Scudder
Greater Europe
Growth Fund
Annual Report
October 31, 1997
Pure No-Load(TM) Funds
For investors seeking long-term growth of capital through investment primarily
in the equity securities of European companies.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
In Brief
o Scudder Greater Europe Growth Fund provided a strong total return of 24.47%
for the fiscal year ended October 31, 1997. For the three-year period ended
October 31, 1997, the Fund was ranked second out of 37 European Region funds
tracked by Lipper Analytical Services, with an average annual return of 21.46%
versus 16.04% over the same period for the Lipper average. Moreover, the only
fund in the Lipper peer group to outperform Scudder Greater Europe Growth Fund
over the period was a fund that focuses its investments in a single country (the
Netherlands), rather than a broad-based regional vehicle such as your Fund.
o Recent stock market performance has been led by the "peripheral" markets of
Spain, Portugal, and Italy, where interest rates continued to converge towards
the lower rates of "core" European countries Germany and France.
o Morningstar assigned the Fund an overall rating of 5-stars (out of five stars)
for its risk-adjusted performance among 637 international equity funds as of
October 31, 1997^1.
^1 Source: Morningstar. Ratings are subject to change monthly and are
calculated from the Fund's three-, five-, and ten-year average annual
returns in excess of 90-day Treasury bill returns with appropriate fee
adjustments, and a risk factor that reflects Fund performance below 90-day
T-bill returns. The Fund received a 5-star rating for the three-year period
among 637 international equity funds. In an investment category, the top
10% of funds receive 5 stars and the next 22.5% receive 4 stars. Past
performance is no guarantee of future results.
Table of Contents
3 Letter from the Fund's Chairman 21 Notes to Financial Statements
4 Performance Update 25 Report of Independent Accountants
5 Portfolio Summary 26 Tax Information
6 Portfolio Management Discussion 26 Officers and Directors
10 Glossary of Investment Terms 27 Stockholder Meeting Results
12 Investment Portfolio 29 Investment Products and Services
17 Financial Statements 30 Scudder Solutions
20 Financial Highlights
2 - Scudder Greater Europe Growth Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the annual report for Scudder Greater Europe
Growth Fund, covering the 12-month period ended October 31, 1997.
As detailed in the management discussion that follows, the Fund provided a
strong total return for the period of 24.47%. Moreover, Scudder Greater Europe
Growth Fund recently attained its three-year anniversary, and the Fund has
received strong ratings for long-term performance versus its peers, including a
five-star rating from Morningstar (please see In Brief on page 2 for more
details).
Many governments in Europe are exercising fiscal discipline in preparation
for the region's monetary union, scheduled for the beginning of 1999. In
addition, the economies and corporate sectors of Europe are at varying stages in
the process of reform and restructuring, providing a range of opportunities to
invest for growth. We believe your Fund is well-positioned to capitalize on the
economic changes sweeping across Europe, and thank you for your continued
investment in Scudder Greater Europe Growth Fund.
Recent volatility in world stock markets has highlighted the importance of
maintaining a diversified investment portfolio. As an investor in Scudder
Greater Europe Growth Fund, you already know that a well-rounded investment
program should include international stocks, in addition to domestic equity,
fixed-income, and cash holdings. For most investors, a properly diversified
portfolio combined with a long-term perspective based on one's financial
objectives has proven the best approach.
If you have any questions regarding Scudder Greater Europe Growth Fund or
any other Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Greater Europe Growth Fund
3 - Scudder Greater Europe Growth Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/97 $10,000 Cumulative Annual
- ---------------------------------------------
SCUDDER GREATER EUROPE GROWTH FUND
TICKER SYMBOL: SCGEX
- ---------------------------------------------
1 Year $ 12,447 24.47% 24.47%
Life of Fund* $ 18,186 81.86% 21.58%
- ---------------------------------------------
MORGAN STANLEY CAPITAL INTERNATIONAL
(MSCI) EUROPE INDEX
- ---------------------------------------------
1 Year $ 12,599 25.99% 25.99%
Life of Fund* $ 16,754 67.54% 18.75%
- ---------------------------------------------
*The Fund commenced operations on October 10, 1994.
Index comparisons begin October 31, 1994.
- ----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- ----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Greater Europe Growth Fund
Year Amount
- ----------------------
10/94* $10,000
4/95 $10,371
10/95 $11,506
4/96 $12,981
10/96 $14,395
4/97 $15,767
10/97 $17,917
Morgan Stanley Capital International
(MSCI) Europe Index
Year Amount
- ----------------------
10/94* $10,000
4/95 $10,597
10/95 $11,321
4/96 $12,288
10/96 $13,299
4/97 $14,863
10/97 $16,754
The Morgan Stanley Capital International (MSCI) Europe Index is
an unmanaged capitalization-weighted measure of 14 stock markets
in Europe. Index returns assume dividends reinvested net of
withholding tax and, unlike Fund returns, do not reflect any
fees or expenses.
- ----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- ----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED OCTOBER 31
1994* 1995 1996 1997
---------------------------------------------
NET ASSET VALUE......... $12.18 $13.99 $17.20 $21.17
INCOME DIVIDENDS........ $ -- $ .02 $ .11 .06
CAPITAL GAINS
DISTRIBUTIONS........... $ -- $ -- $ .14 .14
FUND TOTAL RETURN (%)... 1.50 15.06 25.11 24.47
INDEX TOTAL RETURN (%).. -- 13.21 17.47 25.99
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return and
principal value will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than when purchased. If the Adviser had not maintained the
Fund's expenses, the total returns for the one year and life of Fund periods
would have been lower.
4 - Scudder Greater Europe Growth Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1997
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 0.3% Cash Equivalents)
- ---------------------------------------------------------------------------
United Kingdom 24%
France 20%
Germany 12%
Switzerland 9%
Italy 8%
Portugal 6%
Netherlands 6%
Finland 5%
Spain 4%
Other 6%
- --------------------------------------
100%
- --------------------------------------
More than half of the Fund's equity
holdings are in the large markets of
the UK, France and Germany.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS
(Excludes 0.3% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 29%
Manufacturing 13%
Service Industries 9%
Health 8%
Durables 7%
Technology 7%
Consumer Discretionary 5%
Energy 5%
Communications 4%
Other 13%
- --------------------------------------
100%
- --------------------------------------
The European financial sector's ongoing
consolidation in preparation for EMU
presents a number of opportunities.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(19% of Portfolio)
- --------------------------------------------------------------------------
1. MISYS PLC
Software and hardware computer solutions, support
and data services for various industries
2. AVIS EUROPE PLC
Car rental services
3. DASSAULT SYSTEMES S.A.
Computer aided design, manufacturing and
engineering software products
4. SKANDIA FOERSAEKRINGS AB
Financial conglomerate
5. NOVARTIS AG
Pharmaceutical company
6. ACCOR SA
Catering, hotels, travel services
7. ASSURANCES GENERALES DE FRANCE
Health, life, fire, accident and special
risk insurance
8. ASSICURAZIONI GENERALI SPA
Life and property insurance company
9. BARCLAYS PLC
Commercial and investment banking,
insurance and other financial services
10. PHILIPS ELECTRONICS NV
Leading manufacturer of electrical equipment
Top holdings include major financial
companies and business software
developers.
For more complete details about the Fund's investment portfolio, see page 12.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
5 -- Scudder Greater Europe Growth Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Greater Europe Growth Fund provided a total return of 24.47% for the
fiscal year ended October 31, 1997. While the Fund's return slightly lagged the
MSCI Europe Index return of 25.99% for the 12 months under review, Scudder
Greater Europe Growth Fund ranked in the top third of European regional funds
for the period. Moreover, the Fund held up well during the last quarter's
weakness, which saw European markets lose ground as concerns over the
difficulties of Asian markets infected global equity markets. The MSCI index of
European markets fell 1.65% for the quarter ending October 31, 1997, while the
Fund managed to post a positive return of 0.38% for the period.
Review: Smaller Markets
Lead Performance
Favorable interest rates, a strong U.S. dollar (which helps the competitiveness
of European exporters) and rising corporate earnings underpinned the upward move
of European equities over the last 12 months. Stock market performance was led
by the "peripheral" markets of Spain, Portugal, and Italy, where interest rates
continued to converge toward the lower rates of "core" European countries
Germany and France. The southern countries benefited from the growing conviction
that they would participate in the first wave of European Monetary Union (EMU)
set to begin on January 1, 1999. Both Spain and Portugal have put their fiscal
houses in order and will comfortably meet the Maastricht criteria. Italy is
facing more of a struggle with budget issues, but has demonstrated broad-based
commitment to joining EMU in the first round. All three of these southern
European countries continued to move ahead in the privatization process with
great success this year, as domestic investors showed high enthusiasm,
oversubscribing many of the issues on offer. The Fund's longer term
privatization holdings of Telefonica de Espana, Portugal Telecom, and Telecom
Italia turned in outstanding performances ranging from 36% to 95% (in U.S.
dollar terms). The Fund's more recent participations in new offerings Aeroporti
di Roma and EDP have also outperformed the averages thus far.
At the northern periphery of Europe, Finland stood out in performance this year,
jumping 47% in U.S. dollar terms. Nokia, the globally important manufacturer of
cellular telecommunications equipment, accounted in large part for this rise, as
it constitutes over 35% of the Finnish market and shot up some 90% over the
period. The Fund has had a longstanding position in Nokia, and we took some
profits in late October as its share price surged to new highs.
Two of the largest European markets, France and Germany, failed to keep pace
with many of the smaller markets over the last twelve months. France, suffering
from an unpopular government, fiscal restraint, high unemployment, and a general
lack of confidence, was surprised by a snap election in late spring that
resulted in a change of government with Socialist Lionel Jospin taking charge as
Prime Minister. The new government did not justify the worst fears or fulfill
the best hopes of investors. Public confidence rose and the economy began to
pick up, as Prime Minister Jospin confirmed his support of the euro and allowed
6 - Scudder Greater Europe Growth Fund
<PAGE>
some privatizations to proceed. However, the Socialists disappointed the markets
with an increase in corporate taxation and a program to shorten the work week to
35 hours. Despite the difficult market background, a number of the Fund's best
performing stocks over the last year were French, including Cap Gemini (+63%),
Rhone Poulenc (+49%) and Total (+42%).
The German market was buoyant earlier in the year, with the DAX index hitting
new highs in July, propelled by a rising U.S. dollar, merger activity, corporate
restructurings, and the prospect of structural economic reform. But as the year
progressed, two critical elements of structural change required in Germany --
pension and tax reform -- stalled in the legislature. In addition, still rising
unemployment and falling tax receipts have hindered Germany's efforts to meet
the Maastricht criteria. Against this discouraging background, the German equity
market began to lose steam. The spreading financial problems of the Asian and
other emerging markets coupled with the retreat of the U.S. dollar aroused
further fears and the German market tumbled nearly 10% in the last quarter.
The Fund suffered limited damage from Germany's decline, having cut back to an
underweighted position in that country. But Volkswagen, a highly profitable
holding for the Fund, fell sharply during this last quarter due to concerns over
the company's exposure to the Brazilian markets and the company's proposed
equity rights issue. A bright spot was SAP, the software company and long
established Fund holding, which managed to rise by 20% even in the last quarter,
contributing to a return of 121% over the last twelve months.
Strengthening Economies Support European Equities
There are a number of encouraging factors shaping the European investment
environment as we look toward 1998. Economic indicators are strengthening, with
growth broadening from the smaller peripheral economies and the United Kingdom
to the large, lagging economies of France, Italy and Germany. Business and
consumer confidence is on the rise. European export growth has been robust for
some time, but domestic demand is also picking up as unemployment is stabilizing
and fiscal policies are turning more accommodative. Recent concerns that
developments in Asia may cut off the European economic upturn appear overblown
at this stage. On an overall basis, Europe's direct exposure is limited, as
exports to Asia account for less than 7% of the region's GDP. With stronger
domestic economies supported by benign fiscal and monetary policies, Europe
should be able to withstand a limited decline in external demand. It is the
linkage with the U.S. which is most sensitive. If the U.S. dollar weakens
importantly or the U.S. economy grinds to a halt as a result of Asian events,
Europe would be adversely impacted.
The next year will be a watershed with the move to EMU proceeding from the
decision on participants in the spring of 1998 to implementation on January 1,
1999. It now appears that EMU will be broadly based with 11 members, including
Spain, Portugal, and Italy. Greece will not make the criteria for the
7 - Scudder Greater Europe Growth Fund
<PAGE>
first round, and Denmark and Sweden remain unwilling to participate. The U.K.
government, under the new leadership of Tony Blair, has formally announced that
Britain will not join before the next general election but will work to prepare
for membership thereafter.
Portfolio Focus on Growth and Change
The Fund's strategy is focused on identifying companies in Europe poised for
growth on the basis of effective positioning in new or growing markets, as well
as companies restructuring or undergoing change in which a new focus consistent
with public shareholder interests may enhance returns.
The sector weightings of the Fund reflect our focus on growth and change.
Currently, finance is the largest industry weighting, accounting for nearly 30%
of the portfolio. The European banking and insurance scene is undergoing
tremendous change, as consolidation is pushed forward by the opportunity and
threat of EMU, and the need to cut costs given increased competition and
structurally declining margins. From a growth perspective, banking and insurance
companies will serve burgeoning demand for savings and investment products from
aging European populations faced with shrinking social welfare benefits. The
consolidation of this industry is gathering pace. Three major European
transactions in banking and insurance were announced in just a single day in
October. The Fund profited from its holdings in four of the companies involved:
AGF (France), Generali (Italy), BAT (UK), and Merita (Finland). Earlier this
year, Bayerische Vereinsbank, another Fund holding, merged with another German
bank, creating scale and cost advantages.
Most of the Fund's holdings in the technology area are companies that are
involved in rapidly growing segments and are in many cases global industry
leaders. These include CAD/CAM provider Dassault Systemes (France),
telecommunications companies Ericsson (Sweden) and Nokia (Finland), and software
manufacturers SAP (Germany) and Misys (UK). The fund also holds positions in
leading investment technology consultancy firms Cap Gemini (France) and
Getronics (Netherlands), which are enjoying booming business as European
industries face up to the dual challenges of the Euro and the millennium.
Positive Outlook for
European Equities
We remain optimistic about the prospects for European equity markets. Corporate
earnings have been expanding at an impressive rate, often exceeding
expectations, and look set to record further strong increases next year.
European economic growth is accelerating. Investment spending -- which has
lagged in recent years -- is picking up. Still, there are concerns to monitor.
The path to the Euro may not be a smooth one, and a substantial fall in the U.S.
dollar or global deflationary impulses emanating from Asia may disturb markets.
Nevertheless, there should be underlying support for healthy equity markets from
the mergers and acquisition boom. In addition, the development of a more
equity-oriented culture in Europe, with managements newly attuned to shareholder
8 - Scudder Greater Europe Growth Fund
<PAGE>
interests and increasing numbers of Europeans interested in investing in
equities, suggests a marketplace of increasing opportunities for all investors
in Europe.
Sincerely,
Your Portfolio Management Team
/s/Carol L. Franklin /s/Joan R. Gregory
Carol L. Franklin Joan R. Gregory
/s/Nicholas Bratt
Nicholas Bratt
Scudder Greater Europe
Growth Fund:
A Team Approach to Investing
Scudder Greater Europe Growth Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management
process. Team members work together to develop investment strategies and
select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders and other investment
specialists who work in Scudder's offices across the United States and abroad.
Scudder believes its team approach benefits Fund investors by bringing
together many disciplines and leveraging Scudder's extensive resources.
Carol L. Franklin, Lead Portfolio Manager, sets Fund investment strategy and
oversees its daily operation. Ms. Franklin joined Scudder in 1981 and has ten
years of European research and investment management experience. Nicholas
Bratt, Portfolio Manager, helps set the Fund's general investment strategies.
Mr. Bratt has over 20 years of experience in worldwide investing and has been
with Scudder since 1976. Joan R. Gregory, Portfolio Manager, focuses on stock
selection, a role she has played since she joined Scudder in 1992. Ms. Gregory
has been involved with investment in global and international stocks as an
assistant portfolio manager since 1989.
9 - Scudder Greater Europe Growth Fund
<PAGE>
Glossary of Investment Terms
CURRENCY EXCHANGE RATE The price at which one country's currency can be
exchanged into another currency. When a country's
currency rises relative to other currencies, this
decreases the buying power of foreign purchasers
of that country's goods and services and tends to
hurt the earnings of companies that export; by
contrast, a weak currency promotes exports. From
the perspective of a U.S. investor in overseas
securities, a weakening U.S. dollar adds to total
returns, as assets denominated in foreign
currencies then translate into more in dollar
terms; a strengthening dollar relative to foreign
currencies reduces returns to U.S. investors.
DIVIDEND YIELD With stocks, a company's payment out of earnings
to shareholders divided by its share price. For
example, a stock that sells for $10 and pays
annual dividends totaling $1 has a yield of 10%;
if the stock price goes up to $20, the yield would
fall to 5%.
EMU (EUROPEAN MONETARY A proposed integration of European economies
UNION) involving among other changes a move to a single
currency for member nations. To qualify for EMU
membership, nations will be required to meet
certain guidelines concerning total governmental
debt and annual budget deficits, designed to
ensure a strong common currency.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected
impact of management, products, sales, and
earnings on their balance sheets and income
statements. Distinct from technical analysis,
which evaluates the attractiveness of a stock
based on historical price and trading volume
movements, rather than the financial results of
the underlying company.
GROWTH STOCK Stock of a company that has displayed above
average earnings growth and is expected to
continue to increase profits rapidly going
forward. Stocks of such companies usually trade at
higher multiples to earnings (see price/earnings
ratio) and experience more price volatility than
the market as a whole. Distinct from value stock.
LIQUIDITY A stock that is liquid has enough shares
outstanding and a substantial enough market
capitalization to allow large purchases and sales
to occur without causing a significant move in its
market price as a result.
10 - Scudder Greater Europe Growth Fund
<PAGE>
MARKET CAPITALIZATION The value of a company's outstanding shares of
common stock, determined by the number of shares
outstanding multiplied by the share price (shares
x price = market capitalization). The universe of
publicly traded companies is frequently divided
into large-, mid-, and small-capitalization.
"Large-cap" stocks tend to be more liquid.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation, that
indicates what investors are paying for a
company's earning power at the current stock
price. May be based on a company's projected
earnings for the coming 12 months. A higher
"earnings multiple" indicates higher expected
earnings growth, along with greater risk of
earnings disappointments.
VALUE STOCK A company whose stock price does not fully reflect
its intrinsic value, as indicated by
price/earnings ratio, price/book value ratio,
dividend yield, or some other valuation measure,
relative to its industry or the market overall.
Value stocks tend to display less price volatility
and may carry higher dividend yields. Distinct
from growth stock.
WEIGHTING (OVER/UNDER) Refers to the allocation of assets -- usually in
terms of sectors, industries, or countries --
within a portfolio relative to the portfolio's
benchmark index or investment universe.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
11 - Scudder Greater Europe Growth Fund
<PAGE>
Investment Portfolio as of October 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 0.3%
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/97 at 5.7%, to be
repurchased at $605,287 on 11/3/97, collateralized by a $615,000 U.S. Treasury ---------
Note, 5.875%, 10/31/98 (Cost $605,000) ........................................................... 605,000 605,000
---------
Shares
- -----------------------------------------------------------------------------------------------------------------------------
Common Stocks 99.7%
- -----------------------------------------------------------------------------------------------------------------------------
Austria 0.7%
Schoeller-Bleckmann Oilfield Equipment AG* (Manufacturer of components for oil and
gas drilling equipment) .......................................................................... 11,000 1,300,944
---------
Finland 4.9%
Merita Ltd. "B" (Financial services group) ......................................................... 410,100 1,979,553
Metsa-Serla Oy "B" (Manufacturer of papers, corrugated and paper board, soft and
hardwood pulp) ................................................................................... 172,000 1,511,044
Nokia AB Oy "A" (Leading manufacturer of telecommunications equipment and
cellular telephones) ............................................................................. 16,260 1,419,045
Pohjola Insurance Co., Ltd. "B" (Insurance company) ................................................ 58,000 2,217,331
TT Tieto Oy "B" (Manufacturer of computer software) ................................................ 19,000 2,127,742
---------
9,254,715
---------
France 19.7%
Accor SA (Catering, hotels, travel services) ....................................................... 18,450 3,435,236
Alcatel Alsthom (Manufacturer of transportation, telecommunication and energy equipment) ........... 16,985 2,049,419
Altran Technologies, SA (Engineering and consulting services for aerospace, telecommunications
and electronics fields) .......................................................................... 3,300 881,030
Assurances Generales de France* (Health, life, fire, accident and special risk insurance) .......... 59,000 3,104,321
Banque Nationale de Paris SA (CI) (Bank) ........................................................... 27,000 1,193,603
Cap Gemini Sogeti SA (Software consultants) ........................................................ 29,635 2,353,024
Compagnie Financiere de Paribas (Finance and investment company) ................................... 18,000 1,307,190
Compagnie Generale des Eaux (Water utility) ........................................................ 11,050 1,285,407
Compagnie Generale des Eaux Warrants ............................................................... 14,800 7,826
Comptoirs Modernes (Operator of supermarkets, grocery and department stores) ....................... 2,830 1,285,416
Dassault Systemes S.A. (Computer aided design, manufacturing and engineering
software products) ............................................................................... 130,400 3,910,926
Le Carbone-Lorraine (Manufacturer of industrial and technological systems and components) .......... 8,240 2,185,620
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pinault-Printemps, SA (Distributor of consumer goods) ...................................... 2,796 1,278,698
Rhone-Poulenc SA "A"* (Medical, agricultural and consumer chemicals) ....................... 38,567 1,681,550
Schneider SA (Manufacturer of electronic components and automated manufacturing systems) ... 37,592 2,007,253
Scor SA (Property, casualty and life reinsurance company) .................................. 44,100 2,048,176
Societe Lyonnaise des Eaux SA (Water utility) .............................................. 13,100 1,360,361
Societe Nationale Elf Aquitaine (Petroleum company) ........................................ 16,125 1,995,969
Synthelabo SA (Pharmaceutical and biomedical company) ...................................... 11,200 1,318,389
Total SA "B" (International oil and gas exploration, development and production) ........... 18,323 2,032,977
----------
36,722,391
----------
Germany 11.7%
Allianz AG (Multi-line insurance company) .................................................. 8,100 1,803,862
Bayerische Vereinsbank AG (Commercial bank) ................................................ 30,600 1,774,633
Commerzbank AG (Worldwide multi-service bank) .............................................. 73,300 2,486,835
Deutsche Bank AG (Bank) .................................................................... 22,800 1,491,527
Dresdner Bank AG (Universal bank) .......................................................... 30,000 1,226,585
Fresenius AG (pfd.) (Manufacturer and distributor of pharmaceutical and medical
systems products) ........................................................................ 1,153 194,585
Fresenius AG (pfd.) ........................................................................ 10,380 1,589,236
RWE AG (pfd.) (Producer and marketer of petroleum and chemical products) ................... 31,150 1,123,662
SAP AG (pfd.) (Computer software manufacturer) ............................................. 7,450 2,218,625
SGL Carbon AG (Manufacturer of specialized graphite products) .............................. 13,600 1,908,717
Schering AG (Pharmaceutical and chemical producer) ......................................... 14,150 1,371,261
Siemens AG (Leading electrical engineering and electronics company) ........................ 23,000 1,415,241
VIAG AG (Provider of electrical power and natural gas services, aluminum products,
chemicals, ceramics and glass) ........................................................... 2,100 974,917
Volkswagen AG (pfd.) (Manufacturer of automobiles) ......................................... 5,385 2,442,191
----------
22,021,877
----------
Hungary 0.6%
Graboplast Rt (Producer of home improvement materials, artificial leather and
book bindings) ........................................................................... 20,500 1,105,632
----------
Ireland 1.5%
Bank of Ireland PLC (Bank) ................................................................. 100,000 1,265,863
Irish Life PLC (Provider of life and disability insurance and pensions) .................... 294,718 1,550,777
----------
2,816,640
----------
Italy 7.8%
Aeroporti di Roma SpA* (Management of Fiumicino and Ciampino airports) ..................... 206,000 1,867,806
Alleanza Assicurazioni (Life insurance company) ............................................ 155,000 1,333,082
Assicurazioni Generali SpA* (Life and property insurance company) .......................... 137,000 3,061,972
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Banca Popolare di Brescia (Cooperative bank) ............................................... 266,000 1,994,804
La Rinascente SpA (Department store chain) ................................................. 77,000 570,623
La Rinascente SpA di Risparmio ............................................................. 665,000 2,198,996
Saipem SpA (International contractor in oil and gas exploration and drilling, construction
of refineries and pipelines) ............................................................. 260,000 1,459,286
Telecom Italia SpA*(Telecommunications, electronics, network construction) ................. 550,000 2,221,435
----------
14,708,004
----------
Netherlands 5.9%
Akzo-Nobel NV (Chemical producer) .......................................................... 12,500 2,198,812
Getronics NV (Provider of computer installation and maintenance services) .................. 60,584 1,996,830
Koninklijke Nedlloyd Groep NV (Container shipping and transportation) ...................... 54,000 1,602,118
Philips Electronics NV (Leading manufacturer of electrical equipment) ...................... 36,130 2,823,817
Unilever NV (Producer of packaged consumer goods, food, detergent, personal care items) .... 28,480 1,511,279
Vedior NV CVA (Temporary employment services) .............................................. 41,808 857,743
----------
10,990,599
----------
Poland 0.4%
Computerland Poland S.A.* (Provider of computer services and systems) ...................... 44,356 789,117
----------
Portugal 5.7%
Banco Comercial Portugues (Commercial bank) ................................................ 75,000 1,526,869
Cimentos de Portugal S.A. (Manufacturer of cement, ready mix concrete and aggregates) ...... 85,000 2,150,981
Electricidade de Portugal* (Transmits and distributes electricity) ......................... 96,500 1,695,678
Portugal Telecom SA (Telecommunication services) ........................................... 56,900 2,334,566
Semapa S.A. (Cement producer) .............................................................. 53,000 1,223,657
Telecel-Comunicacoes Pessoais, S.A.* (Cellular communication services) ..................... 18,583 1,680,237
----------
10,611,988
----------
Spain 4.0%
Banco Bilbao Vizcaya SA (Commercial bank) .................................................. 81,000 2,166,014
Compania Telefonica Nacional de Espana S.A. (Telecommunication services) ................... 67,000 1,828,487
Tabacalera, S.A. "A" (Manufactures, sells, imports and exports tobacco products) ........... 21,000 1,512,889
Telepizza, S.A.* (Operator of fast-food pizza restaurants in Spain, Portugal, Poland, Mexico
and Chile) ............................................................................... 29,100 1,998,412
----------
7,505,802
----------
Sweden 3.1%
L.M. Ericsson Telephone Co. "B" (ADR) (Leading manufacturer of cellular telephone equipment) 48,220 2,133,735
Skandia Foersaekrings AB (Free) (Financial conglomerate) ................................... 80,300 3,745,685
----------
5,879,420
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Switzerland 9.1%
Ciba Specialty Chemical (Registered)* (Manufacturer of chemical products for plastics, coatings,
fibers and fabrics) .......................................................................... 10,237 1,004,845
Clariant AG (Registered) (Manufacturer of color chemicals) ..................................... 2,683 2,062,815
Credit Suisse Group (Registered)* (Provider of bank services, management services and
life insurance) .............................................................................. 17,835 2,511,389
Holderbank Financiere Glaris AG (Bearer) (Cement producer) ..................................... 958 770,750
Novartis AG (Bearer) (Pharmaceutical company) .................................................. 938 1,478,515
Novartis AG (Registered) ....................................................................... 1,345 2,105,643
Roche Holdings AG (PC) (Producer of drugs and medicines) ....................................... 226 1,985,244
Schweizerische Lebensversicherungs und Rentenanstalt AG (Global life insurance company) ........ 3,300 2,233,295
Swiss Bank Corp. (Registered) (Universal bank) ................................................. 5,300 1,424,507
Union Bank of Switzerland (Bearer) (Universal bank) ............................................ 1,350 1,553,541
----------
17,130,544
----------
United Kingdom 23.8%
Avis Europe PLC (Car rental services) .......................................................... 1,665,000 4,162,123
B.A.T. Industries PLC (Tobacco, retailing, and financial services) ............................. 114,000 997,410
BOC Group PLC (Producer of industrial gases) ................................................... 129,618 2,181,125
Barclays PLC (Commercial and investment banking, insurance and other financial services) ....... 117,216 2,936,034
British Petroleum PLC (Major integrated world oil company) ..................................... 137,040 2,014,030
Compass Group PLC (International catering group) ............................................... 172,400 1,822,184
General Electric Co., PLC (Manufacturer of power, communications and defense equipment
and other various electrical components) ..................................................... 332,000 2,120,765
Glaxo Wellcome PLC (Pharmaceutical company) .................................................... 81,218 1,730,495
Granada Group PLC (Television systems and broadcast, travel and leisure services, entertainment
and theme park operator) ..................................................................... 174,500 2,406,477
Lloyds TSB Group PLC (Banking and financial services) .......................................... 167,000 2,087,311
Misys (Jersey) Ltd. (Software and hardware computer solutions, support and data services for
various industries) .......................................................................... 21,914 545,043
Misys PLC ...................................................................................... 168,700 4,279,384
Next PLC (Retailer of clothing, accessories and fashion jewelry, also through home shopping) ... 94,000 1,119,697
Norwich Union PLC* (Multi-line insurance company) .............................................. 402,750 2,297,360
Pearson PLC (Diversified media and entertainment holding company) .............................. 167,000 2,157,355
PowerGen PLC (Electric utility) ................................................................ 249,164 2,771,489
Royal & Sun Alliance Insurance Group PLC (Multi-line insurance holding company) ................ 243,000 2,329,898
SmithKline Beecham PLC (Manufacturer of ethical drugs and healthcare products) ................. 216,764 2,054,707
WPP Group PLC (Advertising agency) ............................................................. 496,000 2,263,419
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Zeneca Group PLC (Holding company, manufacturing and marketing of pharmaceutical and
agrochemical products and specialty chemicals) ................................... 77,600 2,448,865
----------
44,725,171
----------
United States 0.8%
Autoliv Inc. (Manufacturer of automobile safety bags) .............................. 39,700 1,565,669
- -----------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $149,149,541) 187,128,513
- -----------------------------------------------------------------------------------------------------------------
Principal
Amount
- -----------------------------------------------------------------------------------------------------------------
Purchased Options 0.0%
- -----------------------------------------------------------------------------------------------------------------
France
----------
Put on French Francs, strike price FRF 6.32, expire 2/17/98 (Cost $670,950) .... FRF 213,000,000 59,325
----------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $150,425,491) (a) 187,792,838
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $150,461,277. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$37,331,561. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $39,459,214 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$2,127,653.
Transactions in written call options on currencies during the year ended October
31, 1997 were:
Principal Amount Premiums
(000s) Received ($)
----------------------------------------
Outstanding at
October 31, 1996 ........... FRF -- --
Contracts written .......... FRF 213,000 670,950
Contracts closed ........... FRF -- --
----------------------------------------
Outstanding at
October 31, 1997
(strike price FRF 5.983,
expires 2/17/98) ........... FRF 213,000 670,950
============= ==========
Currency Abbreviations:
FRF French Franc
The accompanying notes are an integral part of the financial statements.
16 - Scudder Greater Europe Growth Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1997
<TABLE>
<CAPTION>
Assets
- ---------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $150,425,491) ........... $187,792,838
Cash ............................................................ 17,177
Receivable for investments sold ................................. 5,629,550
Receivable for Fund shares sold ................................. 4,448,437
Dividends and interest receivable ............................... 132,947
Foreign taxes recoverable ....................................... 245,884
Deferred organization expenses .................................. 22,836
Other assets .................................................... 2,120
-------------
Total assets .................................................... 198,291,789
Liabilities
- ---------------------------------------------------------------------------------------
Payable for investments purchased ............................... 15,690
Payable for Fund shares redeemed ................................ 640,060
Written options, at value (premiums received $670,950) .......... 1,743,011
Accrued management fee .......................................... 174,973
Other accrued expenses and payables ............................. 203,720
-------------
Total liabilities ............................................... 2,777,454
----------------------------------------------------------------------------------
Net assets, at market value $195,514,335
----------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................. 5,207,695
Unrealized appreciation (depreciation) on:
Investments .................................................. 37,367,347
Written options .............................................. (1,072,061)
Foreign currency related transactions ........................ 6,057
Accumulated net realized gain ................................... 12,354,089
Paid-in capital ................................................. 141,651,208
----------------------------------------------------------------------------------
Net assets, at market value $195,514,335
----------------------------------------------------------------------------------
Net Asset Value
- ---------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($195,514,335 / 9,234,823 shares of capital stock outstanding, ------------
$.01 par value, 100,000,000 shares authorized) ................ $21.17
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 -- Scudder Greater Europe Growth Fund
<PAGE>
Statement of Operations
year ended October 31, 1997
<TABLE>
<CAPTION>
Investment Income
- -------------------------------------------------------------------------------------
<S> <C>
Dividends (net of foreign taxes withheld of $408,107) .......... $2,569,379
Interest ....................................................... 617,376
------------
3,186,755
------------
Expenses:
Management fee ................................................. 1,754,310
Services to shareholders ....................................... 619,060
Custodian and accounting fees .................................. 354,027
Directors' fees and expenses ................................... 63,400
Auditing ....................................................... 53,666
Reports to shareholders ........................................ 75,863
Amortization of organization expense ........................... 11,855
Registration fees .............................................. 27,573
Legal .......................................................... 13,134
Other .......................................................... 40,962
------------
Total expenses before reductions ............................... 3,013,850
Expense reductions ............................................. (100,865)
------------
Expenses, net .................................................. 2,912,985
--------------------------------------------------------------------------------
Net investment income 273,770
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 12,446,393
Foreign currency related transactions .......................... 4,955,407
------------
17,401,800
------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... 19,821,704
Written options ................................................ (1,072,061)
Foreign currency related transactions .......................... 3,224
------------
18,752,867
--------------------------------------------------------------------------------
Net gain on investment transactions 36,154,667
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase in net assets resulting from operations $36,428,437
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Greater Europe Growth Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................ $ 273,770 $ 537,629
Net realized gain from investment transactions ............... 17,401,800 986,362
Net unrealized appreciation on investment transactions
during the period .......................................... 18,752,867 13,130,041
------------- -------------
Net increase in net assets resulting from operations ......... 36,428,437 14,654,032
------------- -------------
Distributions to shareholders from:
Net investment income ........................................ (490,975) (320,199)
------------- -------------
Net realized gains ........................................... (1,145,609) (427,101)
------------- -------------
Fund share transactions:
Proceeds from shares sold .................................... 279,382,379 110,490,941
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 1,574,869 727,064
Cost of shares redeemed ...................................... (240,534,824) (45,416,671)
------------- -------------
Net increase in net assets from Fund share transactions ...... 40,422,424 65,801,334
------------- -------------
Increase in net assets ....................................... 75,214,277 79,708,066
Net assets at beginning of period ............................ 120,300,058 40,591,992
Net assets at end of period (including undistributed net ------------- -------------
investment income of $5,207,695 and $459,368, respectively) $195,514,335 $120,300,058
------------- -------------
Other Information
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................... 6,993,392 2,901,077
------------- -------------
Shares sold .................................................. 14,311,846 6,939,733
Shares issued to shareholders in reinvestment of distributions 88,625 52,194
Shares redeemed .............................................. (12,159,040) (2,899,612)
------------- -------------
Net increase in Fund shares .................................. 2,241,431 4,092,315
------------- -------------
Shares outstanding at end of period .......................... 9,234,823 6,993,392
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder Greater Europe Growth 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
October 10,
1994
(commencement
of operations) to
Years Ended October 31, October 31,
1997 (a) 1996 (a) 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
---------------------------------------------
Net asset value, beginning of period .......... $17.20 $13.99 $12.18 $12.00
---------------------------------------------
Income from investment operations:
Net investment income ......................... .03 .13 .13 .01
Net realized and unrealized gain on investment
transactions ............................... 4.14 3.33 1.70 .17
---------------------------------------------
Total from investment operations .............. 4.17 3.46 1.83 .18
---------------------------------------------
Less distributions from:
Net investment income ......................... (.06) (.11) (.02) --
Net realized gains on investment transactions . (.14) (.14) -- --
---------------------------------------------
Total distributions ........................... (.20) (.25) (.02) --
---------------------------------------------
---------------------------------------------
Net asset value, end of period ................ $21.17 $17.20 $13.99 $12.18
- ---------------------------------------------------------------------------------------------------
Total Return (%) (b) .......................... 24.47 25.11 15.06 1.50**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........ 196 120 41 8
Ratio of operating expenses, net to average
daily net assets (%) ....................... 1.66 1.50 1.50 1.50*
Ratio of operating expenses before expense
reductions, to average daily net assets (%). 1.72 1.97 2.74 11.46*
Ratio of net investment income to average daily
net assets (%) ............................. .16 .82 1.25 2.40*
Portfolio turnover rate (%) ................... 88.8 39.0 27.9 --
Average commission rate paid (c) .............. $.0562 $.0509 $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns would have been lower had certain expenses not been reduced.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after October 31, 1996.
* Annualized
** Not annualized
20 - Scudder Greater Europe Growth Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Greater Europe Growth Fund (the "Fund") is a non-diversified series of
Scudder International Fund, Inc. (the "Corporation"). The Corporation is
organized as a Maryland corporation and is 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 securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the most recent bid quotation.
Securities which are not quoted on the Nasdaq System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used. Money market
investments having an original maturity of sixty days or less are valued at
amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on currencies
primarily as a hedge against potential adverse price movements in the value of
portfolio assets.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
21 - Scudder Greater Europe Growth Fund
<PAGE>
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
22 - Scudder Greater Europe Growth Fund
<PAGE>
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The difference
primarily relates to investments in 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 identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
Other. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. Purchases and Sales of Securities
For the year ended October 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $186,940,306 and
$144,351,268, respectively.
C. Related Parties
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser
a fee equal to an annualized rate of 1.00% of the Fund's average daily net
assets, computed and accrued daily and payable monthly. As manager of the assets
of the Fund, the Adviser directs the investments of the Fund in accordance with
its investment objectives, policies, and restrictions. The Adviser determines
the securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Agreement. The Adviser agreed not to impose all or a portion of its
management fee until February 28, 1997, and during such period to maintain the
annualized expenses of the Fund at not more than 1.50% of average daily net
assets. For the year ended October 31, 1997, the Adviser did not impose a
portion of its management fee amounting to $100,865, and the amount imposed
amounted to $1,653,445.
23 - Scudder Greater Europe Growth Fund
<PAGE>
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close by the end of the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1997, the amount charged by SSC aggregated $471,548, of
which $38,097 was unpaid at October 31, 1997.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. For the year ended October 31,
1997, the Special Servicing Agreement expense charged to the Fund amounted to
$2,683.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1997, the amount charged by STC aggregated $26,160, of which $2,340 was unpaid
at October 31, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Fund. For the year ended
October 31, 1997, the amount charged by SFAC aggregated $135,790, of which
$24,234 was unpaid at October 31, 1997.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1997, Directors' fees and expenses aggregated $63,400.
D. Lines of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
24 - Scudder Greater Europe Growth Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and to the
Shareholders of Scudder Greater Europe Growth Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Greater Europe Growth Fund, including the investment portfolio, as of October
31, 1997, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the period
then ended, and for the period October 10, 1994 (commencement of operations) to
October 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Greater Europe Growth Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the three years in the period then ended, and for the period October 10, 1994
(commencement of operations) to October 31, 1994, in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 19, 1997
25 - Scudder Greater Europe Growth Fund
<PAGE>
Tax Information
The Fund will mail shareholders IRS Form 1099-Div in late January, summarizing
all taxable distributions paid for 1997.
The Fund paid distributions of $0.01 per share from net long-term capital gains
during its fiscal year ended October 31, 1997.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$9,888,827 as capital gain dividends for its fiscal year ended October 31, 1997.
The Fund paid foreign taxes of $408,107 and the Fund recognized $1,983,159 of
foreign source income during the fiscal year ended October 31, 1997. Pursuant to
section 853 of the Internal Revenue Code, the Fund designates $0.04 per share of
foreign taxes and $0.21 of income from foreign sources as having been paid in
the fiscal year ended October 31, 1997.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
Officers and Directors
Daniel Pierce*
Chairman of the Board and
Director
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Chief Executive Officer,
Scientific Learning Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital
Management Corporation
William H. Gleysteen, Jr.
Director; Consultant; Guest
Scholar, Brookings Institute
William H. Luers
Director; President, The
Metropolitan Museum of Art
Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Robert W. Lear
Honorary Director;
Executive-in-Residence, Visiting
Professor, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Elizabeth J. Allan*
Vice President
Joyce E. Cornell*
Vice President
Richard W. Desmond*
Assistant Secretary
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President and Assistant
Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant
Treasurer
*Scudder, Stevens & Clark, Inc.
26 - Scudder Greater Europe Growth Fund
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder Greater Europe
Growth Fund (the "Fund") was held on October 27, 1997, at the offices of
Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street),
New York, New York 10154. At the Meeting, as adjourned and reconvened, the
following matters were voted upon by the stockholders (the resulting votes for
each matter are presented below.) With regard to certain proposals, it was
recommended that the Meeting be reconvened in order to provide stockholders with
an additional opportunity to return their proxies. The date of the reconvened
meeting at which the matters were decided is noted after the proposed matter.
1. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Paul Bancroft III 5,342,349 250,631
Sheryle J. Bolton 5,343,798 249,182
William T. Burgin 5,345,295 247,685
Thomas J. Devine 5,340,833 252,147
Keith R. Fox 5,347,952 245,028
William H. Gleysteen, Jr. 5,338,659 254,321
William H. Luers 5,343,820 249,160
Wilson Nolen 5,341,567 251,413
Daniel Pierce 5,342,687 250,293
Kathryn L. Quirk 5,337,010 255,970
2. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
5,178,811 246,602 167,567 232,874
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise. (Approved on December 2, 1997.)
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
4,732,655 544,843 238,957 222,147
27 - Scudder Greater Europe Growth Fund
<PAGE>
4. To approve changes to certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 diversification 4,676,485 425,243 258,378 232,874
4.2 borrowing 4,615,366 484,787 259,993 232,874
4.3 senior securities 4,664,599 434,472 261,035 232,874
4.4 commodities 4,661,242 440,952 257,912 232,874
4.5 concentration 4,662,577 440,142 257,387 232,874
4.6 underwriting of securities 4,665,467 433,310 261,329 232,874
4.7 investment in real estate 4,661,110 441,998 256,998 232,874
4.8 lending 4,651,379 408,685 300,042 232,874
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
5,286,486 111,116 195,378
* 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.
28 - Scudder Greater Europe Growth Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
29 - Scudder Greater Europe Growth Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder Greater Europe Growth Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
31 - Scudder Greater Europe Growth Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
[LOGO]
