Scudder
Emerging Markets
Income Fund
Semiannual Report
April 30, 1999
No-Load Funds
For investors seeking high current income and, secondarily, long-term capital
appreciation through investment primarily in high-yielding debt securities
issued in emerging markets.
A no-load mutual fund with no commissions to buy, sell or exchange.
SCUDDER
<PAGE>
<TABLE>
<CAPTION>
Scudder Emerging Markets Income Fund
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Date of Inception: 12/31/93 Total Net Assets as of 4/30/99: $207 million Ticker Symbol: SCEMX
- -----------------------------------------------------------------------------------------------------
</TABLE>
o Scudder Emerging Markets Income Fund's return for the six-month period ended
April 30, 1999, was 13.77%. The range of returns during this same period in the
Emerging Market Lipper Universe was -7.33% to +31.05%. The J.P. Morgan Emerging
Markets Bond Index Plus posted a 15.89% return over the same period. As of April
30, the Fund's 30-day net annualized yield was 9.10%.
o In the aftermath of the Russian and Brazilian currency devaluations, emerging
market bonds have recovered strongly, and their yield spreads over U.S.
Treasuries contracted to less than 9 percentage points from as many as 18
percentage points during the peak of the Russian crisis.
o After underweighting much of Latin America in advance of Brazil's devaluation,
the Fund increased its holdings in Brazil and Venezuela in March to take
advantage of attractive value and increasingly favorable economic fundamentals.
Table of Contents
3 Letter from the Fund's Chairman 16 Financial Highlights
4 Performance Update 17 Notes to Financial Statements
5 Portfolio Summary 20 Report of Independent Accountants
6 Portfolio Management Discussion 21 Shareholder Meeting Results
9 Glossary of Investment Terms 24 Officers and Directors
10 Investment Portfolio 25 Investment Products and Services
13 Financial Statements 26 Scudder Solutions
2 - Scudder Emerging Markets Income Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to report the results of Scudder Emerging Markets Income
Fund's most recent semiannual period. In a sharp turnaround, the Fund returned
13.77% for the six-month period ended April 30, 1999. The J.P. Morgan Emerging
Markets Bond Index Plus posted a 15.89% return over the same period.
Emerging market bonds have staged a remarkable recovery since the Russian
currency devaluation sparked intense global market volatility last summer. With
first-hand knowledge of the inherent risks, investors are once again displaying
confidence and optimism concerning the emerging markets. As portfolio managers
Susan Dahl and M. Isabel Saltzman discuss in the interview that begins on page
5, the improved environment is evidenced by strengthening currencies, declining
emerging market interest rates propelled by ample global liquidity, and
rebounding commodity prices.
For those interested in new Scudder products, we are pleased to introduce
Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both funds are
managed with the goal of providing long-term outperformance compared to their
benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
As always, please call a Scudder Investor Information representative at
1-800-225-2470 if you have questions about your Fund. Or visit Scudder's Web
site at www.scudder.com. Page 27 provides more information on how to contact
Scudder. Thank you for choosing Scudder Emerging Markets Income Fund to help
meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce Chairman,
Scudder Emerging Markets Income Fund
3 - Scudder Emerging Markets Income Fund
<PAGE>
Performance Update as of April 30, 1999
----------------------------------------------
Fund Index Comparisons
----------------------------------------------
Total Return
----------------------------------------------
Period Ended Growth of Average
4/30/1999 $10,000 Cumulative Annual
----------------------------------------------
Scudder Emerging Markets Income Fund
----------------------------------------------
1 Year $ 7,262 -27.38% -27.38%
5 Year $ 14,402 44.02% 7.57%
Life of Fund* $ 12,907 29.07% 4.90%
----------------------------------------------
J.P. Morgan Emerging Markets Bond Index Plus
----------------------------------------------
1 Year $ 9,116 -8.84% -8.84%
5 Year $ 20,114 101.14% 14.99%
Life of Fund* $ 15,556 55.56% 8.64%
----------------------------------------------
* The Fund commenced operations on
December 31, 1993.
Index comparisons begin on December 31,
1993.
Growth of a $10,000 Investment
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
- -------------------------------------------
J.P. Morgan Scudder
Emerging Emerging
Markets Bond Markets
Index Plus Income Fund
- -------------------------------------------
12/93* 10000 10000
4/94 7734 8962
4/95 7981 8858
4/96 11269 12131
4/97 14856 15567
4/98 17064 17773
4/99 15556 12907
**The unmanaged J.P. Morgan Emerging Markets Bond Index Plus (EMBI+) tracks
total returns for traded external debt instruments in the emerging markets.
Included in the index are U.S. dollar and other external-currency-denominated
Brady bonds, loans, Eurobonds, and local market instruments.
Returns and Per Share Information
Yearly Periods Ended
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1994* 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 10.67 $ 9.66 $ 11.85 $ 12.66 $ 11.72 $ 7.60
- ------------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .09 $ .92 $ 1.19 $ 1.19 $ 1.04 $ .87
- ------------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ -- $ -- $ 1.18 $ 1.50 $ --
- ------------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) -10.38 -1.17 39.96 28.32 14.17 -27.38
- ------------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) -22.66 3.19 41.20 31.84 14.86 -8.84
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance is historical and assumes reinvestment of all dividends and capital
gains and is not indicative of future results. Total return and principal value
will fluctuate, so an investor's shares, when redeemed, may be worth more or
less than when purchased. If the Adviser had not maintained the Fund's expenses,
the total return for the five year and life of Fund periods would have been
lower.
4 - Scudder Emerging Markets Income Fund
<PAGE>
Portfolio Summary as of April 30, 1999
- --------------------------------------
Diversification
- --------------------------------------
Debt Obligations 100%
------------------------------
100%
------------------------------
The Fund is fully invested in the income markets of emerging countries.
- --------------------------------------
Geographical
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the table below.
Brazil 29%
Mexico 21%
Argentina 14%
Venezuela 7%
Panama 6%
Peru 4%
Bulgaria 3%
Ecuador 3%
Russia 3%
Other 10%
------------------------------
100%
------------------------------
After underweighting Brazil through much of the period, in March we added to our
positions there as a result of the country's more positive economic statistics,
currency stabilization, and attractive value.
- --------------------------------------
Currency Exposure
- --------------------------------------
United States 100%
------------------------------
100%
------------------------------
The Fund invests primarily in dollar-denominated sovereign issues.
- --------------------------------------
Average Life
- --------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
0 < 3 years 1%
3 < 5 years 15%
5 < 10 years 32%
10+ years 52%
------------------------------
100%
------------------------------
Fund assets are invested in instruments with a range of maturities.
For more complete details about the Fund's Investment Portfolio, see page 10. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Emerging Markets Income Fund
<PAGE>
Portfolio Management Discussion
For a discussion of Scudder Emerging Markets Income Fund's performance and
strategy over the Fund's most recent semiannual period, we present an interview
with Lead Portfolio Manager Susan E. Dahl and Portfolio Manager M. Isabel
Saltzman.
Q: How did the Scudder Emerging Markets Income Fund perform over the period?
A: For the six-month period ended April 30, 1999, the Fund posted a 13.77% total
return, compared with the 15.89% return of the J.P. Morgan Emerging Markets Bond
Index Plus. The Fund's 30-day net annualized yield was 9.10% as of April 30.
Q: How did emerging market bonds in general perform compared with U.S.
Treasuries?
A: Emerging market bonds have rebounded strongly. Spreads between emerging
market bonds and long-term Treasuries, as wide as 18 percentage points during
the peak of the Russian devaluation crisis, narrowed to just under 9 percentage
points as of the close of the period, a remarkable recovery. We anticipate
further tightening (and therefore improvement in emerging market bond
performance) as we believe the market has discounted future economic growth in
Latin America too deeply.
Q: Of course, before the rebound, the market had to deal with the situation in
Brazil.
A: Yes. In late December and early January, investor pressure on Brazil's
currency began to build amid concerns over the government's deficit spending,
continued capital flight, and the resignation of Brazil's central bank
president, Gustavo Franco. Investors were also clearly concerned about parallels
to the Russian crisis last summer, though the lack of leverage in the market
during the Brazilian crisis made the latter situation much less destabilizing.
In addition, compared with Russia, Brazil had three times more currency reserves
to draw on during the peak of its crisis.
On January 13, the Brazilian government announced a de facto devaluation of the
real, where the band within which the real was to trade was eliminated and
allowed to float freely. But since the devaluation had already been priced into
Brazilian bonds, the market immediately staged a strong rebound on the news and
then paused for further developments. Importantly, the Brazilian government
acted quickly to shore up support at the International Monetary Fund (IMF) and
the World Bank, appointed a new central bank governor, and adopted disciplined
fiscal and monetary policy stances. The market responded skeptically at first,
but a rally took hold in March and pulled up the rest of the emerging market
bond universe with it. After underweighting Brazil through much of the period,
in March we added to positions as a result of the country's more positive
economic statistics, currency stabilization, and attractive value.
Q: How did other Latin American countries perform?
A: In Mexico, the peso was negatively affected by instability in Brazil for a
time, but Mexico was able to stand apart from the rest of Latin America, in
large measure due to its strong ties to U.S. economic growth and a flexible
exchange rate policy. Mexico also benefited from farsighted economic policy
related to oil prices: When depressed oil prices were projected, the country had
6 - Scudder Emerging Markets Income Fund
<PAGE>
undertaken a series of extensive fiscal cuts to compensate for depressed oil
revenues. Now that oil prices have rebounded, Mexico's position is greatly
strengthened. The Fund maintained an overweight position in Mexico at the close
of the period.
The Fund also increased its position in Venezuela to a market weighting of 7% at
the close of the period. Venezuela is most directly impacted by oil prices. With
the upswing in world oil prices, the financial position of the country has been
greatly enhanced. In light of increased oil prices and market-oriented reforms
enacted by President Chavez, Venezuela has performed extremely well in recent
months.
Q: Please comment on the Fund's holdings in Bulgaria and Russia.
A: Bulgaria has been hurt by the Kosovo conflict. The country's economy endured
several setbacks, including the disruption of trade, the infusion of war
refugees, and the negative impact of a reduction in tourism on the country's
gross domestic product. We believe, however, that Bulgaria's fundamental
economic program is still sound, and after reducing our position in Bulgaria
significantly, we are beginning to add to it again. The Fund held a modest
position in Russian principal loans at the start of the period, and we are
monitoring political and economic developments in the country closely. A final
agreement with the IMF will be a key factor affecting the medium-term outlook.
Q: Asian economies have begun to recover. What does this mean for emerging
markets?
A: Further economic recovery in Asia is another positive factor for emerging
countries, particularly if greater Asian demand provides much-needed support for
depressed commodity prices. Meanwhile, strong consumer demand in the United
States has provided vital support for export-oriented Asian economies. Though
Japan's fundamentals remain poor, the yen has stabilized. China continues to
refrain from devaluing the renminbi. And South Korea has staged an amazing
economic turnaround from one year ago, and was upgraded to investment grade in
February. As we reduced the Fund's position in Brazil in anticipation of the
exchange rate adjustment, we increased the Fund's holdings in South Korea and
the Philippines and benefited from the February upgrade.
Q: The Fund reduced the amount of its regular quarterly distribution in December
and in March. Please explain the reasons for this.
A: As the Fund repositioned into higher credit quality holdings, some of the
higher yielding securities such as Russian and Brazilian assets were sold.
Although the Fund benefited from a less risky portfolio, its yield declined as
the higher risk securities were sold. We believe the Fund's current distribution
level better reflects current market yields and the income potential of the
Fund's holdings.
Q: What is your outlook for emerging market bonds and the Fund?
A: Our outlook is positive. We're seeing strengthening currencies, declining
local emerging market interest rates, and rebounding commodity prices. The U.S.
economy continues to display economic growth with little evidence of inflation.
Coupled with a strong U.S. equity market, this
7 - Scudder Emerging Markets Income Fund
<PAGE>
growth is lending support to other economies around the world. The main risk to
the market comes from U.S. inflationary data, which would put pressure on U.S.
financial markets.
Investors in credit products have shown resiliency, and are regaining their
appetite for risk in the increasingly favorable global environment. This has
been evident, specifically in the Latin American countries -- Brazil, Colombia,
Mexico, and Argentina -- as these countries have successfully offered bonds in
recent months. Global liquidity has accommodated the external financing
requirements for emerging market countries.
Fundamentals, especially in Latin America and Asia, are also increasingly
favorable: In Latin America, currency volatility has returned to pre-crisis
levels, and Brazil has been able to embark on a series of interest rate
reductions. Many Latin American countries have revised their economic forecasts
from recession to flat or slightly positive growth. And though in the United
States the Fed has shifted to a less accommodative stance, global liquidity and
capital flows have remained ample. While we are mindful of the risks, we believe
the global economic environment favors continued recovery for most developing
countries. This could lead to lower risk premiums on emerging market debt and
further tightening of yield spreads between emerging market bonds and U.S.
Treasury bonds over the coming months. Scudder Emerging Markets Income Fund
remains an appropriate vehicle for investors seeking high current income and
long-term capital appreciation.
8 - Scudder Emerging Markets Income Fund
<PAGE>
<TABLE>
<CAPTION>
Glossary of Investment Terms
<S> <C>
BOND An interest-bearing security issued by a government or a corporation
that obligates the issuer to pay the bondholder a specified amount of interest
for a stated period -- usually a number of years -- and to repay the face amount
of the bond at its maturity date.
CAPITAL FLOWS The movement of capital from one country to another in search of investment
opportunities and to accommodate trade.
COUPON The interest rate on a bond the issuer (in the case of sovereign
emerging market bonds a country) promises to pay to the holder of the bond
until maturity, expressed as a semiannual percentage of face value. As an
example, a bond with a 10% coupon will pay $100 of the face amount of
$1,000 each year.
INFLATION An overall increase in the prices of goods and services, as
happens when business and consumer spending increases relative to the
supply of goods available in the marketplace -- in other words, when too
much money is chasing too few goods. High inflation has a negative impact
on the prices of fixed-income securities.
30-DAY SEC YIELD The standard yield reference for bond funds since the SEC
required all bond funds to quote yields based on a prescribed formula. This
yield calculation reflects the 30-day average of the net annualized income
earnings capability of every holding in a given fund's portfolio, assuming
each is held to maturity.
TOTAL RETURN The most common yardstick to measure the performance of a
fund. Total return -- annualized or compounded -- is based on a combination
of capital return plus income and capital gain distributions, if any,
expressed as a percentage gain or loss in value.
YIELD SPREAD The difference in yield between various types of bonds. An
emerging market bond's yield is generally measured against the yield of a
Treasury bond of similar maturity as a market yardstick. If yield spreads
are "narrow," for example, it often means that emerging market bond yields
have been dec lining, and prices rising, compared with Treasury bonds of
similar maturity.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and Investment Terms)
</TABLE>
9 - Scudder Emerging Markets Income Fund
<PAGE>
Investment Portfolio as of April 30, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 0.3%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 4/30/1999 at 4.87%, to be
repurchased at $677,275 on 5/3/1999, collateralized by a $540,000 U.S. Treasury Bond, ------------
7.875%, 2/15/2021 (Cost $677,000) ............................................................. 677,000 677,000
------------
Bonds 99.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Argentina 14.4%
Argentine Republic, Floating Rate Bond, Series L, LIBOR plus .8125% (5.9375%), 3/31/2005 ........ 5,998,500 5,338,665
Argentine Republic Global Bond, 11.375%, 1/30/2017 .............................................. 6,250,000 6,234,375
Argentine Republic, Collateralized Discount Bond, Floating Rate Bond, Series L, 6.0625%,
3/31/2023 ..................................................................................... 7,700,000 5,803,875
Argentine Republic, Collateralized Par Bond, Series L, Step-up Coupon, 6%, 3/31/2023 ............ 10,250,000 7,283,906
Argentine Republic, 9.75%, 9/19/2027 ............................................................ 2,000,000 1,750,000
Republic of Argentina, 11%, 12/4/2005 ........................................................... 2,850,000 2,835,750
------------
29,246,571
------------
Brazil 29.4%
Federative Republic of Brazil, IDU Floating Rate Bond, LIBOR plus .8125% (6.0625%), 1/1/2001 .... 2,214,000 2,104,684
Federative Republic of Brazil, Eligible Interest, Floating Rate Bond, LIBOR plus .8125% (5.875%),
4/15/2006 ..................................................................................... 11,229,000 8,962,146
Federative Republic of Brazil, "New" Money Bond, Floating Rate Bond, LIBOR plus .875%
(5.9375%), 4/15/2009 .......................................................................... 5,635,000 4,029,025
Federative Republic of Brazil, Debt Conversion Bond, Series L, LIBOR plus .875% (5.9375%),
4/15/2012 ..................................................................................... 14,450,000 9,175,750
Federative Republic of Brazil C Bond, 4.5% with 3.5% Interest Capitalization, 8%, 4/15/2014 ..... 21,667,065 15,036,943
Federative Republic of Brazil, Collateralized Discount Bond, Floating Rate Bond, LIBOR plus
.8125% (5.875%), 4/15/2024 .................................................................... 18,430,000 12,255,950
Federative Republic of Brazil Global Bond, 10.125%, 5/15/2027 ................................... 8,185,000 6,517,304
Federative Republic of Brazil, 11.625%, 4/15/2004 ............................................... 1,750,000 1,701,875
------------
59,783,677
------------
Bulgaria 3.2%
Republic of Bulgaria, Interest Arrears Bond, LIBOR plus .8125% (5.875%), 7/28/2011 .............. 700,000 473,375
Republic of Bulgaria, Collateralized Floating Rate Interest Reduction Bond, "A", Step-up Coupon,
2.5%, 7/28/2012 ............................................................................... 990,000 600,188
Republic of Bulgaria, Collateralized Discount Bond, Tranche A, LIBOR plus .8125% (5.875%),
7/28/2024 ..................................................................................... 8,010,000 5,496,863
------------
6,570,426
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Emerging Markets Income Fund
<PAGE>
<TABLE>
<CAPTION>
.
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Colombia 1.1%
<S> <C> <C>
Republic of Colombia, 7.625%, 2/15/2007 .................................................... 1,550,000 1,346,563
Republic of Colombia, 10.875%, 3/9/2004 .................................................... 925,000 973,948
---------
2,320,511
---------
Ecuador 3.1%
Republic of Ecuador, Past Due Interest Bond, 3.75% with 2.25% capitalization, 6%,
2/27/2015 ................................................................................ 7,817,156 3,283,205
Republic of Ecuador, Collateralized Discount Bond, Floating Rate Bond, LIBOR plus .8125%
(6%), 2/28/2025 .......................................................................... 875,000 452,813
Republic of Ecuador, Collateralized Global Par Bond, Step-up Coupon, 4%, 2/28/2025 ......... 6,150,000 2,606,063
---------
6,342,081
---------
Ivory Coast 0.4%
Republic of the Ivory Coast, Floating Rate Interest Reduction Bond, Step-up Coupon, 2%,
3/29/2018 ................................................................................ 3,040,000 775,200
---------
Jamaica 2.3%
Government of Jamaica, 10.875%, 6/10/2005 .................................................. 5,200,000 4,680,000
---------
Mexico 20.5%
Petroleos Mexicanos S.A., 9.5%, 9/15/2027 .................................................. 5,750,000 5,390,625
United Mexican States, 9.875%, 1/15/2007 ................................................... 5,900,000 6,202,375
United Mexican States, 10.375%, 2/17/2009 .................................................. 3,950,000 4,236,375
United Mexican States Global Bond, 11.375%, 9/15/2016 ...................................... 2,710,000 3,109,725
United Mexican States, Collateralized Par Bond (Detachable Oil Priced Indexed Value Recovery
Rights), Series A, 6.25%, 12/31/2019 ..................................................... 8,350,000 6,628,230
United Mexican States, Collateralized Floating Rate Discount Bond (Detachable Oil Priced
Indexed Value Recovery Rights), Series A, LIBOR plus .8125% (5.875%), 12/31/2019 ......... 4,250,000 3,668,281
United Mexican States, Collateralized Floating Rate Discount Bond (Detachable Oil Priced
Indexed Value Recovery Rights), Series D, LIBOR plus .8125% (6.0975%), 12/31/2019 ........ 4,250,000 3,668,281
United Mexican States, Floating Rate Discount Note (Detachable Oil Priced Indexed Value
Recovery Rights), Series B, LIBOR plus .8125% (6.03875%), 12/31/2019 ..................... 1,000,000 863,125
United Mexican States, Floating Rate Discount Note (Detachable Oil Priced Indexed Value
Recovery Rights), Series C, LIBOR plus .8125% (6.201%), 12/31/2019 ....................... 3,500,000 3,020,938
United Mexican States, 11.5%, 5/15/2026 .................................................... 4,160,000 4,948,320
-----------
41,736,275
-----------
Morocco 2.3%
Kingdom of Morocco, Restructuring and Consolidation Agreement, Tranche A, Floating Rate
Bond, LIBOR plus .8125% (6.0625%), 1/1/2009 .............................................. 5,820,238 4,765,320
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Emerging Markets Income Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Panama 6.1%
Republic of Panama, Interest Reduction Bond, Step-up Coupon, 4%, 7/17/2014 ...... 8,800,000 6,908,000
Republic of Panama, 8.875%, 9/30/2027 ........................................... 5,900,000 5,582,875
----------
12,490,875
----------
Peru 4.0%
Republic of Peru, Floating Rate Interest Reduction Bond, 3.75%, 3/7/2017 ........ 6,590,000 4,073,444
Republic of Peru, Past Due Interest Bond, 4.5%, 3/7/2017 ........................ 5,900,000 3,982,500
----------
8,055,944
----------
Philippines 2.5%
Republic of the Philippines, 8.875%, 4/15/2008 .................................. 5,000,000 5,087,500
----------
Poland 0.5%
Republic of Poland, Past Due Interest Bond, Step-up Coupon, 5%, 10/27/2014 ...... 1,000,000 925,000
----------
Russia 2.6%
Russian Federation Principal Loan, Floating Rate Bond, LIBOR plus .8125% (0.0%),
12/15/2020* (b) ............................................................... 74,045,000 5,368,263
----------
Venezuela 7.3%
Republic of Venezuela, Debt Conversion Bond, Floating Rate Bond, Series DL, LIBOR
plus .875% (5.9375%), 12/18/2007 .............................................. 15,642,805 12,631,565
Republic of Venezuela Global, 9.25%, 9/15/2027 .................................. 3,000,000 2,175,000
----------
14,806,565
- ----------------------------------------------------------------------------------------------------------------------------------
Total Bonds (Cost $190,485,526) 202,954,208
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $191,162,526) (a) 203,631,208
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security
(a) The cost for federal income tax purposes was $205,366,337. At April 30,
1999, net unrealized depreciation for all securities based on tax cost was
$1,735,129. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $9,085,640 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$10,820,769.
(b) On December 2, 1998, the Fund wrote down interest receivable of
approximately $1.2 million and stopped accruing income from the Russian
Federation Principal Loan. At April 30, 1999, the bond is in default.
The accompanying notes are an integral part of the financial statements.
12 - Scudder Emerging Markets Income Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 1999
<TABLE>
<CAPTION>
Assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $191,162,526) ............ $ 203,631,208
Cash ............................................................. 559
Receivable for investments sold .................................. 10,252,860
Interest receivable .............................................. 3,952,445
Receivable for Fund shares sold .................................. 242,079
Other assets ..................................................... 2,265
-------------
Total assets ..................................................... 218,081,416
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................ 10,189,360
Payable for Fund shares redeemed ................................. 352,768
Accrued management fee ........................................... 161,586
Other payables and accrued expenses .............................. 288,599
-------------
Total liabilities ................................................ 10,992,313
---------------------------------------------------------------------------------------
Net assets, at market value $ 207,089,103
---------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ..... (1,453,245)
Unrealized appreciation (depreciation) on investments ............ 12,468,682
Accumulated net realized gain (loss) ............................. (120,903,442)
Paid-in capital .................................................. 316,977,108
---------------------------------------------------------------------------------------
Net assets, at market value $ 207,089,103
---------------------------------------------------------------------------------------
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($207,089,103 /27,230,698 shares of capital stock outstanding,
$.01 par value, 100,000,000 shares authorized) ................... $ 7.60
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Emerging Markets Income Fund
<PAGE>
Statement of Operations
six months ended April 30, 1999
<TABLE>
<CAPTION>
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest ...................................................... $ 10,718,903
------------
Expenses:
Management fee ................................................ 1,021,476
Services to shareholders ...................................... 480,845
Directors' fees and expenses .................................. 23,110
Custodian and accounting fees ................................. 152,493
Auditing ...................................................... 46,286
Reports to shareholders ....................................... 45,618
Legal ......................................................... 4,553
Registration fees ............................................. 23,132
Amortization of organization expense .......................... 9,041
Other ......................................................... 19,889
------------
1,826,443
----------------------------------------------------------------------------------
Net investment income 8,892,460
----------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ................................................... (44,916,085)
Foreign currency related transactions ......................... 1,062
------------
(44,915,023)
Net unrealized appreciation (depreciation) during the period
on:
Investments ................................................... 60,942,780
Foreign currency related transactions ......................... 1,503
------------
60,944,283
----------------------------------------------------------------------------------
Net gain (loss) on investment transactions 16,029,260
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 24,921,720
----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Emerging Markets Income Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ............................... $ 8,892,460 $ 30,428,293
Net realized gain (loss) from investment transactions (44,915,023) (78,736,321)
Net unrealized appreciation (depreciation) on
investment transactions during the period............ 60,944,283 (30,037,229)
------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 24,921,720 (78,345,257)
------------- -------------
Distributions to shareholders from:
Net investment income ............................... (10,345,705) (29,195,726)
------------- -------------
Net realized gains .................................. -- (40,190,416)
------------- -------------
Fund share transactions:
Proceeds from shares sold ........................... 66,568,599 208,978,681
Net asset value of shares issued to shareholders in
reinvestment of distributions........................ 8,865,187 60,819,849
Cost of shares redeemed ............................. (96,659,931) (231,955,980)
------------- -------------
Net increase (decrease) in net assets from Fund share
transactions......................................... (21,226,145) 37,842,550
------------- -------------
Increase (decrease) in net assets ................... (6,650,130) (109,888,849)
Net assets at beginning of period ................... 213,739,233 323,628,082
Net assets at end of period (including accumulated
distributions in excess of net investment income of ------------- -------------
$1,453,245 at April 30, 1999)........................ $ 207,089,103 $ 213,739,233
------------- -------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........... 30,361,903 26,485,043
------------- -------------
Shares sold ......................................... 9,248,113 21,734,209
Shares issued to shareholders in reinvestment of
distributions ....................................... 1,258,373 5,912,049
Shares redeemed ..................................... (13,637,691) (23,769,398)
------------- -------------
Net increase (decrease) in Fund shares .............. (3,131,205) 3,876,860
------------- -------------
Shares outstanding at end of period ................. 27,230,698 30,361,903
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Emerging Markets Income Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
December 31,
1993
(commencement of
Six Months Ended Years Ended October 31, operations) to
April 30, October 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
Net asset value, beginning of
period.......................... $ 7.04 $ 12.22 $ 12.98 $ 10.26 $ 11.05 $ 12.00
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income ............ .31 1.04 1.06 1.20 1.14 0.60
Net realized and unrealized gain
(loss) on investments........... .62 (3.71) .46 2.71 (.82) (1.04)
---------------------------------------------------------------------------------
Total from investment operations . .93 (2.67) 1.52 3.91 .32 (.44)
---------------------------------------------------------------------------------
Less distributions from:
Net investment income .......... (.37) (1.01) (1.10) (1.19) (1.11) (.51)
Net realized gain on investment
transactions.................... -- (1.50) (1.18) -- -- --
---------------------------------------------------------------------------------
Total distributions .............. (.37) (2.51) (2.28) (1.19) (1.11) (.51)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Net asset value, end of period ... $ 7.60 $ 7.04 $ 12.22 $ 12.98 $ 10.26 $ 11.05
---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Total Return (%) ................. 13.77** (27.60) 12.34 39.78(b) 3.46(b) (3.54)(b)**
Ratios and Supplemental Data
Net assets, end of period ($
millions)....................... 207 214 324 305 169 95
Ratio of operating expenses, net
to average daily net assets (%) 1.79* 1.56 1.49 1.44 1.50 1.50*
Ratio of operating expense, before
expense reductions to average
daily net assets (%)........... 1.79* 1.56 1.49 1.45 1.68 2.23*
Ratio of net investment income to
average daily net assets (%)... 8.71* 9.97 8.03 10.05 12.83 9.17*
Portfolio turnover rate (%) ...... 307.9* 239.7 409.5 430.0 302.2 180.6*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns are higher due to maintenance of Fund expenses.
* Annualized
** Not annualized
16 - Scudder Emerging Markets Income Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Emerging Markets Income Fund (the "Fund") is a non-diversified series of
the Global/International Fund, Inc. (the "Corporation"), a Maryland corporation
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio debt securities purchased with original maturities
greater than sixty days are valued by pricing agents approved by the Officers of
the Corporation, whose quotations reflect broker/dealer-supplied valuations and
electronic data processing techniques. If the pricing agents are unable to
provide such quotations, the most recent bid quotation supplied by a bona fide
market maker shall be used. Money market instruments purchased with an original
maturity of sixty days or less are valued at amortized cost. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Directors.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value is equal to at least the repurchase price.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at the
daily rates of exchange, and
(ii)purchases and sales of investment securities, interest income and certain
expenses at the daily rates of exchange prevailing on the respective
dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on interest
and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
17 - Scudder Emerging Markets Income Fund
<PAGE>
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code of 1986, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes, and no federal
income tax provision was required. At October 31, 1998, the Fund had a net tax
basis capital loss carryforward of approximately $60,900,000, which may be
applied against any realized net taxable capital gains of each succeeding year
until fully utilized or until October 31, 2006, the expiration date.
Distribution of Income and Gains. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to foreign denominated investments and certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
The Fund uses the specific identified cost method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization and initial registration of shares were deferred and were amortized
on a straight-line basis over a five-year period.
Other. Investment security transactions are accounted for on a trade date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are amortized/accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
For the six months ended April 30, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $298,506,356 and
$302,399,099, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 1.00% of the Fund's
18 - Scudder Emerging Markets Income Fund
<PAGE>
average daily net assets, computed and accrued daily and payable monthly. For
the six months ended April 30, 1999, the fee pursuant to these agreements
amounted to $1,021,476, of which $161,586 is unpaid at April 30, 1999.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 1999, the amount charged to the Fund by SSC
aggregated $242,940, of which $41,064 is unpaid at April 30, 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 Fund. For the six months ended April 30,
1999, the amount charged to the Fund by STC aggregated $28,209, of which $4,776
is unpaid at April 30, 1999.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 1999, the amount charged to the Fund by SFAC aggregated $84,111,
of which $27,491 is unpaid at April 30, 1999.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. For the six months ended April
30, 1999, the Special Servicing Agreement expense charged to the Fund amounted
to $45,214.
The Fund pays each Director not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 1999, Directors' fees and expenses aggregated $23,110.
D. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. Lines of Credit
The Fund and several Scudder 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 pro rata 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.
19 - Scudder Emerging Markets Income Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Global/International Fund, Inc. and to the
Shareholders of Scudder Emerging Markets Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Emerging Markets Income
Fund (the "Fund") at April 30, 1999, the results of its operations for the six
months then ended, the changes in its net assets for the six months then ended
and for the year ended October 31, 1998, and the financial highlights for the
periods indicated therein, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with 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 April 30, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Massachusetts PricewaterhouseCoopers LLP
June 11, 1999
20 - Scudder Emerging Markets Income Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Emerging Markets
Income Fund (the "Fund") was held on December 15, 1998, at the office of Scudder
Kemper Investments, Inc., Two International Place, Boston, Massachusetts 02110.
At the Meeting the following matters were voted upon by the shareholders (the
resulting votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
---------- ------- ------- -----------------
16,787,105 447,571 482,519 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
---------- ------- ------- -----------------
13,922,180 738,603 586,877 2,469,536
- -------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or
nominees when the broker or nominee neither has received instructions
from the beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter.
21 - Scudder Emerging Markets Income Fund
<PAGE>
This Page
intentionally
left blank.
22 - Scudder Emerging Markets Income Fund
<PAGE>
This Page
intentionally
left blank.
23 - Scudder Emerging Markets Income Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board,
Vice President and
Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Consultant and
Venture Capitalist
Sheryle J. Bolton
Director; Chief Executive
Officer, Scientific Learning
Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Keith R. Fox
Director; Private Equity
Investor
William H. Luers
Director; Chairman
and President, U.N. Association of
the U.S.A.
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Joan E. Spero
Director; President, Doris Duke
Charitable Foundation
Thomas J. Devine
Honorary Director; Consultant
William H. Gleysteen, Jr.
Honorary Director; Consultant;
Guest Scholar, Brookings
Institute
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus of the Board and
Director, Kirby Corporation
Susan E. Dahl*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - Scudder Emerging Markets Income Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
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**
Scudder Pennsylvania 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
Scudder Pathway International 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 Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
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.
Scudder New Europe 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.
25 - Scudder Emerging Markets Income Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder Emerging Markets Income Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
800 no-load funds from well-known companies--with no
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
27 - Scudder Emerging Markets Income Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $280 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 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
