SCUDDER
INVESTMENTS(SM)
[LOGO]
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BOND/GLOBAL
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Scudder Emerging
Markets Income Fund
Fund #076
Semiannual Report
April 30, 2000
The fund's primary investment objective is to provide investors with high
current income. As a secondary investment objective, the fund seeks long-term
capital appreciation.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
9 Portfolio Management Discussion
15 Glossary of Investment Terms
17 Investment Portfolio
21 Financial Statements
24 Financial Highlights
25 Notes to Financial Statements
30 Report of Independent Accountants
31 Officers and Directors
32 Investment Products and Services
34 Scudder Solutions
2
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Scudder Emerging Markets Income Fund
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ticker symbol SCEMX fund number 076
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Date of o For the six-month period ended April 30, 2000, the fund
Inception: provided a total return of 10.19%, compared to a 9.16%
12/31/93 return for the fund's unmanaged benchmark, the J.P.
Morgan Emerging Markets Bond Global Constrained Index.
Total Net o The global economic cycle appears to be gaining
Assets as of momentum and, as evidence of this, emerging market
4/30/00: fundamentals generally continued to improve throughout
$161 million the period, highlighted by numerous credit upgrades of
emerging market debt from ratings agencies during the
first quarter.
o The focus of the fund continues to be on credit quality
-- investing in countries with economies that have
improving fundamentals warranting credit upgrades. This
strategy led the fund to shift assets out of Asia and
into Latin America, which we believe has begun
exhibiting signs of economic growth, fiscal reform, and
strengthening currencies.
3
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Letter from the Fund's President
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Dear Shareholders,
During the six-month period ended April 30, 2000, credit fundamentals continued
to improve as economies gained strength around the world. Even Asia, which was
in economic turmoil not too long ago, has recovered to the point that, in our
view, many of its debt securities now fairly reflect the momentum of these
economies. At the same time, Mexico, South Africa, and Turkey, among others,
have received credit upgrades from major bond-rating agencies. These improving
fundamentals are reflected in the stronger performance of the emerging market
debt asset class. However, volatility from developed country equity markets and
concerns over rising inflation in the United States continue to create risk for
emerging market debt.
Over its most recent semiannual period ended April 30, 2000, your fund returned
10.19%. The fund continued to emphasize higher credit quality issues, focusing
on countries with improving fundamentals leading to credit upgrades. The J.P.
Morgan Emerging Markets Bond Global Constrained Index returned 9.16% during the
same period. The shift of fund assets from Asia to Latin America that began in
the latter part of 1999 has accelerated somewhat in recent months, as certain
countries in this region have shown signs of economic reform, strengthening
currencies, and greater economic momentum. Specifically, countries such as
Brazil and Argentina are benefiting from renewed commitments to fight inflation,
increased political
4
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stability, and generally improving fundamentals. Mexico, meanwhile, continues to
enjoy the benefits of a strong U.S. economy while maintaining a policy of
prudent debt management. For more information about Scudder Emerging Market
Income Fund's investment environment, strategy, and outlook, please read the
interview that begins on page 9.
As always, please call a Scudder 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 34 provides more information on how to contact
Scudder. Thank you for choosing Scudder Emerging Markets Income Fund to help
meet your investing needs.
Sincerely,
/S/Nicholas Bratt
Nicholas Bratt
President,
Scudder Emerging Markets Income Fund
5
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Performance Update
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April 30, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
Scudder Emerging J.P. Morgan Emerging
Markets Income Fund Markets Bond Index Plus*
12/93** 10000 10000
'94 8962 7734
'95 8858 7981
'96 12131 11269
'97 15567 14856
'98 17773 17064
'99 12907 15556
'00 14590 18432
Yearly periods ended April 30
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 4/30/2000 $10,000 Cumulative Annual
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Scudder Emerging Markets Income Fund
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1 year $ 11,304 13.04% 13.04%
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5 year $ 16,472 64.72% 10.50%
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Life of Fund** $ 14,590 45.90% 6.15%
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J.P. Morgan Emerging Markets Bond Index Plus*
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1 year $ 11,849 18.49% 18.49%
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5 year $ 23,096 130.96% 18.20%
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Life of Fund** $ 18,432 84.32% 10.14%
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* 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. Index returns
assume reinvested dividends and, unlike Fund returns, do not reflect any fees
or expenses.
** The Fund commenced operations on December 31, 1993.
6
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Returns and Per Share Information
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Yearly periods ended April 30
Scudder Emerging J.P. Morgan Emerging
Markets Income Fund Markets Bond Index Plus*
1994** -10.38 -22.66
1995 -1.17 3.19
1996 39.96 41.20
1997 28.32 31.84
1998 14.17 14.86
1999 -27.38 -8.84
2000 13.04 18.49
1994** 1995 1996 1997 1998 1999 2000
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Fund Total
Return (%) -10.38 -1.17 39.96 28.32 14.17-27.38 13.04
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Index Total
Return (%) -22.66 3.19 41.20 31.84 14.86 -8.84 18.49
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Net Asset
Value($) 10.67 9.66 11.85 12.66 11.72 7.60 7.87
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Income
Dividends ($) .09 .92 1.19 1.19 1.04 .87 .68
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Capital Gains
Distributions($) -- -- -- 1.18 1.50 -- --
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* 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. Index returns
assume reinvested dividends and, unlike Fund returns, do not reflect any fees
or expenses.
** The Fund commenced operations on December 31, 1993.
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.
7
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Portfolio Summary
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April 30, 2000
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Diversification
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Debt Obligations 92%
Cash Equivalents 8%
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100%
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The fund is largely invested in the income markets of emerging countries, with a
cash position of less than 10%.
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Geographical
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(Excludes 8% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Brazil 20%
Mexico 19%
Argentina 16%
Russia 10%
Venezuela 6%
Colombia 4%
Turkey 4%
Philippines 4%
South Africa 4%
Other 13%
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100%
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Brazil, our largest holding, has benefited from a renewed commitment to fight
inflation, increased political stability and generally improving fundamentals.
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Currency Exposure
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United States 100%
The fund invests primarily in dollar-denominated sovereign issues.
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Average Life
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(Excludes 8% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
0 < 3 years 8%
3 < 5 years 19%
5 < 10 years 30%
10+ years 43%
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100%
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Fund assets are invested in instruments with a range of maturities.
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
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Portfolio Management Discussion
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April 30, 2000
In the following interview, lead portfolio manager Susan E. Dahl and portfolio
manager M. Isabel Saltzman discuss Scudder Emerging Markets Income Fund's
strategy and the market environment for the six-month period ended April 30,
2000.
Q: How did the fund perform over the six-month period ended April 30?
A: The Fund returned 10.19% during the period. The J.P. Morgan Emerging Markets
Bond Global Constrained Index, which we use as the fund's unmanaged benchmark,
returned 9.16% during the same period. The fund's 30-day net annualized yield
was 9.31% as of April 30.
Q: How would you characterize the tone of the overall market during the period?
A: Overall, the market has been quite supportive for emerging markets. The
global economic cycle appears to be gaining momentum and emerging market
fundamentals have generally continued to improve throughout the period,
highlighted by the numerous credit upgrades from the ratings agencies during the
first quarter. Mexico, for example, received an investment-grade rating from
Moody's Investors Service, Inc. in March. South Africa was also upgraded to
investment grade by Standard & Poor's (S&P). In Asia, Malaysia received a
one-notch upgrade from S&P to BBB late last year. In Europe, Turkey also
received a one-notch upgrade from S&P. These improving fundamentals have been
reflected in the performance of the asset class as well. Contrary to the
corporate debt markets throughout Europe and the United States, emerging market
debt has been one of the best-performing fixed-income asset classes this year.
However, the external markets continue to create the greatest risks to emerging
markets. Volatility from developed equity markets as well as inflation fears out
of the United States are having the greatest negative influence on emerging
market spreads. And with the weakness in the U.S. corporate and high yield
markets, demand from investors outside of emerging
9
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markets has slowed as these "crossover" investors have found value within their
own markets.
But despite the corrections in the Dow Jones Industrial Average and Nasdaq
Composite Index, the tightening cycle of the U.S. Federal Reserve Board (the
Fed), and the significant dislocations in the U.S. high-grade corporate market,
emerging market debt has generally performed quite well.
Q: What have been some of the key events around the globe over the period?
A: For many emerging market countries, the end of 1999 provided signs of a
strong economic recovery. Rising commodity prices (particularly oil), fading
concerns regarding the Y2K effects, and improving fundamentals all provided
support for emerging market bonds. The global backdrop was also favorable as the
Fed began injecting liquidity into the financial markets in an attempt to
increase investor confidence as the Y2K rollover approached. Investors' appetite
for risk returned to global asset markets as the Nasdaq soared to new highs and
emerging market debt spreads continued to rally. The world began to exhibit
signs of balanced growth, with Europe generally demonstrating sustainable growth
with low inflation, Japan showing signs of a recovery, and the Fed was set to
slow U.S. growth to a pace more sustainable over the long term.
After the new year, governments attempted to capitalize on the positive momentum
in emerging markets through active debt management. Debt buybacks and exchanges
provided a positive backdrop for the market as did the numerous credit upgrades
throughout the emerging market investment universe. However, as the United
States continued to exhibit strong growth, concerns over inflation began to
impact credit markets. U.S. credit markets began to weaken, and the U.S.
Treasury curve began to invert, with yields on shorter-term debt exceeding those
of longer-term debt (partly due to the announcement of buybacks). It soon became
clear that the appetite for credit
10
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was falling and risk aversion was returning to credit markets. As the volatility
of developed equity markets increased, the results began to impact emerging
market debt.
Q: Please describe the fund's overall strategy and discuss how you have been
implementing this strategy.
A: The focus of the fund continues to be on credit quality -- investing in those
countries that have improving fundamentals warranting credit upgrades. This
strategy guided the fund as we shifted assets out of Asia and into Latin
America, where several countries had begun exhibiting signs of economic growth,
fiscal reform, and strengthening currencies. On a relative value basis, Latin
America generally offered attractive valuations whereas many Asian bonds fairly
reflected the economic momentum they had regained since the Asian financial
crisis. As a result, we did not feel Asian bonds overall offered as much upside
potential as bonds issued by many Latin American countries. The fund's largest
position during the period was in Mexico. Mexico enjoys the benefits of a strong
U.S. economy and continues to demonstrate prudent debt management. We added to
the fund's holdings in Brazil and Argentina, two countries continuing to gain
significant ground on economic reform. In addition, Brazil continued to
demonstrate its renewed focus on growth as well as its commitment to fight
inflation.
Q: What investments have you made outside of Latin America?
A: In Eastern and Central Europe, the fund remains invested in its position in
Turkey, where the government has made significant progress in reducing inflation
while achieving outstanding results on its privatization program. Also, many
local banks are flush with liquidity, creating significant demand for external
debt. The fund also increased its exposure to Russia as we became more
comfortable with the political climate. More important,
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economic performance continues to improve, leading to rising reserve levels.
There are also sings that President Putin's government is serious about
undertaking deep structural and economic reform.
Q: Has the financial situation in Russia stabilized since Vladimir Putin took
over presidential duties from Boris Yeltsin?
A: As it became more evident that Putin would gain a first-round victory in the
March presidential elections, investors' confidence and comfort with the
political situation continued to grow. Capital flight has begun to slow and the
general economic indicators have started to improve. Foreign exchange reserves
have begun to accumulate and continue to do so. And London Club negotiations
regarding the debt of the former Soviet Union, which had been stalled in the
runup to parliamentary elections in December, have picked up with the
possibility of the deal closing by the end of the second quarter or early in the
third quarter.
Q: What's your outlook for Russia going forward?
A: Over the near term, we believe prospects for Russia are looking more
positive. International reserves should continue to grow, and it appears that
Russia will be able to finance its debt service payments for the rest of 2000
without lending from the International Monetary Fund (IMF) or other multilateral
organizations. We would expect to see significant structural reforms going
forward -- reforms that are crucial in putting the economy on the path to
sustainable growth. We also expect to see tangible investment taking place
coupled with real wage growth. And once the London Club deal closes, we expect
President Putin to announce a reform-minded medium-term economic program as well
as start serious discussions with the IMF regarding a new adjustment program.
Through the IMF program we will be looking for an improvement in transparency, a
key to our future outlook for the country.
12
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Q: Do you see progress in other emerging markets?
A: As many emerging market fundamentals continue to improve, governments are
attempting to capitalize on this trend through passage of important structural
adjustments. For example, in Latin America, the Argentine Senate has approved
the Labor Reform Bill which attempts to streamline the government workforce
through easing the hiring/firing of workers and the reduction of union power. In
Brazil, the government approved the Fiscal Responsibility Law which emphasizes
fiscal prudence through limiting spending, indebtedness, and financing. And in
Mexico, the Lower House passed the Bankruptcy Law which will help to simplify
and shorten the bankruptcy process. In Eastern Europe, Turkey continues to make
significant progress on its privatization front and should, we believe, easily
surpass the year-end IMF target of $7.6 billion in proceeds. And in Asia,
significant progress surrounding the restructuring and recapitalization of the
financial sector continues.
Q: What markets are you avoiding and why?
A: Asia is the one region that the fund has had very few investments with
recently. This is more a reflection of relative value rather than fundamentals.
Since the Asian financial crisis, most of the Asian economies have regained
their economic momentum. The economic recovery has caused Asian bond spreads to
tighten, pushing prices to the point where we felt the bonds had become
overvalued. Given the expected economic improvements elsewhere within the
emerging markets universe, we felt that we could find more attractive
investments outside of Asia. In Latin America, progress continues to be slow
regarding Ecuador's restructuring negotiations with the Paris Club and
bondholders. Given what we see as the weakness of the banking sector and the dim
prospects for an economic recovery under the dollarization plan, risks remain
too high to warrant exposure to Ecuador in the fund.
13
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Q: What is your outlook for emerging market debt over the coming months?
A: We expect overall emerging market fundamentals to continue to improve. While
the fundamentals warrant tighter spread levels, external markets and technical
factors will continue to impact emerging market debt. U.S. interest rate policy
has kept asset markets on edge as investors attempt to discern whether the Fed
has been active enough in its fight against inflation. This has increased market
volatility in developed countries as well as dislocations in the U.S. credit
markets -- both which have yet to demonstrate signs of stabilizing. Taking all
these factors into account, the strategy of the fund has become more
conservative. Our focus remains on higher credit quality, countries with greater
liquidity, and low refinancing requirements. The fund continues to search for
opportunities within the emerging market universe and remains poised to take
advantage of the strong fundamentals in emerging markets once the external
markets stabilize.
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Glossary of Investment Terms
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Credit Spread The difference in yield between non-Treasury bonds,
such as corporate bonds or mortgage backed securities, and
Treasury bonds of comparable maturity. If a credit spread is
said to be "narrow," for example, it typically means that
the yields of non-government issues have been declining, and
their prices rising, compared with Treasury bonds of similar
maturity. Such a condition is considered positive for the
bond market. In contrast, "widening" spreads are considered
to be negative.
International An organization focused on the lowering of trade barriers
Monetary and the stabilization of currency exchange rates. While
Fund (IMF) helping developing nations to pay their debts, the IMF
usually imposes tough guidelines aimed at lowering
inflation, cutting imports, and raising exports.
Inverted An unusual situation where short term interest rates are
Yield Curve higher than long term interest rates. An inverted curve
results when a surge in demand for short term credit drives
up short term rates, while long term rates move up more
slowly since borrowers are not willing to commit themselves
to pay high rates for many years. This scenario is often
indicative of negative sentiment concerning a country's
economic health.
Monetary The decision of a central bank to control the level of
Policy economic activity by either supplying credit through lower
interest rates or open market purchases, or by restricting
credit through higher rates or open market sales. Looser
credit tends to stimulate the economy, while tighter credit
tends to calm inflationary forces.
30-Day SEC The standard yield reference for bond funds, based on a
Yield formula prescribed by the SEC. This annualized yield
calculation reflects the 30-day average of the income
earnings capability of every holding in a given fund's
portfolio, net of expenses, assuming each is held to
maturity.
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Total Return The most common yardstick to measure the performance of a
fund. Total return -- annualized or compounded -- is based
on a combination of share price changes plus income and
capital gain distributions, if any, expressed as a
percentage gain or loss in value.
Yield Curve A graph showing the term structure of interest rates by
plotting the yields of all bonds of the same quality with
maturities ranging from the shortest to the longest
available. The resulting curve shows the relationship
between short-, intermediate-, and long-term interest rates.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
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<TABLE>
<CAPTION>
Investment Portfolio as of April 30, 2000
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Principal
Amount ($) Value ($)
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U.S. Government Agency Obligations 7.7%
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<S> <C> <C>
Federal Home Loan Bank, 5.88%**, 5/1/2000 ----------
(Cost $12,602,000) ............................................ 12,602,000 12,602,000
----------
-------------------------------------------------------------------------------------------------
Foreign Bond-- U.S. Dollar Denominated 92.3%
-------------------------------------------------------------------------------------------------
Argentina 14.4%
Argentine Republic, Collateralized Discount Floating
Rate Bond, Series L, LIBOR plus .8125%, (6.875%),
3/31/2023 ..................................................... 4,800,000 4,080,000
Argentine Republic, Collateralized Par Bond, Series L,
Step-up Coupon, 6%, 3/31/2023 ................................. 3,930,000 2,746,088
Argentine Republic, 9.75%, 9/19/2027 ............................. 1,700,000 1,423,750
Argentine Republic, Floating Rate Bond, Series L, LIBOR
plus .8125%, (7.38%), 3/31/2005 ............................... 7,892,000 7,349,425
Republic of Argentina, 11.75%, 4/7/2009 .......................... 2,150,000 2,109,688
Republic of Argentina, 12.125%, 2/25/2019 ........................ 1,200,000 1,188,000
Republic of Argentina, 12%, 2/1/2020 ............................. 4,820,000 4,766,980
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23,663,931
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Brazil 18.3%
Federative Republic of Brazil, 11.625%, 4/15/2004 ................ 2,510,000 2,492,430
Federative Republic of Brazil, Eligible Interest, Floating
Rate Bond, LIBOR plus .8125%, (7.375%), 4/15/2006 ............. 5,031,300 4,490,435
Federative Republic of Brazil, 9.375%, 4/7/2008 .................. 3,330,000 2,763,900
Federative Republic of Brazil, Debt Conversion Bond,
Series L, LIBOR plus .875%, (7.44%), 4/15/2012 ................ 2,405,000 1,734,606
Federative Republic of Brazil, C Bond, 8%, 4/15/2014 ............. 17,462,086 12,529,046
Federative Republic of Brazil, 12.75%, 1/15/2020 ................. 3,660,000 3,508,110
Federative Republic of Brazil, Collateralized Discount Bond,
Floating Rate Bond, LIBOR plus .8125%,
(7.375%), 4/15/2024 ........................................... 3,300,000 2,549,250
----------
30,067,777
----------
Bulgaria 2.9%
Republic of Bulgaria, Collateralized Discount Bond,
Tranche A, LIBOR plus .8125%, (7.06%), 7/28/2024 .............. 1,220,000 930,250
Republic of Bulgaria, Collateralized Floating Rate Interest
Reduction Bond, "A", Step-up Coupon, 2.75%,
7/28/2012 ..................................................... 1,590,000 1,105,050
Republic of Bulgaria, Floating Rate Bond, LIBOR plus
.8125%, (7.0625%), 7/28/2011 .................................. 3,740,000 2,823,700
----------
4,859,000
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The accompanying notes are an integral part of the financial statements.
17
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Principal
Amount ($) Value ($)
------------------------------------------------------------------------------------------------
Colombia 3.8%
Republic of Colombia, 7.625%, 2/15/2007 ............................ 4,395,000 3,208,350
Republic of Colombia, 8.625%, 4/1/2008 ............................. 450,000 335,250
Republic of Colombia, 9.75%, 4/23/2009 ............................. 1,205,000 951,950
Republic of Colombia, 8.375%, 2/15/2027 ............................ 2,825,000 1,779,750
----------
6,275,300
----------
Jamaica 2.1%
Government of Jamaica, 10.875%, 6/10/2005 .......................... 3,530,000 3,477,050
----------
Malaysia 0.9%
Government of Malaysia, 8.75%, 6/1/2009 ............................ 1,500,000 1,539,375
----------
Mexico 17.2%
United Mexican States, Global Bond, 11.375%, 9/15/2016 ............. 1,910,000 2,160,688
United Mexican States, Collateralized Par Bond (Detachable
Oil Priced Indexed Velue Recovery Rights) Series A,
6.25%, 12/31/2019 ............................................... 5,120,000 4,204,800
United Mexican States, Collateralized Par Bond, (Detachable
Oil Priced Indexed Value Recovery Rights), Series B,
6.25%, 12/31/2019 ............................................... 2,750,000 2,258,437
United Mexican States, Collateralized Par Bond, Series A,
6.25%, 12/31/2019 ............................................... 1,470,000 1,207,238
United Mexican States, Floating Rate Discount Bond
(Detachable Oil Priced Indexed Value Recovery Rights),
Series D, LIBOR plus .8125%, (6.902%), 12/31/2019 ............... 5,495,000 5,378,231
United Mexican States, Floating Rate Discount Note
(Detachable Oil Priced Indexed Value Recovery Rights),
Series B, LIBOR plus .8125%, (5.875%), 12/31/2019 ............... 250,000 244,688
United Mexican States, 11.5%, 5/15/2026 ............................ 1,950,000 2,298,563
Petroleos Mexicanos S.A., 9.5%, 9/15/2027 .......................... 10,915,000 10,642,125
----------
28,394,770
----------
Morocco 2.1%
Kingdom of Morocco, Restructuring and Consolidation
Agreement, Tranche A, Floating Rate Bond, LIBOR
plus .8125%, (6.844%), 1/1/2009 ................................. 3,968,214 3,531,711
----------
Panama 2.4%
Republic of Panama, Interest Reduction Bond, Step-up Coupon, 4.25% to
7/17/2000, LIBOR plus .8125% to
7/17/2014 ....................................................... 4,965,000 3,909,938
----------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------------
Peru 1.3%
Republic of Peru, Floating Rate Interest Reduction Bond,
3.75%, 3/7/2017 ....................................... 3,400,000 2,201,747
----------
Philippines 3.5%
Republic of the Philippines, 8.875%, 4/15/2008 ........... 2,055,000 1,885,463
Republic of the Philippines, 10.625%, 3/16/2025 .......... 4,120,000 3,811,000
----------
5,696,463
----------
Russia 9.3%
City of St. Petersburg, 9.5%, 6/18/2002 .................. 1,410,000 1,120,950
Russian Ministry of Finance, 9.25%, 11/27/2001 ........... 3,660,000 3,422,100
Russian Ministry of Finance, 11.75%, 6/10/2003 ........... 4,700,000 4,159,500
Russian Ministry of Finance, 10%, 6/26/2007 .............. 4,364,000 3,120,260
Russian Federation, 11%, 7/24/2018 ....................... 2,300,000 1,644,500
Russian Federation, Step-up Coupon, 2.25%, 3/31/2030* (b) 5,250,000 1,771,875
----------
15,239,185
----------
Slovak Republic 1.8%
Slovak Republic, 9.5%, 5/28/2003 ......................... 2,935,000 2,975,356
----------
South Africa 3.6%
Republic of South Africa, 8.375%, 10/17/2006 ............. 890,000 835,488
Republic of South Africa, 9.125%, 5/19/2009 .............. 3,570,000 3,436,125
Republic of South Africa, 8.5%, 6/23/2017 ................ 1,850,000 1,616,530
----------
5,888,143
----------
Turkey 3.6%
Republic of Turkey, 11.875%, 11/5/2004 ................... 765,000 797,513
Republic of Turkey, 12%, 12/15/2008 ...................... 2,090,000 2,231,075
Republic of Turkey, 12.375%, 6/15/2009 ................... 1,175,000 1,267,531
Republic of Turkey, 11.875%, 1/15/2030 ................... 1,500,000 1,620,000
----------
5,916,119
----------
Venezuela 5.1%
Republic of Venezuela, Collateralized Front Loaded Interest
Reduction Bond, Series A, LIBOR plus .875%, (7.44%),
3/31/2007 ............................................. 4,333,302 3,358,309
Republic of Venezuela, Debt Conversion Floating Rate
Bond, Series DL, LIBOR plus .875%, (7%), 12/18/2007 ... 4,571,435 3,577,148
Republic of Venezuela Global, 9.25%, 9/15/2027 ........... 2,240,000 1,430,800
----------
8,366,257
----------
--------------------------------------------------------------------------------------
Total Foreign Bonds-- U.S. Dollar Denominated (Cost $151,396,782) 152,002,122
--------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $163,998,782) (a) 164,604,122
--------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
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* Non-income producing security.
** Annualized rate at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $167,038,508. At April 30,
2000, net unrealized depreciation for all securities based on tax cost was
$2,434,386. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $247,663 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $2,682,049.
(b) When issued or forward delivery securities.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of April 30, 2000
-----------------------------------------------------------------------------------------------
Assets
-----------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $163,998,782) ...................... $ 164,604,122
Cash ......................................................................... 15,018
Receivable for investments sold .............................................. 2,242,568
Receivable for when-issued and forward delivery securities ................... 6,187,500
Interest receivable .......................................................... 3,404,264
Receivable for Fund shares sold .............................................. 42,487
Other assets ................................................................. 530
-------------
Total assets ................................................................. 176,496,489
Liabilities
-----------------------------------------------------------------------------------------------
Payable for investments purchased ............................................ 5,906,530
Payable for when-issued and forward delivery securities ...................... 8,650,625
Payable for Fund shares redeemed ............................................. 421,050
Accrued management fee ....................................................... 135,043
Accrued reorganization expense ............................................... 55,793
Accrued Directors' fees and expenses ......................................... 32,684
Other accrued expenses and payables .......................................... 106,915
-------------
Total liabilities ............................................................ 15,308,640
-----------------------------------------------------------------------------------------------
Net assets, at value $ 161,187,849
-----------------------------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income (loss) ................................... 264,301
Net unrealized appreciation (depreciation) on investments .................... 605,340
Accumulated net realized gain (loss) ......................................... (103,129,529)
Paid-in capital .............................................................. 263,447,737
-----------------------------------------------------------------------------------------------
Net assets, at value $ 161,187,849
-----------------------------------------------------------------------------------------------
Net Asset Value
-----------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($161,187,849 /
20,482,191 shares of capital stock outstanding, $.01 par value, 100,000,000 -------------
shares authorized) ....................................................... $ 7.87
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended April 30, 2000
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Interest ...................................................... $ 9,922,947
------------
Expenses:
Management fee ................................................ 901,592
Services to shareholders ...................................... 326,940
Custodian and accounting fees ................................. 140,588
Auditing ...................................................... 49,244
Legal ......................................................... 12,996
Directors' fees and expenses .................................. 83,233
Reports to shareholders ....................................... 27,430
Registration fees ............................................. 10,614
Reorganization ................................................ 60,890
Other ......................................................... 21,970
------------
Total expenses, before expense reductions ..................... 1,635,497
Expense reductions ............................................ (29,195)
------------
Total expenses, after expense reductions ...................... 1,606,302
--------------------------------------------------------------------------------
Net investment income (loss) 8,316,645
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... 15,110,671
------------
15,110,671
Net unrealized appreciation (depreciation) during the period on
investments ................................................ (5,170,703)
------------
(5,170,703)
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 9,939,968
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 18,256,613
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------
Six Months Year Ended
EndedApril 30, October 31,
Increase (Decrease) in Net Assets 2000 1999
------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) ...................... $ 8,316,645 $ 17,385,886
Net realized gain (loss) on investment transactions 15,110,671 (42,475,899)
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (5,170,703) 54,251,644
------------- -------------
Net increase (decrease) in net assets resulting
from operations ................................ 18,256,613 29,161,631
------------- -------------
Distributions to shareholders from:
Net investment income ............................. (8,052,344) (17,161,638)
------------- -------------
Net realized gains ................................ -- --
------------- -------------
Tax return of capital ............................. -- (1,702,384)
------------- -------------
Fund share transactions:
Proceeds from shares sold ......................... 26,830,408 99,257,682
Reinvestment of distributions ..................... 6,877,689 16,206,909
Cost of shares redeemed ........................... (74,768,062) (147,457,888)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (41,059,965) (31,993,297)
------------- -------------
Increase (decrease) in net assets ................. (30,855,696) (21,695,688)
Net assets at beginning of period ................. 192,043,545 213,739,233
Net assets at end of period (including
undistributed net investment income (loss) ------------- -------------
of $264,301) ................................... $ 161,187,849 $ 192,043,545
------------- -------------
Other Information
------------------------------------------------------------------------------------
Shares outstanding at beginning of period ......... 25,730,471 30,361,903
------------- -------------
Shares sold ....................................... 3,403,076 13,712,051
Shares issued to shareholders in reinvestment of
distributions .................................. 866,687 2,279,508
Shares redeemed ................................... (9,518,043) (20,622,991)
------------- -------------
Net increase (decrease) in Fund shares ............ (5,248,280) (4,631,432)
------------- -------------
Shares outstanding at end of period ............... 20,482,191 25,730,471
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
--------------------------------------------------------------------------------------
Years Ended October 31, 2000(a)(b) 1999(b) 1998(b) 1997(b) 1996(b) 1995
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 7.46 $ 7.04 $12.22 $12.98 $10.26 $11.05
------------------------------------------------------
--------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .36 .63 1.04 1.06 1.20 1.14
--------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions .40 .49 (3.71) .46 2.71 (.82)
------------------------------------------------------
--------------------------------------------------------------------------------------
Total from investment
operations .76 1.12 (2.67) 1.52 3.91 .32
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.35) (.64) (1.01) (1.10) (1.19) (1.11)
--------------------------------------------------------------------------------------
Net realized gains on -- -- (1.50) (1.18) -- --
--------------------------------------------------------------------------------------
investment transactions
Tax return on capital -- (.06) -- -- -- --
------------------------------------------------------
--------------------------------------------------------------------------------------
Total distributions (.35) (.70) (2.51) (2.28) (1.19) (1.11)
--------------------------------------------------------------------------------------
Net asset value, end of period $ 7.87 $ 7.46 $ 7.04 $12.22 $12.98 $10.26
------------------------------------------------------
--------------------------------------------------------------------------------------
Total Return (%) 10.19** 16.70 (27.60) 12.34 39.78(c) 3.46(c)
--------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 161 192 214 324 305 169
--------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 1.75(d)* 1.75 1.56 1.49 1.45 1.68
--------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 1.73(d)* 1.75 1.56 1.49 1.44 1.50
--------------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) 9.28* 8.82 9.97 8.03 10.05 12.83
--------------------------------------------------------------------------------------
Portfolio turnover rate (%) 339* 327 240 410 430 302
--------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended April 30, 2000.
(b) Based on monthly average shares outstanding during the period.
(c) Total returns are higher due to maintenance of Fund expenses.
(d) The ratio of operating expenses excluding costs incurred in connection with
the reorganization before and after expense reductions was 1.68%.
* Annualized
** Not annualized
24
<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") 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.
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 an original
maturity greater than sixty days are valued by pricing agents approved by the
officers of the Corporation, whose quotations reflect broker/dealer-supplied
valuations and electronic data processing techniques. If the pricing agents are
unable to provide such quotations, the most recent bid quotation supplied by a
bona fide market maker shall be used. Money market instruments purchased with an
original maturity of sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
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
25
<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.
When-Issued/Forward Delivery Securities. The Fund may purchase securities with
delivery or payment to occur at a later date beyond the normal settlement
period. At the time the Fund enters into a commitment to purchase a security,
the transaction is recorded and the value of the security is reflected in the
net asset value. The value of the security may vary with market fluctuations. No
interest accrues to the Fund until payment takes place. At the time the Fund
enters into this type of transaction it is required to segregate cash or other
liquid assets at least equal to the amount of the commitment.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
At October 31, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $115,201,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2006 ($60,953,000) or October 31, 2007 ($54,248,000), the respective expiration
dates.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made quarterly. 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 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.
26
<PAGE>
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis. All discounts are accreted for both tax and financial
reporting purposes.
B. Purchases and Sales of Securities
For the six months ended April 30, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $280,220,558 and
$324,756,157, 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
average daily net assets, computed and accrued daily and payable monthly. For
the six months ended April 30, 2000, the fee pursuant to these agreements
amounted to $901,592.
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, 2000, the amount charged to the Fund by SSC
aggregated $179,565, of which $27,609 is unpaid at April 30, 2000.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended April 30,
2000, the amount charged to the Fund by STC aggregated $31,711, of which $12,126
is unpaid at April 30, 2000.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 2000, the amount charged to the Fund by SFAC aggregated $76,773,
of which $12,095 is unpaid at April 30, 2000.
27
<PAGE>
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, 2000, the Special Servicing Agreement expense charged to the Fund amounted
to $5,904.
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, 2000, Directors' fees and expenses aggregated $24,844. In
addition, a one-time fee of $58,389 was accrued for payment to those Directors
not affiliated with the Adviser who are not standing for re-election, under the
reorganization plan mentioned in Note F. Inasmuch as the Adviser will benefit
from administrative efficiencies of a consolidated board, the Adviser has agreed
to bear $29,195 of the cost of any such benefit.
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 $1 billion
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated, pro rata based upon net assets, among each of the
Participants. Interest is calculated based on the market rates at the time of
the
28
<PAGE>
borrowing. The Fund may borrow up to a maximum of 33 percent of its net assets
under the agreement.
F. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund.
29
<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 statements 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, 2000, the results of its operations, the changes
in its net assets and the financial highlights for each of the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States 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, 2000 by
correspondence with the custodian and brokers provide a reasonable basis for the
opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
June 16, 2000
30
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Nicholas Bratt* Robert G. Stone, Jr.
o President o Honorary Director; Chairman
Emeritus of the Board and
Sheryle J. Bolton Director, Kirby Corporation
o Director; Chief Executive Officer,
Scientific Learning Corporation Susan E. Dahl*
o Vice President
William T. Burgin
o Director; General Partner, Jan C. Faller*
Bessemer Venture Partners o Vice President
Keith R. Fox Ann M. McCreary*
o Director; General Partner, o Vice President
The Exeter Group of Funds
Gerald J. Moran*
William H. Luers o Vice President
o Director; Chairman and President,
U.N. Association of America M. Isabel Saltzman*
o Vice President
Kathryn L. Quirk*
o Director, Vice President and John Millette*
Assistant Secretary o Vice President and Secretary
Joan E. Spero John R. Hebble*
o Director; President, Doris Duke o Treasurer
Charitable Foundation
Caroline Pearson*
Paul Bancroft III o Assistant Secretary
o Honorary Director; Consultant
*Scudder Kemper Investments, Inc.
Thomas J. Devine
o Honorary Director; Consultant
William H. Gleysteen, Jr.
o Honorary Director; Consultant;
Guest Scholar, Brookings
Institution
31
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
The Scudder Family of Funds+++
--------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares* Scudder Micro Cap Fund
Managed Shares*
Growth
Tax Free Money Market+ Scudder Classic Growth Fund***
Scudder Tax Free Money Fund Scudder Large Company Growth Fund***
Scudder California Tax Free Money Fund** Scudder Select 1000 Growth Fund
Scudder New York Tax Free Money Fund** Scudder Development Fund
Scudder 21st Century Growth Fund
Tax Free+
Scudder Limited Term Tax Free Fund Global Equity
Scudder Medium Term Tax Free Fund Worldwide
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder High Yield Tax Free Fund Scudder International Value Fund
Scudder California Tax Free Fund** Scudder International Growth and
Scudder Massachusetts Limited Term Income Fund
Tax Free Fund** Scudder International Fund++
Scudder Massachusetts Tax Free Fund** Scudder International Growth Fund
Scudder New York Tax Free Fund** Scudder Global Discovery Fund***
Scudder Ohio Tax Free Fund** Scudder Emerging Markets Growth Fund
Scudder Gold Fund
U.S. Income
Scudder Short Term Bond Fund Regional
Scudder GNMA Fund Scudder Greater Europe Growth Fund
Scudder Income Fund Scudder Pacific Opportunities Fund
Scudder Corporate Bond Fund Scudder Latin America Fund
Scudder High Yield Bond Fund The Japan Fund, Inc.
Global Income Industry Sector Funds
Scudder Global Bond Fund Choice Series
Scudder International Bond Fund Scudder Financial Services Fund
Scudder Emerging Markets Income Fund Scudder Health Care Fund
Scudder Technology Fund
Asset Allocation
Scudder Pathway Conservative Portfolio Preferred Series
Scudder Pathway Balanced Portfolio Scudder Tax Managed Growth Fund
Scudder Pathway Growth Portfolio Scudder Tax Managed Small Company Fund
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund***
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
</TABLE>
32
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Closed-End Funds#
-----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
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
Kemper Investment'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 Kemper Investment'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.
33
<PAGE>
Scudder Solutions
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in
securities regardless of price fluctuations and does not
assure a profit or protect against loss in declining
markets. Investors should consider their ability to
continue such a plan through periods of low price
levels.
Around-the- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
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.
34
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
35
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
About the Fund's Adviser
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of [LOGO] Zurich Financial Services Group
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.
