/server mission critical enterprise software) ................................. 25,400 273,050
THQ, Inc.* (Developer, publisher and distributor of interactive
entertainment software) ............................................................. 12,900 530,513
TSI International Software Ltd.* (Provider of software and
related services to businesses) ..................................................... 113,300 2,719,200
Taubman Centers, Inc. (Real estate investment trust
company) ............................................................................ 64,800 733,050
The Cheesecake Factory Inc.* (Operator of casual
dining restaurants) ................................................................. 13,700 419,563
Tiffany & Co. (Retailer of jewelry and gift items) ..................................... 306,000 18,207,000
United Natural Foods, Inc.* (Distributor of natural foods
and related products) ............................................................... 47,000 414,188
VISX Inc.* (Developer of laser technologies and systems
for vision correction) .............................................................. 164,000 10,260,250
Vitesse Semiconductor Corp.* (Manufacturer of digital
integrated circuits) ................................................................ 331,200 15,193,800
Watts Industries, Inc. "A" (Manufacturer of water
and steam valves) ................................................................... 100 1,369
Wesley Jessen VisionCare, Inc.* (Manufacturer of soft
contact lenses) ..................................................................... 85,100 2,287,063
Wisconsin Central Transportation Co.* (Operator of
regional freight railroad) .......................................................... 386,400 5,361,300
Wolverine World Wide, Inc. (Manufacturer of casual,
outdoor and work footwear) .......................................................... 100 1,025
Young Broadcasting Inc. "A"* (Operator of
television stations) ................................................................ 1,800 83,475
-----------
186,294,957
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $276,912,317) 441,314,251
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $345,388,317) (a) 509,790,251
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate (unaudited).
(a) The cost for federal income tax purposes was $347,617,992. At October 31,
1999, net unrealized appreciation for all securities based on tax cost was
$162,172,259. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $181,052,161 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$18,879,902.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $1,190,375 (0.24% 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 October 31, 1999 aggregated $1,477,500.
The accompanying notes are an integral part of the financial statements.
SCUDDER GLOBAL DISCOVERY FUND 25
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 1999
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at market (identified cost $345,388,317) ......... $ 509,790,251
Receivable for investments sold ............................... 3,617,876
Receivable for Fund shares sold ............................... 693,184
Dividends and interest receivable ............................. 243,988
Foreign taxes recoverable ..................................... 48,617
Other assets .................................................. 8,605
-------------
Total assets .................................................. 514,402,521
Liabilities
- --------------------------------------------------------------------------------
Due to custodian bank ......................................... 616,253
Payable for investments purchased ............................. 18,675,583
Payable for Fund shares redeemed .............................. 230,470
Accrued management fee ........................................ 879,688
Other payables and accrued expenses ........................... 499,606
-------------
Total liabilities ............................................. 20,901,600
- --------------------------------------------------------------------------------
Net assets, at market value $ 493,500,921
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income .. (2,180,693)
Unrealized appreciation (depreciation) on investments ......... 164,401,934
Unrealized appreciation (depreciation) on foreign currency
related transcations ......................................... (9,657)
Accumulated net realized gain (loss) .......................... 44,572,975
Paid-in capital ............................................... 286,716,362
- --------------------------------------------------------------------------------
Net assets, at market value $ 493,500,921
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Scudder Shares
Net asset value, offering and redemption price per share
($403,737,096 / 14,333,256 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares -------------
authorized) ................................................ $28.17
-------------
Class A Shares
Net asset value and redemption price per share ($54,786,944 /
1,953,348 outstanding shares of beneficial interest, $.01 par -------------
value, unlimited number of shares authorized) .............. $28.05
-------------
-------------
Maximum offering price per share (100 / 94.25 of $28.05) ...... $29.76
-------------
Class B Shares
Net asset value and redemption price (subject to contingent
deferred sales charge) per share ($27,490,359 / 992,873
outstanding shares of beneficial interest, $.01 par value, -------------
unlimited number of shares authorized) ..................... $27.69
-------------
Class C Shares
Net asset value and redemption price (subject to contingent
deferred sales charge) per share ($7,486,522 / 270,208
outstanding shares of beneficial interest, $.01 par value, -------------
unlimited number of shares authorized) ..................... $27.71
-------------
The accompanying notes are an integral part of the financial statements.
26 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income (Loss)
- --------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $ 216,241) ................ $ 2,491,096
Interest .............................................................. 1,594,154
-------------
4,085,250
Expenses:
Management fee ........................................................ 4,401,513
Services to shareholders .............................................. 1,378,562
Custodian and accounting fees ......................................... 688,152
Distribution fees ..................................................... 130,774
Administrative service fee ............................................ 100,695
Directors' fees and expenses .......................................... 53,248
Reports to shareholders ............................................... 151,525
Auditing .............................................................. 79,132
Legal ................................................................. 14,261
Registration fees ..................................................... 114,604
Other ................................................................. 48,870
-------------
Total expenses before reductions ...................................... 7,161,336
Expense reductions .................................................... (145,364)
-------------
Expenses, net ......................................................... 7,015,972
- --------------------------------------------------------------------------------------
Net investment income (loss) (2,930,722)
- --------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................... 66,853,036
Foreign currency related transactions ................................. (31,713)
-------------
66,821,323
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................... 73,977,722
Foreign currency related transactions ................................. (13,553)
-------------
73,964,169
- --------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 140,785,492
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 137,854,770
- --------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER GLOBAL DISCOVERY FUND 27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .............................................. $ (2,930,722) $ (1,674,161)
Net realized gain (loss) from investment transactions ..................... 66,821,323 2,110,032
Net unrealized appreciation (depreciation) on investment
transactions during the period ......................................... 73,964,169 2,940,060
------------- -------------
Net increase (decrease) in net assets resulting from operations ........... 137,854,770 3,375,931
------------- -------------
Distributions to shareholders from:
Net investment income -- Scudder Shares ................................... -- (9,815,437)
------------- -------------
Net realized gains -- Scudder Shares ...................................... -- (21,794,909)
------------- -------------
Fund share transactions:
Proceeds from shares sold ................................................. 467,347,036 203,840,754
Net asset value of shares issued to shareholders in reinvestment of
distributions .......................................................... -- 29,399,080
Cost of shares redeemed ................................................... (440,429,826) (225,398,432)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions ........ 26,917,210 7,841,402
------------- -------------
Increase (decrease) in net assets ......................................... 164,771,980 (20,393,013)
Net assets at beginning of period ......................................... 328,728,941 349,121,954
Net assets at end of period (including accumulated distributions in
excess of net investment income of $2,180,693 and $4,219,149, ------------- -------------
respectively) .......................................................... $ 493,500,921 $ 328,728,941
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 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>
- ---------------------------------------------------------------------------------------------------------------
Years Ended October 31, 1999(a) 1998(a) 1997(a) 1996(a) 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.81 $21.64 $20.45 $17.54 $16.27
-------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.13) (.10) (.12) (.04) (.03)
Net realized and unrealized gain (loss) on
investments 8.49 .32 2.30 3.59 1.38
-------------------------------------------------------
Total from investment operations 8.36 .22 2.18 3.55 1.35
Less distributions:
From net investment income -- (.64) (.13) (.20) --
From net realized gains on investment transactions -- (1.41) (.86) (.44) (.08)
-------------------------------------------------------
Total distributions -- (2.05) (.99) (.64) (.08)
Net asset value, end of period $28.17 $19.81 $21.64 $20.45 $17.54
=======================================================
Total Return (%) 41.95 1.19 11.14 20.97 8.32
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period ( $millions) 404 310 349 351 255
Ratio of operating expenses
to average daily net assets (%) 1.68 1.65 1.63 1.60 1.69
Ratio of net investment income
to average daily net assets (%) (.66) (.45) (.58) (.20) (.12)
Portfolio turnover rate (%) 64 41 61 63 44
</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.
SCUDDER GLOBAL DISCOVERY FUND 29
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1999
A. Significant Accounting Policies
Global Discovery Fund (the "Fund") (formerly known as Scudder Global Fund, Inc.)
is a diversified series of Global/International Fund, Inc. (the "Corporation")
which is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment company organized as a
Maryland Corporation.
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 offered to investors subject to an initial sales charge. Class B
shares are offered without an initial sales charge but are subject to higher
ongoing expenses than Class A 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 offered without an initial
sales charge but are subject to higher ongoing expenses than Class A 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, generally not available to new investors, are not subject to initial or
contingent deferred sales charges. Certain detailed financial information for
the Class A, B, and C shares is provided separately and is available upon
request.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares except that
each class bears certain expenses unique to that class such as distribution
services, shareholder services, administrative services and certain other class
specific expenses. Differences in class expenses may result in payment of
different per share dividends by class. All shares of the Fund have equal rights
with respect to voting subject to class specific arrangements.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale
30 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
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. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Fund, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
SCUDDER GLOBAL DISCOVERY FUND 31
<PAGE>
- --------------------------------------------------------------------------------
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
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, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in 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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
All discounts are accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
During the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $235,781,037 and
$235,262,846, respectively.
32 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
C. Related Parties
Management Agreement. Under the Management Agreement (the "Agreement") with
Scudder Kemper Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Fund
pays 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 Agreement. For the year ended October 31, 1999,
the fee pursuant to the Agreement amounted to $4,401,513, of which $879,688 was
unpaid at October 31, 1999.
Distribution Service Agreement. In accordance with Rule 12b-1 under the
Investment Company Act of 1940, Kemper Distributors, Inc. ("KDI"), a subsidiary
of the Adviser, receives a fee of 0.75% 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. For the year ended October 31, 1999, the Distribution Fee was as
follows:
Unpaid
Total Fees Waived at October 31,
Distribution Fee Aggregated by KDI 1999
- ---------------------------- ------------ ------------- ----------------
Class B .................... $ 96,201 $ 46,668 $ 31,593
Class C .................... 34,573 -- 12,019
--------- --------- ---------
$ 130,774 $ 46,668 $ 43,612
--------- --------- ---------
Underwriting Agreement and Contingent Deferred Sales Charge. KDI is the
principal underwriter for Classes A, B and C. Underwriting commissions paid in
connection with the distribution of Class A shares for the year ended October
31, 1999 aggregated $211,669, of which $206,026 was paid to other firms.
In addition, KDI receives any contingent deferred sales charge (CDSC) from Class
B share redemptions occurring within six years of purchase and Class C share
redemptions occurring within one year of purchase. There is no such charge upon
redemption of any share appreciation or reinvested dividends. Contingent
deferred sales charges are based on declining rates ranging from 4% to 1% for
Class B and 1% for Class C, of the value of the shares
SCUDDER GLOBAL DISCOVERY FUND 33
<PAGE>
- --------------------------------------------------------------------------------
redeemed. For the year ended October 31, 1999, the CDSC for Classes B and C
aggregated $36,207 and $1,512, respectively.
Administrative Service Fees. 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 upon the assets of shareholder accounts the firms service. For the year
ended October 31, 1999, the Administrative Service Fee was as follows:
Unpaid
Total Fees Waived at October 31,
Administrative Service Fee Aggregated by KDI 1999
- ----------------------------- ------------ ------------- ---------------
Class A .................... $ 57,535 $ 57,535 $ --
Class B .................... 31,844 31,844 --
Class C .................... 11,316 9,317 --
--------- --------- ---------
$ 100,695 $ 98,696 $ --
--------- --------- ---------
Shareholder Services Fees. 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 year ended October 31, 1999, the
amount charged to Classes A, B and C by KSC aggregated $125,755, $107,969, and
$21,403, respectively, of which $56,055 is unpaid at October 31, 1999. Scudder
Service Corporation ("SSC"), a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Scudder Shares. For the
year ended October 31, 1999, the amount charged to the Scudder Shares by SSC for
shareholder services aggregated $652,269, of which $102,077 is unpaid at October
31, 1999.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Scudder Shares of the Fund. For the year
ended October 31, 1999, the amount charged to the Scudder Shares by STC
aggregated $222,376, of which $58,347 is unpaid at October 31, 1999.
Fund Accounting Fees. Scudder Fund Accounting Corporation ("SFAC"), a subsidiary
of the Adviser, is responsible for determining the daily net asset value per
share and maintaining the portfolio and general accounting records of the Fund.
For the year ended October 31, 1999, the amount charged to the Fund by SFAC
aggregated $416,308, of which $77,999 is unpaid at October 31, 1999.
34 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
Directors Fees. The Fund pays each of its Directors not affiliated with the
Adviser an annual retainer plus specified amounts for attended board and
committee meetings. For the year ended October 31, 1999, the Directors fees and
expenses aggregated $53,248.
D. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $850
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement.
SCUDDER GLOBAL DISCOVERY FUND 35
<PAGE>
- --------------------------------------------------------------------------------
E. Capital Share Transactions
The following tables summarizes capital share and dollar activity in the Fund:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
--------------------------------------------------------------
Shares Dollars Shares Dollars
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Shares ................................................. 5,590,925 $ 133,793,434 6,972,104 $ 148,104,107
Class A ........................................................ 12,149,520 303,252,844 2,260,575 46,546,836
Class B ........................................................ 892,185 22,521,387 309,368 6,651,125
Class C ........................................................ 314,217 7,779,371 117,930 2,538,686
----------- ------------- ----------- -------------
18,946,847 $ 467,347,036 9,659,977 $ 203,840,754
----------- ------------- ----------- -------------
Shares issued to shareholders in reinvestment of distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Shares ................................................. -- -- 1,514,636 $ 29,399,080
Class A ........................................................ -- -- -- --
Class B ........................................................ -- -- -- --
Class C ........................................................ -- -- -- --
----------- ------------- ----------- -------------
-- -- 1,514,636 $ 29,399,080
----------- ------------- ----------- -------------
Shares redeemed
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Shares ................................................. (6,880,203) $(163,612,997) (8,999,114) $(190,396,588)
Class A ........................................................ (10,768,400) (268,241,904) (1,688,347) (34,483,052)
Class B ........................................................ (189,471) (4,631,255) (19,209) (386,029)
Class C ........................................................ (155,289) (3,943,670) (6,650) (132,763)
----------- ------------- ----------- -------------
(17,993,363) $(440,429,826) (10,713,320) $(225,398,432)
----------- ------------- ----------- -------------
Net increase (decrease)
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Shares ................................................. (1,289,278) $ (29,819,563) (512,374) $ (12,893,401)
Class A ........................................................ 1,381,120 35,010,940 572,228 12,063,784
Class B ........................................................ 702,714 17,890,132 290,159 6,265,096
Class C ........................................................ 158,928 3,835,701 111,280 2,405,923
----------- ------------- ----------- -------------
953,484 $ 26,917,210 461,293 $ 7,841,402
----------- ------------- ----------- -------------
</TABLE>
36 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors of Global/International Fund, Inc.
and to the Scudder Shares Shareholders of Global Discovery Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of
operations and of changes in net assets and the Scudder Shares financial
highlights present fairly, in all material respects, the financial
position of Scudder Global Discovery Fund (the "Fund") at October 31,
1999, the results of its operations, the changes in its net assets, and
the Scudder Shares financial highlights for the periods indicated therein,
in conformity with generally accepted accounting principles. These
financial statements and Scudder Shares financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion
expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 10, 1999
SCUDDER GLOBAL DISCOVERY FUND 37
<PAGE>
Tax Information (Unaudited)
- --------------------------------------------------------------------------------
October 31, 1999
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$44,000,000 as capital gain dividends for its year ended October 31, 1999,
of which 100% represents 20% rate gains.
The Fund paid foreign taxes of $216,241 and earned $216,241 of foreign
source income during the year ended October 31, 1999. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $0.02 per share as
foreign taxes paid and $0.02 per share as income earned from foreign
sources for the year ended October 31, 1999.
Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have
specific questions about your account, please call 1-800-SCUDDER.
38 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Officers and Directors
- --------------------------------------------------------------------------------
Nicholas Bratt*
o President
Sheryle J. Bolton
o Director; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin
o Director; General Partner, Bessemer Venture Partners
Keith R. Fox
o Director; Private Equity Investor
William H. Luers
o Director; Chairman and President, U.N. Association of America
Kathryn L. Quirk*
o Director, Vice President and Assistant Secretary
Joan E. Spero
o Director; President, Doris Duke Charitable Foundation
Thomas J. Devine
o Honorary Director; Consultant
William H. Gleysteen, Jr.
o Honorary Director; Consultant; Guest Scholar, Brookings Institution
Robert G. Stone, Jr.
o Honorary Director; Chairman Emeritus of the Board and Director,
Kirby Corporation
Susan E. Dahl*
o Vice President
Ann M. McCreary*
o Vice President
Gerald J. Moran*
o Vice President
M. Isabel Saltzman*
o Vice President
John Millette*
o Vice President and Secretary
John R. Hebble*
o Treasurer
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
SCUDDER GLOBAL DISCOVERY FUND 39
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
The Scudder Family of Funds
- --------------------------------------------------------------------------------
Money Market
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market
Series -- Managed Shares*
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder Tax Free Money Market
Series -- Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term
Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
U.S. Income
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and
Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
Choice Series
Scudder Financial Services Fund
Scudder Heath Care Fund
Scudder Technology Fund
Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
40 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**[[
Scudder Horizon Advantage**[[[
Education Accounts
Education IRA
UGMA/UTMA
- --------------------------------------------------------------------------------
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
[ Funds within categories are listed in order from expected least risk to
most risk. Certain Scudder funds or classes thereof may not be available
for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to federal,
state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family of
Funds.
++ Only the International Shares of the fund are part of the Scudder Family
of Funds.
[[ A no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance
agencies, 1-800-225-2470.
[[[ A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold by
Scudder's insurance agencies, 1-800-225-2470.
# These funds, advised by Scudder Kemper Investments, Inc., are traded on
the New York Stock Exchange and, in some cases, on various other stock
exchanges.
SCUDDER GLOBAL DISCOVERY FUND 41
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient ways to invest, quickly and reliably
Automatic Investment Plan
A convenient investment program in which money is electronically debited
from your bank account monthly to regularly purchase fund shares and
"dollar cost average" -- buy more shares when the fund's price is lower
and fewer when it's higher, which can reduce your average purchase price
over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase shares -- use
distributions from one Scudder fund to purchase shares in another,
automatically (accounts with identical registrations or the same social
security or tax identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically, avoiding potential
mailing delays; money for each of your transactions is electronically
debited from a previously designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks -- invested in
up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in securities
regardless of price fluctuations and does not assure a profit or
protect against loss in declining markets. Investors should consider
their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some
transactions
Scudder Automated Information Line: SAIL(TM) -- 1-800-343-2890
Personalized account information, the ability to exchange or redeem
shares, and information on other Scudder funds and services via touchtone
telephone.
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information and
transactions, interactive worksheets, prospectuses and applications for
all Scudder funds, plus your current asset allocation, whenever your need
them. Scudder's site also provides news about Scudder funds, retirement
planning information, and more.
42 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and those who depend on investment proceeds can enjoy these convenient,
timely, and reliable automated withdrawal programs
Automatic Withdrawal Plan
You designate the bank account, determine the schedule (as frequently as
once a month) and amount of the redemptions, and Scudder does the rest.
Distributions Direct
Automatically deposits your fund distributions into the bank for living
expenses account you designate within three business days after each
distribution is paid.
QuickSell
Provides speedy access to your money by electronically crediting your
redemption proceeds to the bank account you previously designated.
For more information about these services
Call a Scudder representative at 1-800-SCUDDER
Or visit our Web site at www.scudder.com
Please address all written correspondence to
The Scudder Funds
PO Box 2291
Boston, Massachusetts
02107-2291
SCUDDER GLOBAL DISCOVERY FUND 43
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, Massachusetts 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED OCTOBER 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
KEMPER GLOBAL DISCOVERY FUND 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
"... Our success in the technology sector underscores our belief about global
investing today: There is no such thing as a domestic or international
technology stock. Either they are global or they are a failure. ..."
[KEMPER FUNDS LOGO]
<PAGE>
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
GEOGRAPHIC COMPOSITION
10
LARGEST HOLDINGS
11
PORTFOLIO OF INVESTMENTS
19
FINANCIAL STATEMENTS
22
FINANCIAL HIGHLIGHTS
25
NOTES TO FINANCIAL STATEMENTS
30
REPORT OF INDEPENDENT AUDITORS
AT A GLANCE
KEMPER GLOBAL DISCOVERY FUND
TOTAL RETURNS
FOR THE YEAR ENDED OCTOBER 31, 1999 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL DISCOVERY KEMPER GLOBAL DISCOVERY LIPPER GLOBAL SMALL CAP
KEMPER GLOBAL DISCOVERY FUND CLASS A FUND CLASS B FUND CLASS C FUNDS CATEGORY AVERAGE*
- ------------------------------------ ----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
41.61 40.43 40.41 27.18
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
10/31/99 10/31/98
.........................................................
<S> <C> <C>
GLOBAL DISCOVERY FUND CLASS
A $28.05 $19.78
.........................................................
GLOBAL DISCOVERY FUND CLASS
B $27.69 $19.70
.........................................................
GLOBAL DISCOVERY FUND CLASS
C $27.71 $19.70
.........................................................
</TABLE>
KEMPER GLOBAL DISCOVERY FUND
LIPPER RANKINGS AS OF 10/31/99*
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER GLOBAL SMALL CAP FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
.........................................................
<S> <C> <C> <C>
1-YEAR #11 of #12 of #13 of
43 funds 43 funds 43 funds
.........................................................
</TABLE>
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN
NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF
SALES CHARGES. IF THEY HAD, RESULTS MAY HAVE BEEN LESS FAVORABLE.
TERMS TO KNOW
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc., Chicago, IL (312)
BOX] 696-6000. The Equity Style Box placement is based
on a fund's price-to-earnings and price-to-book
ratios 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 DOES NOT REPRESENT
FUTURE PERFORMANCE. THE FUND'S PORTFOLIO CHANGES
FROM DAY TO DAY. A LONGER-TERM VIEW IS
REPRESENTED BY A FUND'S MORNINGSTAR CATEGORY,
WHICH IS BASED ON ACTUAL INVESTMENT STYLE AS
MEASURED BY ITS UNDERLYING PORTFOLIO OVER THE
LAST THREE YEARS. CATEGORY PLACEMENTS OF NEW
FUNDS ARE ESTIMATED. MORNINGSTAR HAS PLACED
KEMPER GLOBAL DISCOVERY IN THE WORLD STOCK
CATEGORY. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
</TABLE>
GROWTH STOCK Stock of a company that has displayed above-average earnings growth
and is expected to continue to increase profits faster than the overall market.
Stocks of such companies usually experience more price volatility than the
market as a whole. Distinct from value stock.
OVER/UNDERWEIGHTING The allocation of assets -- usually by sector, industry or
country -- within a portfolio relative to a benchmark index (e.g., the MSCI
Emerging Markets index) or an investment universe.
MARKET CAPITALIZATION The value of a company's outstanding shares of common
stock, determined by multiplying the number of shares outstanding by the share
price. The universe of publicly traded companies is frequently divided into
large, mid and small capitalizations.
<PAGE>
ECONOMIC OVERVIEW
Scudder Kemper Investments, the investment manager for Kemper Funds, is one of
the largest and most experienced investment management organizations in the
world, managing more than $290 billion in assets for institutional and corporate
clients, retirement and pension plans, insurance companies, mutual fund
investors and individuals. 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.
DEAR KEMPER FUNDS SHAREHOLDER:
Markets have been aquiver about inflation risks. Growth in the United States
continues to exceed most expectations. Labor markets are visibly tight. These
are the precursors to inflation -- everybody knows it.
Everybody except us, that is. We don't buy it in principle, and reality is
proving our theory correct.
First, let's look at growth. The traditional economic view is that growth
causes inflation. Today, we're seeing exactly the opposite: Low inflation is
causing growth. Low inflation keeps interest rates down, and low interest rates
spur investment by making borrowing money cheap. Investment allows companies to
add capacity, keeping competition fierce. As a result, companies aren't raising
prices; they're competing for business by keeping goods attractive and prices
low. That's true for the old economy, in which consumers were buying t-shirts,
and the new economy, in which consumers are buying Internet services. Everywhere
they look, consumers see bargains -- in the malls, in the auto showrooms, at the
mortgage companies.
As for tight labor markets, the traditional economic view is that tight
labor -- i.e., many "help-wanted" signs -- forces companies to pay a premium for
talent. That, in turn, forces companies to raise their prices in order to
protect their profits. And raising prices results in inflation. In contrast, we
believe that tight labor markets won't cause wages to surge. Why?
To start with, temporary agencies have proliferated, accounting for 2.2
percent of jobs, up from 0.5 percent in the early 1980s. They get just the right
amount and type of labor to the right spot at the right time to get the job
done.
Immigration also keeps a lid on wage rates, since it replenishes the work
force much faster than births. Immigration is at its highest level ever; an
amazing 10 percent of the population is foreign-born. Nearly 1 million people
enter the United States legally each year, and another 300,000 just show up.
When they get here, they look for jobs. And often, they're willing to accept
lower-paying jobs than the average citizen.
Finally, and perhaps most importantly, wage rates are kept in check by
executives' intense profit focus. Payroll is a company's biggest expense. When
payroll skyrockets, profits decline -- and that would be bad for a CEO who
promised Wall Street double-digit earnings growth from now to the end of time.
If investors are disappointed in earnings growth, they sell their stock. And
when they sell their stock, the stock options that are an essential part of many
executives' compensation are as valuable as scrap paper.
Supporting our theory are two distinct and important sets of data released
in late October: The Bureau of Economic Analysis released its third-quarter
estimate of gross domestic product (GDP), the value of all goods and services
produced in the United States, and the Bureau of Labor Statistics released its
employment cost index (ECI), which measures what employers pay for their
workers' wages, salaries and benefits.
GDP grew at a 4.8 percent rate in the third quarter, up sharply from the
revised 1.9 percent second-quarter pace and just slightly above the consensus
estimate of 4.7 percent.
At the same time, however, the ECI rose by 0.8 percent in the July-September
period, down from a 1.1 percent increase in the second quarter. The
third-quarter gain also was lower than the 0.9 percent increase forecast by
economists in a Reuters poll. (The report, by the way, is said to be one of the
favorites of Federal Reserve Chairman Alan Greenspan, who uses it as a key
indicator of inflation pressures in the world's largest economy.)
In essence, then, the U.S. economy posted its strongest growth so far this
year in the third quarter, while wage costs remained tame. The combination of
strong consumer demand and the lowest unemployment in a generation just isn't
igniting wage-driven inflation.
Nevertheless, the Federal Reserve Board raised the federal funds rate and
the discount rate by one quarter of a point (0.25%) each at its Nov. 16 meeting.
Do we think the Fed made a bad decision? Actually, no.
First, the Fed has to guard against the possibility that the old
relationship between growth and inflation will soon reassert itself. Even if the
Fed shared our belief that
3
<PAGE>
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 (11/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.00 5.50 4.80 5.90
Prime rate(2) 8.50 7.75 8.00 8.50
Inflation rate(3)* 2.60 2.30 1.50 2.00
The U.S. dollar(4) -0.7 -0.9 1.20 9.40
Capital goods orders(5)* 12.60 2.50 -0.6 6.40
Industrial production(5)* 3.30 2.90 3.50 6.90
Employment growth(6)* 2.10 2.10 2.30 2.70
</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) CHANGES 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 10/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
strong consumer demand and low unemployment isn't igniting wage-driven
inflation, the organization wouldn't be doing its job if it didn't act in the
face of any possibility that inflation might reassert itself.
More important, the Fed has to be concerned about the explosion in credit
we've seen during the last year. Almost everyone but Uncle Sam has been loading
up on debt. Companies have borrowed heavily to fund mergers, share buybacks and
new investments. Homeowners have taken out bigger mortgages on their houses and
new home equity loans. Equity shareholders have ramped up their margin debt.
Financial institutions have issued record amounts of new paper to fund their
aggressive growth. The Fed's decision to raise interest rates, thereby making
borrowing costlier, should take the frenzy out of this borrowing binge. That is
a good thing for future financial stability.
Indeed, the early positive market reaction to the Fed's move suggests that
the markets share our views that the Fed made the right decision.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
The information contained in this piece has been taken from sources believed to
be reliable, but the accuracy of the information is not guaranteed. the opinions
and forecasts expressed are those of the economic advisors of Scudder Kemper
Investments, Inc. as of November 18, 1999, and may not actually come to pass.
this information is subject to change. no part of this material is intended as
an investment recommendation.
To obtain a Kemper Funds prospectus, download one from www.kemper.com, talk to
your financial representative or call Shareholder Services at (800) 621-1048.
The prospectus contains more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
4
<PAGE>
PERFORMANCE UPDATE
[MORANG PHOTO]
GERALD MORAN IS A SENIOR VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS, INC. AND
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'S 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 TIME, BASED ON MARKET AND OTHER
CONDITIONS.
KEMPER GLOBAL DISCOVERY FUND ONCE AGAIN SOUNDLY OUTPACED ITS BENCHMARK INDEX AND
MANY OF THE GLOBAL SMALL-CAP EQUITY FUNDS, REWARDING INVESTORS WITH AN
EXTRAORDINARY 41.61 PERCENT (CLASS A SHARES UNADJUSTED FOR SALES CHARGE) RETURN
FOR THE 12-MONTH PERIOD ENDING OCTOBER 31, 1999. LEAD PORTFOLIO MANAGER GERALD
MORAN DISCUSSES THE STOCK SELECTION, FORTUITOUS TIMING AND POSITIVE ENVIRONMENT
THAT CONTRIBUTED TO THESE EXCEPTIONAL RETURNS.
Q THE KEMPER GLOBAL DISCOVERY FUND'S BENCHMARK, THE SALOMON BROTHERS WORLD
EQUITY EXTENDED MARKET INDEX, ROSE BY A RESPECTABLE, 17.45 PERCENT. YOUR LIPPER
PEER GROUP AVERAGED A STRONG 27.18 PERCENT RETURN. WHAT ACCOUNTS FOR KEMPER
GLOBAL DISCOVERY FUND'S OUTPERFORMANCE DURING THIS PERIOD?
A By any standard, it was a good year for the fund. A lot of factors were in
our favor, but the performance was mostly a function of two things. Primarily,
we were well positioned going into the period. We made a major commitment to our
holdings before the period began, and held those positions through a difficult
year that included the Asian meltdown and several interest-rate increases. The
types of stocks we like to hold are the sort that typically perform well in
recoveries.
Specifically, one important factor behind our outperformance was our focus on
putting sufficient money behind our stock selections so that they would make a
difference in portfolio performance. Our stock selection was quite good during
this period, especially within the profitable technology sector. We use our
global advantage to better diversify our portfolio, and because of this, we feel
more comfortable taking relatively large positions in a few, very promising
stocks. We're willing to take a specific risk when we can diversify our
systematic risk. In January, for example, we took a 4 percent position in VISX,
and it had phenomenal performance by the end of June.
Q WHAT SECTORS WERE YOU INVESTED IN, AND DID YOU MAKE ANY MAJOR ALLOCATION
CHANGES DURING THE PERIOD?
A As investors in small companies that we hope will grow into large
companies, the portfolio will always tend to be "overweighted" (see Terms To
Know on page 2) in four sectors: technology, health, consumer goods and
services. Any changes in allocation within these four groups are largely a
function of the strong performance of the stocks in these categories. Technology
contributed 56 percent of the profits for the fiscal year. Health care was
second with 22 percent.
Many of our technology holdings are benefitting from the convergence of
methods for transmitting voice and data. We think the revolution in
communications will continue. Growth in cellular communications is exploding,
especially as the Internet begins to move in that direction. One shift we made
during the period was in our telecommunications focus. We've shifted from the
service providers to those companies that produce components or support the
manufacturing process. JOT Automation Group out of Finland is a major developer
of production
5
<PAGE>
Performance UPDATE
automation systems and is one of the most successful stocks in the portfolio for
the year. Another very successful holding is ARM Holdings. This is a virtual
company that designs system platforms and receives royalties for its chips that
are used in cellular phones and other devices.
Q YOU MENTIONED THE PHENOMENAL PERFORMANCE OF VISX. CAN YOU TELL US A LITTLE
ABOUT THAT COMPANY AND SOME OF THE OTHER STOCKS THAT PERFORMED ESPECIALLY WELL?
A VISX was a top performer for the fund. This U.S.-based company
manufactures the lasers that are used in vision-correction surgery. Its U.S.
patent allows it to collect $250 for each eyeball corrected using its lasers.
More than one million people have already had vision-correction surgery, and
there are some 30 million more candidates. We trimmed this position at higher
prices following its extraordinary runup in price through June. The company
remains among our top ten because we think it still has great growth potential.
Our second strongest performer was Network Appliance, a U.S.-based designer
and manufacturer of fast network-data-storage devices. It is currently the
leading holding in the portfolio. Technology stocks are not the only sources of
profit for the portfolio, though. Tiffany & Co., the high-end retailer of
jewelry and gift items, rallied thanks to the strong U.S. economy, the resulting
increase in disposable income, and superb execution on the part of company
management. While earnings increases for Tiffany have come in at well above
expectations, the price increase was also driven by investors' desire to own
perceived value-added companies and avoid those liable to be pulled down by
strong price competition. Finally, Fujitsu Support and Services, the Japanese
provider of information services, also made a significant contribution.
Q LOOKING BACK OVER THE PERIOD, WERE THERE ANY STOCKS OR EXTERNAL FACTORS
THAT DRAGGED ON PERFORMANCE?
A Telepizza, a Spanish fast-food restaurant chain, and Jeronimo Martins, a
Portuguese food producer and retailer, were two growth stocks that disappointed
us. The peripheral European countries such as Spain and Portugal were punished
rather severely this period when European stock pickers chose to concentrate on
the larger economies. Leon de Bruxelles, a French family restaurant operator,
didn't grow as quickly as expected, either. We also took a loss buying into
Anglo Irish Bank Corp., an Irish bank focused on loans to small businesses, but
we are so optimistic about the outlook and the stock price, we are expanding our
position there. We expect the bank to thrive on the technological and
pharmaceutical revolution overtaking that country. In addition to those few
unsuccessful stock plays, we were hurt somewhat by the big drop in the value of
the euro, especially in light of our overweighting (see Terms To Know on page 2)
in that area.
Q WHAT COUNTRIES PROVIDED MOST OF YOUR PERFORMANCE, AND HOW DID YOU ADJUST
THE FUND'S COUNTRY WEIGHTINGS TO SUIT MARKET CONDITIONS DURING THE PERIOD?
A Because of our focus on technology, our country weightings are a result of
where we happened to find good companies rather than a conscious effort to
invest in specific regions. Our success in the technology sector underscores our
belief about global investing today: There is no such thing as a domestic or
international technology stock. Either they are global or they are a failure.
Our four top-performing technology holdings are from four different regions.
That said, the United States was far and away the largest contributor to our
performance. Investments in the United Kingdom and Japan have just about equally
helped enhance our returns. We began a substantial commitment to Japan only in
the second half of the period, which illustrates how fast and furious growth has
been there. Israel and France were solid contributors to the fund as well.
Today, Europe is the region most overweighted versus our benchmark because we
think the long-term secular situation there will change significantly. Large
companies are undergoing restructuring and, in doing so, are producing niches
for smaller companies. We see enormous potential in this region. On the flip
side, our 50 percent United States allocation represents an underweighting
relative to the index. We think the growth experienced in the United States over
the past year will spread to the rest of the world.
Q WHAT DO YOU EXPECT FROM THE GLOBAL SMALL-CAP EQUITY MARKET IN THE NEXT
YEAR, AND HOW WILL YOU POSITION THE FUND TO TAKE ADVANTAGE OF OPPORTUNITIES AND
AVOID THREATS?
It wouldn't be realistic to expect another 40 percent year for the fund.
One of the
6
<PAGE>
PERFORMANCE UPDATE
reasons technology was up so strongly this year was the market's willingness to
commit to very unproven technology cases. We're seeing some excesses in the
initial public offering market that are a function of supply and demand that do
not reflect economic reality.
Nonetheless, the prospects for the Internet are making substantial changes in
the business world. Thus, we don't plan on running from technology investments,
but we do want to position the fund so that it is not a "one-trick pony." We
increased our energy holdings to about 4 percent of the portfolio. We don't
necessarily think energy is a high-growth area, but we think the recent price
increases will stay with us and the energy service stocks will benefit.
Despite the threats, we think there are boundless growth opportunities out
there. One of the benefits of being a global fund is that we have the freedom to
find those opportunities, wherever they are, and capitalize on them.
7
<PAGE>
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR LIFE OF CLASS(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER GLOBAL DISCOVERY FUND CLASS A 33.44% 14.46% 13.29% (since 9/10/91)
.....................................................................................................
KEMPER GLOBAL DISCOVERY FUND CLASS B 37.43 N/A 7.80 (since 4/16/98)
.....................................................................................................
KEMPER GLOBAL DISCOVERY FUND CLASS C 40.41 N/A 9.69 (since 4/16/98)
.....................................................................................................
</TABLE>
KEMPER GLOBAL DISCOVERY FUND NAME
<TABLE>
<CAPTION>
KEMPER GLOBAL DISCOVERY SALOMON BROTHERS WORLD
FUND CLASS A1 EQUITY INDEX+ CONSUMER PRICE INDEX++
----------------------- ---------------------- ----------------------
<S> <C> <C> <C>
9/30/91 9428.00 10000.00 10000.00
9599.00 10295.00 10051.00
9592.00 10257.00 10340.00
12/31/93 13254.00 12590.00 10627.00
12236.00 12988.00 10911.00
14419.00 15162.00 11180.00
12/31/96 17515.00 17062.00 11560.00
19253.00 18494.00 11757.00
22368.00 19592.00 11946.00
10/31/99 27182.00 21068.00 12296.00
</TABLE>
KEMPER GLOBAL DISCOVERY FUND NAME
<TABLE>
<CAPTION>
KEMPER GLOBAL DISCOVERY SALOMON BROTHERS WORLD
FUND CLASS B1 EQUITY INDEX+ CONSUMER PRICE INDEX++
----------------------- ---------------------- ----------------------
<S> <C> <C> <C>
4/30/98 10000.00 10000.00 10000.00
9631.00 9817.00 10018.00
9766.00 9699.00 10031.00
9762.00 9305.00 10043.00
7962.00 7825.00 10055.00
8115.00 8028.00 10068.00
8361.00 8520.00 10092.00
11/30/98 9006.00 8895.00 10092.00
9737.00 9306.00 10086.00
10187.00 9259.00 10111.00
9325.00 8962.00 10123.00
9864.00 9078.00 10154.00
4/30/99 10187.00 9691.00 10228.00
9919.00 9655.00 10228.00
10688.00 10063.00 10228.00
10947.00 10086.00 10258.00
11079.00 9984.00 10283.00
11231.00 9874.00 10332.00
10/31/99 11450.00 10008.00 10382.00
</TABLE>
KEMPER GLOBAL DISCOVERY FUND NAME
<TABLE>
<CAPTION>
KEMPER GLOBAL DISCOVERY SALOMON BROTHERS WORLD
FUND CLASS C1 EQUITY INDEX+ CONSUMER PRICE INDEX++
----------------------- ---------------------- ----------------------
<S> <C> <C> <C>
4/30/98 10000.00 10000.00 10000.00
9635.00 9817.00 10018.00
9771.00 9699.00 10031.00
9766.00 9305.00 10043.00
7965.00 7825.00 10055.00
8122.00 8028.00 10068.00
8369.00 8520.00 10092.00
11/30/98 9014.00 8895.00 10092.00
9741.00 9306.00 10086.00
10191.00 9259.00 10111.00
9329.00 8962.00 10123.00
9868.00 9078.00 10154.00
4/30/99 10191.00 9691.00 10228.00
9924.00 9655.00 10228.00
10692.00 10063.00 10228.00
10960.00 10086.00 10258.00
11092.00 9984.00 10283.00
11245.00 9874.00 10332.00
10/31/99 11750.00 10008.00 10382.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT
SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN ORIGINAL COST.
*Average annual total returns and total
return measure net investment income
and capital gain or loss from
portfolio investments, assuming
reinvestment of all dividends and for
Class A shares adjustment for the
maximum sales charge of 5.75 percent,
for Class B shares adjustment for the
applicable contingent deferred sales
charge (CDSC) of 3 percent and for
Class C shares no adjustment for sales
charge. The maximum CDSC for Class B
shares is 4 percent. For Class C
shares, there is a 1 percent CDSC on
certain redemptions within the first
year of purchase.
(1)Class A shares performance prior to
April 16, 1998 is derived from the
Scudder "S" share inception date
and has been adjusted to reflect
the current maximum initial sales
charge of 5.75%. Class S shares are
subject to certain other, or
different levels of, expenses than
Class A. The expenses applicable to
Class S shares have been reflected
in the performance presented for
Class A. The difference in expenses
will affect performance. The fund's
shares were offered without a sales
charge until April 15, 1998. Kemper
Class A, B and C shares were
initially offered on April 16,
1998. Class B shares is adjusted
for the CDSC in effect at the end
of the period. When comparing
Kemper Global Discovery Fund to the
Salomon Brothers World Equity
Index, you should note that the
fund's performance reflects the
maximum sales charge, while no such
charges are reflected in the
performance of the index. During
the periods noted, securities
prices fluctuated. For additional
information, see the Prospectus and
Statement of Additional Information
and the Financial Highlights at the
end of this report.
+THE SALOMON BROTHERS WORLD EQUITY
INDEX (EMII) IS COMPRISED OF EQUITY
SECURITIES LISTED ON STOCK EXCHANGES
IN 22 COUNTRIES.
++THE CONSUMER PRICE INDEX IS A
STATISTICAL MEASURE OF CHANGE, OVER
TIME, IN THE PRICES OF GOODS AND
SERVICES IN MAJOR EXPENDITURE GROUPS
FOR ALL URBAN CONSUMERS. IT IS
GENERALLY CONSIDERED TO BE A MEASURE
OF INFLATION. SOURCE IS WIESENBERGER.
THE SPECIAL RISK CONSIDERATIONS
ASSOCIATED WITH AN INVESTMENT IN THE
FUND, INCLUDING RISKS RELATED TO FOREIGN
INVESTMENTS AND TO A NONDIVERSIFIED
INVESTMENT COMPANY, ARE DISCUSSED IN THE
PROSPECTUS. RISKS ASSOCIATED WITH
FOREIGN SECURITIES, INCLUDING
FLUCTUATING EXCHANGE RATES, GOVERNMENT
REGULATIONS AND DIFFERENCES IN
LIQUIDITY, MAY AFFECT YOUR INVESTMENT.
AS A NONDIVERSIFIED INVESTMENT COMPANY,
THE FUND MAY INVEST MORE THAN 5% OF ITS
ASSETS IN THE SECURITIES OF A PARTICULAR
FOREIGN GOVERNMENT.
8
<PAGE>
GEOGRAPHIC COMPOSITION
GEOGRAPHIC COMPOSITION OF GLOBAL DISCOVERY FUND
Based on total common stocks as of October 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL DISCOVERY FUND ON 10/31/99
----------------------------------------
<S> <C>
UNITED STATES 42.00%
UNITED KINGDOM 15.00%
OTHER 12.00%
JAPAN 11.00%
IRELAND 7.00%
FRANCE 5.00%
GERMANY 3.00%
NETHERLANDS 2.00%
ISRAEL 2.00%
ITALY 1.00%
</TABLE>
9
<PAGE>
LARGEST HOLDINGS
KEMPER GLOBAL DISCOVERY FUND'S TOP 20 HOLDINGS*
Representing 53.1 percent of the fund's portfolio on October 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
HOLDINGS COUNTRY PERCENT
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
1. NETWORK APPLIANCE United States 5.2%
- -----------------------------------------------------------------------------------
2. SERCO GROUP United Kingdom 4.6%
- -----------------------------------------------------------------------------------
3. TIFFANY & CO. United States 4.1%
- -----------------------------------------------------------------------------------
4. SYMBOL TECHNOLOGIES United States 3.8%
- -----------------------------------------------------------------------------------
5. ALTRAN TECHNOLOGIES France 3.7%
- -----------------------------------------------------------------------------------
6. VITESSE SEMICONDUCTOR United States 3.4%
- -----------------------------------------------------------------------------------
7. ARM HOLDINGS United Kingdom 3.1%
- -----------------------------------------------------------------------------------
8. BENESSE Japan 3.1%
- -----------------------------------------------------------------------------------
9. VISX United States 2.3%
- -----------------------------------------------------------------------------------
10. ANGLO IRISH BANK Ireland 2.2%
- -----------------------------------------------------------------------------------
11. CONCORD EFS United States 2.1%
- -----------------------------------------------------------------------------------
12. SPDR United States 2.1%
- -----------------------------------------------------------------------------------
13. FISERV United States 2.0%
- -----------------------------------------------------------------------------------
14. UNI-CHARM Japan 2.0%
- -----------------------------------------------------------------------------------
15. CHECK POINT SOFTWARE TECHNOLOGIES Israel 1.9%
- -----------------------------------------------------------------------------------
16. IHC CALAND Netherlands 1.8%
- -----------------------------------------------------------------------------------
17. RM PLC United Kingdom 1.6%
- -----------------------------------------------------------------------------------
18. FUJITSU SUPPORT & SERVICE Japan 1.4%
- -----------------------------------------------------------------------------------
19. MARSCHOLLEK LAUTENSCHLAEGER UND Germany 1.4%
PARTNER
- -----------------------------------------------------------------------------------
20. QLT PHOTOTHERAPEUTICS Canada 1.3%
- -----------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
10
<PAGE>
PORTFOLIO OF INVESTMENTS
KEMPER GLOBAL DISCOVERY FUND
PORTFOLIO OF INVESTMENTS AS OF OCTOBER 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
REPURCHASE AGREEMENTS--3.6% AMOUNT ($) VALUE ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 10/29/1999 at 5.2%, to be
repurchased at $18,484,006 on 11/1/1999,
collateralized by a $18,494,000 U.S.
Treasury Note Inflationary Index, 3.625%,
1/15/2008 (Cost $18,476,000) 18,476,000 18,476,000
--------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SHORT TERM NOTES--9.8%
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Home Loan Mortgage Corp., 5.16%**,
11/1/1999 (Cost $50,000,000) 50,000,000 50,000,000
--------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--86.6% SHARES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AUSTRALIA--0.3%
Austar United Communications Limited*
(PROVIDER OF CABLE TELEVISION SERVICES) 236,800 769,171
CI Technologies Group, Ltd.
(DEVELOPER OF PROCESS MONITORING AND
INDUSTRIAL AUTOMATION SOFTWARE) 219,700 951,503
--------------------------------------------------------------------------
1,720,674
- ------------------------------------------------------------------------------------------------------------------
AUSTRIA--0.2%
Schoeller-Bleckmann Oilfield Equipment AG
(MANUFACTURER OF PARTS FOR DRILLING
EQUIPMENT) 136,000 910,493
Topcall International AG*
(DEVELOPER, MARKETER, AND SUPPORTER OF
HIGH-END UNIFIED MESSAGING SYSTEMS) 20,150 308,040
--------------------------------------------------------------------------
1,218,533
- ------------------------------------------------------------------------------------------------------------------
CANADA--1.3%
Creo Products Inc.*
(MANUFACTURER OF PRINTING RELATED PRODUCTS) 33,300 849,150
QLT Phototherapeutics Inc.*
(DEVELOPER OF PHARMACEUTICAL PRODUCTS) 138,100 5,828,866
--------------------------------------------------------------------------
6,678,016
- ------------------------------------------------------------------------------------------------------------------
CROATIA--0.1%
Pliva D.D. (GDR)
(PHARMACEUTICAL COMPANY) 26,900 293,210
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
FINLAND--1.3%
JOT Automation Group Oyj
(DEVELOPER OF PRODUCTION AUTOMATION SYSTEMS) 1,102,900 5,697,657
PerlosOyj*
(MANUFACTURER OF INJECTION MOULDED,
THERMOPLASTIC COMPONENTS) 42,900 705,579
--------------------------------------------------------------------------
6,403,236
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FRANCE--4.4%
Altran Technologies S.A.
(PROVIDER OF ENGINEERING AND CONSULTING
SERVICES) 47,773 16,414,623
Dassault Systemes S.A.
(COMPUTER AIDED DESIGN, MANUFACTURING AND
ENGINEERING SOFTWARE) 42,691 1,774,709
GFI Informatique
(PROVIDER OF COMPUTER CONSULTING AND SYSTEMS
INTEGRATION SERVICES) 8,052 721,584
Leon de Bruxelles S.A.
(OPERATOR OF LOW COST FAMILY RESTAURANTS) 25,605 658,686
Transiciel S.A.
(DEVELOPER OF SOFTWARE FOR PUBLIC SERVICES,
FINANCE AND INDUSTRY) 51,384 2,974,160
------------------------------------------------------------------------------
22,543,762
- ----------------------------------------------------------------------------------------------------------------------
GERMANY--2.8%
ADVA AG Optical Networking*
(MANUFACTURER OF OPTICAL NETWORKING
PRODUCTS) 2,200 236,585
Epcos AG*
(PRODUCER OF ELECTRONIC COMPONENTS AND
INTEGRATED CIRCUITS) 57,601 2,367,205
Hawesko Holding AG
(MARKETER OF WINES AND LIQUEURS AND RELATED
PRODUCTS) 43,424 1,373,457
Marschollek, Lautenschlaeger und Partner AG
(pfd.)
(INSURANCE COMPANY) 28,200 5,961,115
Medion AG
(MARKETER AND DISTRIBUTOR OF MULTIMEDIA
PRODUCTS AND VARIOUS CONSUMER APPLIANCES) 2,218 596,301
Pfeiffer Vacuum Technology AG (ADR)
(MANUFACTURER OF VARIOUS PUMPS AND VACUUM
SYSTEMS) 64,300 2,443,400
Trintech Group PLC*
(DEVELOPER OF ELECTRONIC POINT OF SALE
SYSTEMS) 34,900 615,113
W.E.T. Automotive Systems AG*
(MANUFACTURER OF HEATING, WIRING, AND CABLE
COMPONENTS) 17,945 743,533
------------------------------------------------------------------------------
14,336,709
- ----------------------------------------------------------------------------------------------------------------------
GREECE--0.3%
STET Hellas Telecommunications S.A. (ADR)*
(MOBILE TELECOMMUNICATION SERVICES) 58,221 1,251,752
------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
HONG KONG--0.5%
Li & Fung Ltd.
(INVESTMENT HOLDING COMPANY) 1,294,000 2,265,499
------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
HUNGARY--0.2%
OTP Bank Rt (GDR)
(SAVINGS AND COMMERCIAL BANK) 23,300 1,042,675
------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
INDONESIA--0.0%
PT Steady Safe Transportation Service Tbk*
(OPERATOR OF TAXIS AND BUSES IN JAKARTA) 444 16
------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IRELAND--6.3%
Anglo Irish Bank Corp. PLC
(PROVIDER OF FINANCIAL SERVICES FOR BUSINESS
AND PRIVATE SECTORS) 4,105,821 9,653,147
ESAT Telecom Group PLC (ADR)*
(PROVIDER OF TELECOMMUNICATION SERVICES) 111,800 5,003,050
Elan Corp. "A"* (Warrants) expires 12/31/2001
(DEVELOPER OF CONTROLLED-ABSORPTION DRUG
DELIVERY SYSTEMS) 156,100 4,136,650
Green Property PLC
(CONDUCTS OPERATIONS IN PROPERTY
DEVELOPMENT, INVESTMENT AND TRADING) 354,880 2,086,750
Irish Continental Group PLC
(TRANSPORTER OF PASSENGERS, FREIGHT AND
CONTAINERS BETWEEN IRELAND THE U.K. AND THE
CONTINENT) 211,555 2,219,271
Irish Permanent PLC
(RETAIL FINANCIAL SERVICES GROUP) 185,662 1,898,711
Jury's Hotel Group PLC
(HOTEL OPERATOR) 616,435 5,329,239
Ryan Hotels PLC
(OWNER AND OPERATOR OF HOTEL CHAIN) 1,926,080 1,766,679
------------------------------------------------------------------------------
32,093,497
- ----------------------------------------------------------------------------------------------------------------------
ISRAEL--1.7%
Check Point Software Technologies Ltd.*
(DEVELOPER, MARKETER AND SUPPORTER OF
MANAGEMENT SOLUTIONS FOR ACTIVE NETWORKS) 71,600 8,283,225
Sapiens International Corp. N.V.*
(PROVIDER OF SOFTWARE APPLICATIONS) 46,800 432,900
------------------------------------------------------------------------------
8,716,125
- ----------------------------------------------------------------------------------------------------------------------
ITALY--1.4%
Bulgari SpA
(MANUFACTURER AND RETAILER OF FINE JEWELRY,
LUXURY WATCHES AND PERFUMES) 444,800 3,141,981
Safilo SpA
(MANUFACTURER OF FRAMES FOR GLASSES) 518,000 3,817,429
------------------------------------------------------------------------------
6,959,410
- ----------------------------------------------------------------------------------------------------------------------
JAMAICA--0.3%
Kyorin Pharmaceutical Co., Ltd.
(SELLER OF PRESCRIPTION MEDICINES) 40,000 1,455,313
------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
JAPAN--9.6%
Benesse Corp.
(PROVIDER OF EDUCATIONAL SERVICES) 64,000 13,700,682
Chugai Pharmaceutical Co., Ltd.
(PHARMACEUTICAL COMPANY) 188,000 2,237,880
Family Mart Co., Ltd.
(CONVENIENCE STORE CHAIN) 66,000 4,593,453
Fujitsu Support and Service Inc.
(PROVIDER OF INFORMATION SERVICES) 21,500 6,047,326
Gunze, Ltd.
(LEADING MANUFACTURER OF UNDERWEAR AND
SPORTSWEAR) 173,000 423,490
Internet Initiative Japan Inc. (ADR)*
(PROVIDER OF INTERNET SERVICES) 34,700 1,865,125
Jafco Co., Ltd.
(VENTURE CAPITAL COMPANY) 37,000 4,155,707
Rock Field Co., Ltd.
(MARKETER OF DELICATESSEN FOOD) 18,000 891,619
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Uni-Charm Co.
(MANUFACTURER OF SANITARY NAPKINS, DIAPERS,
AND BODYCARE GOODS) 152,000 8,886,244
Wako Securities Co., Ltd.*
(SECURITIES FIRM) 1,269,000 3,849,515
York-Benimaru Co., Ltd.
(OPERATOR OF SUPERMARKET CHAIN) 53,700 2,216,665
--------------------------------------------------------------------------
48,867,706
- ------------------------------------------------------------------------------------------------------------------
LUXEMBOURG--0.8%
Millicom International Cellular S.A.*
(DEVELOPER AND OPERATOR OF CELLULAR
TELEPHONE NETWORKS) 127,400 4,299,750
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
NETHERLANDS--1.7%
IHC Caland NV
(SUPPLIER OF MATERIALS FOR OFFSHORE
OILFIELDS) 178,580 7,766,419
Versatel Telecom International NV*
(TELECOMMUNICATION SERVICES) 66,360 825,567
--------------------------------------------------------------------------
8,591,986
- ------------------------------------------------------------------------------------------------------------------
NORWAY--0.5%
Petroleum Geo-Services (ADR)*
(PROVIDER OF OILFIELD SERVICES) 183,300 2,680,763
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PHILIPPINES--0.3%
International Container Terminal Services,
Inc.
(CONTAINERIZED CARGO HANDLING FIRM) 15,415,650 1,480,056
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
POLAND--0.2%
Pioneer Poland Fund (b)
(CLOSED-END INVESTMENT COMPANY) 3 1,190,375
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PORTUGAL--1.1%
Jeronimo Martins SGPS, S.A.
(FOOD PRODUCER AND RETAILER) 150,925 4,223,049
SIVA SGPS SA
(IMPORTER OF AUTOMOBILES) 37,150 500,949
Semapa-Sociedade de Investimento e Gestao,
SPGS SA
(CEMENT PRODUCER) 27,650 499,072
UNICER-Uniao Cervejaria, SA
(BOTTLER OF BEER, SOFT DRINKS, JUICES AND
WATER) 22,750 431,736
--------------------------------------------------------------------------
5,654,806
- ------------------------------------------------------------------------------------------------------------------
SINGAPORE--0.4%
Chartered Semiconductor (ADR)*
(MANUFACTURER OF SEMICONDUCTORS) 60,400 2,004,525
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
SPAIN--0.4%
Sogecable, S.A.*
(PROVIDER OF CABLE TELEVISION) 41,793 1,150,468
Telefonica Publicidad e Informacion, S.A.*
(PUBLISHER OF TELEPHONE DIRECTORIES) 38,717 846,184
--------------------------------------------------------------------------
1,996,652
- ------------------------------------------------------------------------------------------------------------------
SWEDEN--0.7%
Framtidsfabriken AB*
(INTERNET CONSULTING COMPANY) 7,500 302,607
Kinnevik AB "B"
(DIVERSIFIED HOLDING COMPANY) 53,200 1,057,035
Modern Times Group MTG "B"*
(GROUP OF MEDIA COMPANIES) 72,900 2,363,738
--------------------------------------------------------------------------
3,723,380
</TABLE>
14
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWITZERLAND--0.6%
Fantastic Corp.*
(PROVIDER OF MULTIMEDIA RELATED SOFTWARE
SOLUTIONS) 11,457 809,300
Kuoni Reisen AG
(REGISTERED) (TRAVEL AGENCY) 511 2,181,323
--------------------------------------------------------------------------
2,990,623
- ------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--12.7%
ARM Holdings PLC*
(DESIGNER OF RISC MICROPROCESSORS AND
RELATED TECHNOLOGY) 488,100 13,800,586
Aegis Group PLC
(INDEPENDENT MEDIA SERVICES GROUP) 1,463,854 3,852,393
Baltimore Technologies PLC*
(MANUFACTURER OF COMPUTER RELATED SOFTWARE) 52,990 1,638,569
Bodycote International PLC
(DIVERSIFIED HOLDING COMPANY) 610,570 2,490,577
Expro International Group PLC
(PROVIDER OF OILFIELD SERVICES) 438,900 2,537,487
Games Workshop Group PLC
(MANUFACTURER OF TABLE TOP WAR GAME SYSTEMS
AND MINIATURES) 163,000 1,260,081
Guardian IT PLC
(PROVIDER OF BUSINESS CONTINUITY AND
DISASTER RECOVERY SERVICES) 84,016 907,905
JSB Software Technologies*
(DEVELOPER OF NETWORKING AND CONNECTIVITY
SOFTWARE) 100 526
Matalan PLC
(CLOTHING RETAILER) 256,786 5,828,587
Pizza Express PLC
(OPERATOR OF PIZZA RESTAURANTS) 270,092 3,587,295
RM PLC
(INFORMATION TECHNOLOGY SOLUTIONS TO
EDUCATIONAL MARKETS) 677,500 6,942,409
Regent Inns PLC
(OWNER AND OPERATOR OF HOTELS AND
RESTAURANTS) 190,992 552,892
Serco Group PLC
(FACILITIES MANAGEMENT COMPANY) 703,700 20,255,289
Taylor Nelson Sofres PLC
(MARKET RESEARCH COMPANY) 300,062 905,649
--------------------------------------------------------------------------
64,560,245
- ------------------------------------------------------------------------------------------------------------------
UNITED STATES--36.5%
AMCOL International Corp.
(PRODUCER AND DISTRIBUTOR OF POLYMERS) 28,600 350,350
Advance Paradigm, Inc.*
(PROVIDER OF HEALTH BENEFIT MANAGEMENT
SERVICES) 6,400 272,795
Alexion Pharmaceuticals, Inc.*
(DEVELOPER OF IMMUNO REGULATORY COMPOUNDS) 79,500 1,063,313
Alpharma Inc.
(MANUFACTURER AND MARKETER OF HUMAN
PHARMACEUTICAL AND ANIMAL HEALTH PRODUCTS) 68,800 2,420,900
America West Holdings Corp. "B"*
(PASSENGER AIRLINE) 203,200 4,203,700
American Axle & Manufacturing Holdings, Inc.*
(DESIGNER AND MANUFACTURER OF AUTOMOBILE
PARTS) 29,400 409,763
American Italian Pasta Co. "A"*
(PRODUCER AND MARKETER OF DRY PASTA) 15,200 381,900
Anadarko Petroleum Corp.
(OIL AND GAS EXPLORATION AND PRODUCTION) 56,100 1,728,581
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aptargroup, Inc.
(MANUFACTURER OF PACKAGING EQUIPMENT
COMPONENTS) 118,200 3,176,625
ArthroCare Corp.*
(MANUFACTURER OF ORTHOPEDIC SURGICAL
EQUIPMENT) 22,300 1,616,750
Audiovox Corp. "A"*
(SUPPLIER OF AUTOMOTIVE ACCESSORIES) 28,000 570,500
Axogen Ltd.*
(DEVELOPER OF THERAPEUTIC PRODUCTS FOR
NEUROLOGICAL DISORDERS) 106,100 3,408,463
Barrett Resources Corp.*
(OIL AND GAS EXPLORATION AND PRODUCTION) 67,100 2,252,044
Basin Exploration, Inc.*
(EXPLORER AND DEVELOPER OF OIL AND NATURAL
GAS) 100 1,644
Beringer Wine Estates Holdings, Inc. "B"*
(PRODUCER OF TABLE WINES) 100 3,975
Biomatrix, Inc.*
(DEVELOPER, MANUFACTURER AND MARKETER OF
VISCO-ELASTIC PRODUCTS) 100 2,269
BlackBox Corp.*
(MANUFACTURER OF WIDE AREA NETWORKING
PRODUCTS) 39,000 1,979,250
Buckeye Technologies, Inc.*
(MANUFACTURER AND MARKETER OF SPECIALTY
CELLULOSE AND ABSORBENT PRODUCTS) 100 1,513
CNF Transportation, Inc.
(TRUCKING, AIR FREIGHT) 95,700 3,164,081
Columbia Sportswear Co.*
(MANUFACTURER OF ACTIVE OUTDOOR APPAREL) 24,600 498,150
Complete Business Solutions, Inc.*
(PROVIDER OF INFORMATION TECHNOLOGY SERVICES
TO ORGANIZATIONS) 22,300 323,350
Concord EFS, Inc.*
(ELECTRONIC TRANSACTION AUTHORIZATION,
PROCESSING, SETTLEMENT AND TRANSFER
SERVICES) 338,750 9,167,422
Copart, Inc.*
(AUCTIONEER OF DAMAGED VEHICLES FOR
INSURANCE COMPANIES) 100 2,300
Cumulus Media Inc. "A"*
(RADIO BROADCASTING COMPANY) 21,200 760,550
Cybex Computer Products Corp.*
(PRODUCER OF COMPUTER PARTS AND EQUIPMENT) 100 3,906
Daisytek International Corp.*
(DISTRIBUTOR OF COMPUTER AND OFFICE
AUTOMATION SUPPLIES) 7,100 118,037
Dave & Buster's, Inc.*
(OPERATOR OF RESTAURANT/ENTERTAINMENT
COMPLEXES) 16,900 163,719
Diamond Offshore Drilling, Inc.
(OFFSHORE OIL AND GAS WELL DRILLING) 106,100 3,368,675
El Paso Electric Co.*
(ELECTRIC UTILITY COMPANY) 45,400 414,275
Elcor Corp.
(MANUFACTURER OF ROOFING AND OTHER
INDUSTRIAL PRODUCTS) 18,100 445,713
Fiserv Inc.*
(PROVIDER OF DATA PROCESSING SERVICES) 280,743 8,983,776
G & K Services, Inc. "A"
(UNIFORM RENTALS) 52,100 1,957,006
Hain Food Group, Inc.*
(MANUFACTURER OF SPECIALTY FOOD PRODUCTS) 20,200 506,263
</TABLE>
16
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inter-Tel, Inc.
(MANUFACTURER OF BUSINESS COMMUNICATIONS
SOFTWARE AND SYSTEMS) 100 1,588
Keane, Inc.*
(PROVIDER OF COMPUTER SOFTWARE PROJECT
MANAGEMENT AND DESIGN DEVELOPMENT SERVICES) 98,900 2,324,150
Korn/Ferry International*
(A GLOBAL EXECUTIVE SEARCH FIRM) 30,200 671,950
MIH Ltd.*
(PROVIDER OF PAY-TV SERVICES) 66,400 2,971,400
Mercury Computer Systems, Inc.*
(MANUFACTURER OF DIGITAL SIGNAL PROCESSING
COMPUTER SYSTEMS) 16,100 722,488
NICE Systems Ltd. (ADR)*
(DEVELOPER OF TELEPHONE AND VIDEO RECORDING
EQUIPMENT) 100 2,900
Nabors Industries, Inc.*
(LAND DRILLING CONTRACTOR) 178,200 4,042,913
Network Appliance, Inc.*
(DESIGNER AND MANUFACTURER OF NETWORK DATA
STORAGE DEVICES) 308,200 22,806,800
Newpark Resources, Inc.*
(ENVIRONMENTAL MANAGEMENT AND OILFIELD
CONSTRUCTION SERVICES) 40,100 258,144
PSI Net, Inc.*
(PROVIDER OF INTERNET ACCESS SERVICES) 155,900 5,612,400
Parametric Technology Corp.*
(DEVELOPER OF INTEGRATED PRODUCT DEVELOPMENT
AND LIFECYCLE MANAGEMENT SOLUTIONS) 257,000 4,899,063
Penton Media, Inc.
(PUBLISHER OF MAGAZINES AND ELECTRONIC
INFORMATION PRODUCTS) 100 1,850
Performance Food Group Co.*
(FOOD DISTRIBUTOR) 15,100 409,588
Radio Unica Corp.*
(OPERATOR OF A SPANISH-LANGUAGE NATIONAL
RADIO NETWORK) 17,100 489,488
Rational Software Corp.*
(DEVELOPER OF SOFTWARE DEVELOPMENT TOOLS AND
SERVICES) 111,300 4,758,075
S & P Mid-Cap 400 Depository Receipts
(SECURITY THAT REPRESENTS OWNERSHIP IN THE
MID-CAP SPDR TRUST) 121,700 9,165,531
Shaw Group, Inc.*
(MANUFACTURER OF PIPING SYSTEMS) 100 2,275
Simpson Manufacturing Co., Inc.*
(MANUFACTURER OF WOOD-TO-WOOD, WOOD-TO-
CONCRETE AND WOOD-TO-MASONRY CONNECTORS) 8,000 324,500
Symbol Technologies Inc.
(MANUFACTURER OF BARCODE LASER SCANNERS) 418,200 16,623,450
Systems & Computer Technology Corp.*
(PROVIDER OF CLIENT/SERVER MISSION CRITICAL
ENTERPRISE SOFTWARE) 25,400 273,050
THQ, Inc.*
(DEVELOPER, PUBLISHER AND DISTRIBUTOR OF
INTERACTIVE ENTERTAINMENT SOFTWARE) 12,900 530,513
TSI International Software Ltd.*
(PROVIDER OF SOFTWARE AND RELATED SERVICES
TO BUSINESSES) 113,300 2,719,200
Taubman Centers, Inc.
(REAL ESTATE INVESTMENT TRUST COMPANY) 64,800 733,050
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Cheesecake Factory Inc.*
(OPERATOR OF CASUAL DINING RESTAURANTS) 13,700 419,563
Tiffany & Co.
(RETAILER OF JEWELRY AND GIFT ITEMS) 306,000 18,207,000
United Natural Foods, Inc.*
(DISTRIBUTOR OF NATURAL FOODS AND RELATED
PRODUCTS) 47,000 414,188
VISX Inc.*
(DEVELOPER OF LASER TECHNOLOGIES AND SYSTEMS
FOR VISION CORRECTION) 164,000 10,260,250
Vitesse Semiconductor Corp.*
(MANUFACTURER OF DIGITAL INTEGRATED
CIRCUITS) 331,200 15,193,800
Watts Industries, Inc. "A"
(MANUFACTURER OF WATER AND STEAM VALVES) 100 1,369
Wesley Jessen VisionCare, Inc.*
(MANUFACTURER OF SOFT CONTACT LENSES) 85,100 2,287,063
Wisconsin Central Transportation Co.*
(OPERATOR OF REGIONAL FREIGHT RAILROAD) 386,400 5,361,300
Wolverine World Wide, Inc.
(MANUFACTURER OF CASUAL, OUTDOOR AND WORK
FOOTWEAR) 100 1,025
Young Broadcasting Inc. "A"*
(OPERATOR OF TELEVISION STATIONS) 1,800 83,475
--------------------------------------------------------------------------
186,294,957
--------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $276,912,317) 441,314,251
--------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $345,388,317)(a) $509,790,251
--------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate (unaudited).
(a) The cost for federal income tax purposes was $347,617,992. At October 31,
1999, net unrealized appreciation for all securities based on tax cost was
$162,172,259. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$181,052,161 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $18,879,902.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $1,190,375 (0.24% 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 October 31, 1999 aggregated $1,477,500.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 1999
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------
Investments, at market (identified cost $345,388,317) $509,790,251
- ----------------------------------------------------------------------------
Receivable for investments sold 3,617,876
- ----------------------------------------------------------------------------
Receivable for Fund shares sold 693,184
- ----------------------------------------------------------------------------
Dividends and interest receivable 243,988
- ----------------------------------------------------------------------------
Foreign taxes recoverable 48,617
- ----------------------------------------------------------------------------
Other assets 8,605
- ----------------------------------------------------------------------------
TOTAL ASSETS 514,402,521
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------
Due to custodian bank 616,253
- ----------------------------------------------------------------------------
Payable for investments purchased 18,675,583
- ----------------------------------------------------------------------------
Payable for Fund shares redeemed 230,470
- ----------------------------------------------------------------------------
Accrued management fee 879,688
- ----------------------------------------------------------------------------
Other payables and accrued expenses 499,606
- ----------------------------------------------------------------------------
TOTAL LIABILITIES 20,901,600
- ----------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $493,500,921
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (2,180,693)
- ----------------------------------------------------------------------------
Unrealized appreciation (depreciation) on investments 164,401,934
- ----------------------------------------------------------------------------
Unrealized appreciation (depreciation) on foreign currency
related transactions (9,657)
- ----------------------------------------------------------------------------
Accumulated net realized gain (loss) 44,572,975
- ----------------------------------------------------------------------------
Paid-in capital 286,716,362
- ----------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $493,500,921
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NET ASSET VALUE
- ----------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($54,786,944/1,953,348 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $28.05
- ----------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $28.05) $29.76
- ----------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($27,490,359/992,873 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $27.69
- ----------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($7,486,522/270,208 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $27.71
- ----------------------------------------------------------------------------
CLASS S SHARES
Net asset value, offering and redemption price per share
($403,737,096/14,333,256 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $28.17
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are in integral part of the financial statements.
19
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------
INVESTMENT INCOME (LOSS)
- ----------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $216,241) $ 2,491,096
- ----------------------------------------------------------------------------
Interest 1,594,154
- ----------------------------------------------------------------------------
4,085,250
- ----------------------------------------------------------------------------
Expenses:
Management fee 4,401,513
- ----------------------------------------------------------------------------
Services to shareholders 1,378,562
- ----------------------------------------------------------------------------
Custodian and accounting fees 688,152
- ----------------------------------------------------------------------------
Distribution fees 130,774
- ----------------------------------------------------------------------------
Administrative service fee 100,695
- ----------------------------------------------------------------------------
Directors' fees and expenses 53,248
- ----------------------------------------------------------------------------
Reports to shareholders 151,525
- ----------------------------------------------------------------------------
Auditing 79,132
- ----------------------------------------------------------------------------
Legal 14,261
- ----------------------------------------------------------------------------
Registration fees 114,604
- ----------------------------------------------------------------------------
Other 48,870
- ----------------------------------------------------------------------------
Total expenses before reductions 7,161,336
- ----------------------------------------------------------------------------
Expense reductions (145,364)
- ----------------------------------------------------------------------------
Expenses, net 7,015,972
- ----------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (2,930,722)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- ----------------------------------------------------------------------------
Net realized gain (loss) from:
Investments 66,853,036
- ----------------------------------------------------------------------------
Foreign currency related transactions (31,713)
- ----------------------------------------------------------------------------
66,821,323
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments 73,977,722
- ----------------------------------------------------------------------------
Foreign currency related transactions (13,553)
- ----------------------------------------------------------------------------
73,964,169
- ----------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENT TRANSACTIONS 140,785,492
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $137,854,770
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are in integral part of the financial statements.
20
<PAGE>
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------
1999 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ (2,930,722) $ (1,674,161)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment transactions 66,821,323 2,110,032
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 73,964,169 2,940,060
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 137,854,770 3,375,931
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income -- Class S Shares -- (9,815,437)
- ------------------------------------------------------------------------------------------------------
Net realized gains -- Class S Shares -- (21,794,909)
- ------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 467,347,036 203,840,754
- ------------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
reinvestment of distributions -- 29,399,080
- ------------------------------------------------------------------------------------------------------
Cost of shares redeemed (440,429,826) (225,398,432)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 26,917,210 7,841,402
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 164,771,980 (20,393,013)
- ------------------------------------------------------------------------------------------------------
Net assets at beginning of period 328,728,941 349,121,954
- ------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including accumulated
distributions in excess of net investment income of
$2,180,693 and $4,219,149, respectively) $ 493,500,921 $ 328,728,941
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are in integral part of the financial statements.
21
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
----------------------
CLASS A
----------------------
YEARS ENDED OCTOBER 31,
----------------------
1999 1998(B)
- ---------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------
Net asset value, beginning of period $19.78 $23.98
- ---------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.24) (.09)
- ---------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 8.51 (4.11)
- ---------------------------------------------------------------
Total from investment operations 8.27 (4.20)
- ---------------------------------------------------------------
Net asset value, end of period $28.05 $19.78
- ---------------------------------------------------------------
TOTAL RETURN (%) (C) (D) 41.61 (17.51)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 55 11
- ---------------------------------------------------------------
Ratio of operating expenses to average
daily net assets (%) 2.01 1.95*
- ---------------------------------------------------------------
Ratio of operating expenses, before
expense reductions, to average daily net
assets (%) 2.26 2.20*
- ---------------------------------------------------------------
Ratio of net investment income to average
daily net assets (%) (.98) (1.00)*
- ---------------------------------------------------------------
Portfolio turnover rate (%) 64 41
- ---------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the Period April 16, 1998 (commencement of sales of Class A shares) to
October 31, 1998.
(c) Total return does not reflect the effect of any sales charges.
(d) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
22
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
----------------------
CLASS B
----------------------
YEARS ENDED OCTOBER 31,
----------------------
1999 1998(B)
- ---------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------
Net asset value, beginning of period $19.70 $23.98
- ---------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.43) (.18)
- ---------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 8.42 (4.10)
- ---------------------------------------------------------------
Total from investment operations 7.99 (4.28)
- ---------------------------------------------------------------
Net asset value, end of period $27.69 $19.70
- ---------------------------------------------------------------
TOTAL RETURN (%) (C) (D) 40.43 (17.85)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 27 6
- ---------------------------------------------------------------
Ratio of operating expenses to average
daily net assets (%) 2.83 2.83*
- ---------------------------------------------------------------
Ratio of operating expenses, before
expense reductions, to average daily net
assets (%) 3.44 3.13*
- ---------------------------------------------------------------
Ratio of net investment income to average
daily net assets (%) (1.81) (1.87)*
- ---------------------------------------------------------------
Portfolio turnover rate (%) 64 41
- ---------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the Period April 16, 1998 (commencement of sales of Class B shares) to
October 31, 1998.
(c) Total return does not reflect the effect of any sales charges.
(d) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
23
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
----------------------
CLASS C
----------------------
YEARS ENDED OCTOBER 31,
----------------------
1999 1998(B)
- ---------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------
Net asset value, beginning of period $19.70 $23.98
- ---------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.43) (.17)
- ---------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 8.44 (4.11)
- ---------------------------------------------------------------
Total from investment operations 8.01 (4.28)
- ---------------------------------------------------------------
Net asset value, end of period $27.71 $19.70
- ---------------------------------------------------------------
TOTAL RETURN (%) (C) (D) 40.41 (17.85)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 8 2
- ---------------------------------------------------------------
Ratio of operating expenses to average
daily net assets (%) 2.80 2.80*
- ---------------------------------------------------------------
Ratio of operating expenses, before
expense reductions, to average daily net
assets (%) 3.00 3.23*
- ---------------------------------------------------------------
Ratio of net investment income to average
daily net assets (%) (1.79) (1.88)*
- ---------------------------------------------------------------
Portfolio turnover rate (%) 64 41
- ---------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the Period April 16, 1998 (commencement of sales of Class C shares) to
October 31, 1998.
(c) Total return does not reflect the effect of any sales charges.
(d) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Global Discovery Fund (the "Fund") (formerly known
as Scudder Global Fund, Inc.) is a diversified
series of Global/International Fund, Inc. (the
"Corporation") which is registered under the
Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment
company organized as a Maryland Corporation.
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 Class S
Shares. Class A shares are offered to investors
subject to an initial sales charge. Class B shares
are offered without an initial sales charge but are
subject to higher ongoing expenses than Class A
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 offered without
an initial sales charge but are subject to higher
ongoing expenses than Class A 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, generally not available to new
investors, are not subject to initial or contingent
deferred sales charges. Certain detailed financial
information for the Class S shares is provided
separately and is available upon request.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. 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. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Fund, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair value as
determined in good faith by the Valuation Committee
of the Board of Directors.
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
exchange rates at period end. Purchases and sales
of investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
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, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. These differences primarily relate to
investments in 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
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as soon as the Fund is
informed of such dividends. Realized gains and
losses from investment transactions are recorded on
an identified cost basis.
All discounts are accreted for both tax and
financial reporting purposes.
- --------------------------------------------------------------------------------
2 PURCHASES AND
SALES OF SECURITIES During the year ended October 31, 1999, purchases
and sales of investment securities (excluding
short-term investments) aggregated $235,781,037 and
$235,262,846, respectively.
- --------------------------------------------------------------------------------
3 RELATED PARTIES MANAGEMENT AGREEMENT. Under the Management
Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the
"Adviser"), the Fund pays 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
Agreement. For the year ended October 31, 1999, the
fee pursuant to the Agreement amounted to
$4,401,513, of which $879,688 was unpaid at October
31, 1999.
DISTRIBUTION SERVICE AGREEMENT. In accordance with
Rule 12b-1 under the Investment Company Act of
1940, Kemper Distributors, Inc. ("KDI"), a
subsidiary of the Adviser, receives a fee of 0.75%
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.
For the year ended October 31, 1999, the
Distribution Fee was as follows:
<TABLE>
<CAPTION>
FEES UNPAID AT
TOTAL WAIVED BY OCTOBER 31,
DISTRIBUTION FEE AGGREGATED KDI 1999
---------------- ---------- --------- -----------
<S> <C> <C> <C>
Class B $ 96,201 $46,668 $31,593
Class C 34,573 -- 12,019
-------- ------- -------
$130,774 $46,668 $43,612
======== ======= =======
</TABLE>
UNDERWRITING AGREEMENT AND CONTINGENT DEFERRED
SALES CHARGE. KDI is the principal underwriter for
Classes A, B and C. Underwriting commissions paid
in connection with the distribution of Class A
shares for the year ended October 31, 1999
aggregated $211,669, of which $206,026 was paid to
other firms.
In addition, KDI receives any contingent deferred
sales charge (CDSC) from Class B share redemptions
occurring within six years of purchase and Class C
share redemptions occurring within one year of
purchase. There is no such charge upon redemption
of any share appreciation or reinvested dividends.
Contingent deferred sales charges are based on
declining rates ranging from 4%
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
to 1% for Class B and 1% for Class C, of the value
of the shares redeemed. For the year ended October
31, 1999, the CDSC for Classes B and C aggregated
$36,207 and $1,512, respectively.
Administrative Service Fees. 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 upon the assets
of shareholder accounts the firms service. For the
year ended October 31, 1999, the Administrative
Service Fee was as follows:
<TABLE>
<CAPTION>
UNPAID AT
TOTAL FEES OCTOBER 31,
ADMINISTRATIVE SERVICE FEE AGGREGATED WAIVED BY KDI 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Class A $ 57,535 $57,535 $ --
Class B 31,844 31,844 --
Class C 11,316 9,317 --
-------- ------- -------
$100,695 $98,696 $ --
======== ======= =======
</TABLE>
SHAREHOLDER SERVICES FEES. 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 year ended October 31, 1999, the amount charged
to Classes A, B and C by KSC aggregated $125,755,
$107,969, and $21,403, respectively, of which
$56,055 is unpaid at October 31, 1999. Scudder
Service Corporation ("SSC"), a subsidiary of the
Adviser, is the transfer, dividend-paying and
shareholder service agent for the Scudder Shares.
For the year ended October 31, 1999, the amount
charged to the Scudder Shares by SSC for
shareholder services aggregated $652,269, of which
$102,077 is unpaid at October 31, 1999.
Scudder Trust Company ("STC"), a subsidiary of the
Adviser, provides recordkeeping and other services
in connection with certain retirement and employee
benefit plans invested in the Class S Shares of the
Fund. For the year ended October 31, 1999, the
amount charged to the Class S Shares by STC
aggregated $222,376, of which $58,347 is unpaid at
October 31, 1999.
FUND ACCOUNTING FEES. Scudder Fund Accounting
Corporation ("SFAC"), a subsidiary of the Adviser,
is responsible for determining the daily net asset
value per share and maintaining the portfolio and
general accounting records of the Fund. For the
year ended October 31, 1999, the amount charged to
the Fund by SFAC aggregated $416,308, of which
$77,999 is unpaid at October 31, 1999.
DIRECTORS FEES. The Fund pays each of its Directors
not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and
committee meetings. For the year ended October 31,
1999, the Directors fees and expenses aggregated
$53,248.
- --------------------------------------------------------------------------------
4 LINE OF CREDIT The Fund and several affiliated Funds (the
"Participants") share in a $850 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
among each of the Participants. Interest is
calculated
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
based on the market rates at the time of the
borrowing. The Fund may borrow up to a maximum of
33 percent of its net assets under the agreement.
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following tables summarizes capital share and
dollar activity in the Fund:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------------------- ----------------------------
SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 12,149,520 $ 303,252,844 2,260,575 $ 46,546,836
-----------------------------------------------------------------------------------
Class B 892,185 22,521,387 309,368 6,651,125
-----------------------------------------------------------------------------------
Class C 314,217 7,779,371 117,930 2,538,686
-----------------------------------------------------------------------------------
Class S 5,590,925 133,793,434 6,972,104 148,104,107
-----------------------------------------------------------------------------------
18,946,847 $ 467,347,036 9,659,977 $ 203,840,754
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
SHARES ISSUED TO SHAREHOLDERS IN REINVESTMENT OF DISTRIBUTIONS
Class A -- -- -- --
-----------------------------------------------------------------------------------
Class B -- -- -- --
-----------------------------------------------------------------------------------
Class C -- -- -- --
-----------------------------------------------------------------------------------
Class S -- -- 1,514,636 29,399,080
-----------------------------------------------------------------------------------
-- -- 1,514,636 $ 29,399,080
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
SHARES REDEEMED
Class A (10,768,400) $(268,241,904) (1,688,347) $ (34,483,052)
-----------------------------------------------------------------------------------
Class B (189,471) (4,631,255) (19,209) (386,029)
-----------------------------------------------------------------------------------
Class C (155,289) (3,943,670) (6,650) (132,763)
-----------------------------------------------------------------------------------
Class S (6,880,203) (163,612,997) (8,999,114) (190,396,588)
-----------------------------------------------------------------------------------
(17,993,363) $(440,429,826) (10,713,320) $(225,398,432)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE)
Class A 1,381,120 $ 35,010,940 572,228 $ 12,063,784
-----------------------------------------------------------------------------------
Class B 702,714 17,890,132 290,159 6,265,096
-----------------------------------------------------------------------------------
Class C 158,928 3,835,701 111,280 2,405,923
-----------------------------------------------------------------------------------
Class S (1,289,278) (29,819,563) (512,374) (12,893,401)
-----------------------------------------------------------------------------------
953,484 $ 26,917,210 461,293 $ 7,841,402
-----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$44,000,000 as capital gain dividends for its year ended October 31, 1999, of
which 100% represents 20% rate gains.
The Fund paid foreign taxes of $216,241 and earned $216,241 of foreign source
income during the year ended October 31, 1999. Pursuant to Section 853 of the
Internal Revenue Code, the Fund designates $0.02 per share as foreign taxes paid
and $0.02 per share as income earned from foreign sources for the year ended
October 31, 1999.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS OF GLOBAL/INTERNATIONAL FUND, INC.
AND TO THE CLASS A, CLASS B AND CLASS C SHAREHOLDERS OF
GLOBAL DISCOVERY FUND:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights for the Class A, Class B,
and Class C shares present fairly, in all material respects, the financial
position of Global Discovery Fund (the "Fund") at October 31, 1999, the results
of its operations, the changes in its net assets, and the financial highlights
for the Class A, Class B and Class C shares for each of the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights for the Class A, Class B and Class
C shares (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 10, 1999
30
<PAGE>
NOTES
31
<PAGE>
DIRECTORS&OFFICERS
<TABLE>
<CAPTION>
<S> <C> <C>
DIRECTORS OFFICERS
NICHOLAS BRATT KATHRYN L. QUIRK SUSAN E. DAHL
President Director, Vice President Vice President
and Assistant Secretary
PAUL BANCROFT III THOMAS W. JOSEPH
Director JOAN E. SPERO Vice President
Director
SHERYLE J. BOLTON ANN M. MCCREARY
Director ROBERT G. STONE, JR. Vice President
Honorary Director
WILLIAM T. BURGIN JOHN MILLETTE
Director Vice President and Secretary
THOMAS J. DEVINE GERALD J. MORAN
Honorary Director Vice President
KEITH R. FOX M. ISABEL SALTZMAN
Director Vice President
WILLIAM H. GLEYSTEEN, JR. JOHN R. HEBBLE
Honorary Director Treasurer
WILLIAM H. LUERS CAROLINE PEARSON
Director Assistant Secretary
</TABLE>
- --------------------------------------------------------------------------------
LEGAL COUNSEL DECHERT, PRICE & RHOADS
Ten Post Office Square South
Boston, MA 02109
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 219557
Kansas City, MO 64121
- --------------------------------------------------------------------------------
CUSTODIAN STATE STREET BANK AND TRUST
225 Franklin Street
Boston, MA 02110
- --------------------------------------------------------------------------------
INDEPENDENT PRICEWATERHOUSECOOPERS LLP
AUDITORS 160 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
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 - 2 (12/28/99) 1096720
