Scudder
Greater Europe
Growth Fund
Annual Report
October 31, 1998
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>
Scudder Greater Europe Growth Fund
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Date of Inception: 10/10/94 Total Net Assets as of Ticker Symbol: SCGEX
10/31/98: $1.132 billion
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o Scudder Greater Europe Growth Fund provided a total return of 24.68% for the
twelve months ended October 31, 1998, placing it well ahead of the 15.45%
average return of the 91 European funds tracked by Lipper Analytical Services.
o Although the performance of the European equity markets was hurt by the crises
abroad, the outlook for the region remains favorable due to positive economic
growth and rising profits.
o Morningstar assigned the Fund an overall rating of five stars (out of five
stars) for its risk adjusted performance among 839 international equity funds as
of October 31, 1998.^1
Table of Contents
3 Letter from the Fund's Chairman 19 Financial Highlights
4 Performance Update 20 Notes to Financial Statements
5 Portfolio Summary 25 Report of Independent Accountants
6 Portfolio Management Discussion 26 Tax Information
10 Glossary of Investment Terms 28 Officers and Directors
11 Investment Portfolio 29 Investment Products and Services
16 Financial Statements 30 Scudder Solutions
^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 839 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.
2 - Scudder Greater Europe Growth Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the annual report for the Scudder Greater Europe
Growth Fund, covering the twelve-month period ended October 31, 1998. In a
period of unusual turbulence in the global financial markets, the Fund's total
return of 24.68% placed it among the top funds within its category. For more
details, please see the portfolio manager discussion beginning on page 6.
Although European stocks fell along with the other major world markets
throughout the recent correction, we believe that several trends demonstrate
that the region continues to be a source of dynamic growth and opportunity. The
gradual recovery of the region's economy has boosted consumer spending, the
outlook is favorable for further corporate consolidation and restructuring, and
interest rates have fallen sharply. While the start of the European Monetary
Union presents risks, it has prompted governments to adopt sound fiscal and
monetary policies and continue the process of deregulation and liberalization.
We believe that by investing in growing companies that are well positioned for
the new European economy, the Fund stands to benefit from the many changes
taking place in the region.
For those of you who are interested in new Scudder products, we recently
introduced the Scudder Tax Managed Growth Fund, investing in medium- to
large-sized U.S. companies, and Scudder Tax Managed Small Company Fund, which
invests in stocks of small U.S. companies. Using a combination of quantitative
and fundamental research, the funds focus on companies with strong earnings
growth, reasonable valuations, and favorable risk profiles. Both funds strive to
maximize after tax returns by systematically taking into account the tax
implications of portfolio transactions and seeking to offset capital gains by
realizing losses when appropriate.
Thank you for your continued investment in Scudder Greater Europe Growth
Fund. If you have any questions about your investment, please call Scudder
Investor Information at 1-800-225-2470, or visit our Web site at
www.scudder.com.
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, 1998
- ----------------------
Fund Index Comparisons
- ----------------------
Total Return
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Period Ended Growth of Average
10/31/98 $10,000 Cumulative Annual
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Scudder Greater Europe Growth Fund
- ---------------------------------------------------
1 Year $ 12,468 24.68% 24.68%
Life of Fund* $ 22,674 126.74% 22.35%
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Morgan Stanley Capital International (MSCI) Europe
Index
- ---------------------------------------------------
1 Year $ 12,306 23.06% 23.06%
Life of Fund* $ 20,618 106.18% 19.81%
- ---------------------------------------------------
* The Fund commenced operations on October 10, 1994.
Index comparisons begin October 31, 1994.
- ------------------------------
Growth of a $10,000 Investment
- ------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Morgan Stanley Capital Scudder Greater Europe
International (MSCI) Growth Fund
Europe Index
10/94* 10000 10000
4/95 10598 10371
10/95 11321 11506
4/96 12288 12981
10/96 13298 14395
4/97 14863 15767
10/97 16754 17917
4/98 21624 24321
10/98 20618 22329
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
- ---------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1994* 1995 1996 1997 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value $ 12.18 $ 13.99 $ 17.20 $ 21.17 $ 24.23
- -------------------------------------------------------------------------------------------
Income Dividends $ -- $ .02 $ .11 $ .06 $ .54
- -------------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ -- $ .14 $ .14 $ 1.30
- -------------------------------------------------------------------------------------------
Fund Total Return (%) 1.50 15.06 25.11 24.47 24.68
- -------------------------------------------------------------------------------------------
Index Total Return (%) -- 13.21 17.47 25.99 23.06
- -------------------------------------------------------------------------------------------
</TABLE>
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 life of Fund period would have been lower.
4 - Scudder Greater Europe Growth Fund
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Portfolio Summary as of October 31, 1998
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Geographical
(Excludes 9% Cash Equivalents)
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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
France 27%
United Kingdom 21%
Germany 12%
Italy 10%
Spain 10%
Netherlands 5%
Finland 4%
Ireland 3%
Switzerland 3%
Other 5%
--------------------------------------
100%
--------------------------------------
The Fund substantially increased its weighting in the United
Kingdom, while maintaining its position in Germany.
- ------------------------------
Sectors
(Excludes 9% Cash Equivalents)
- ------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Financial 19%
Manufacturing 12%
Service Industries 12%
Consumer Discretionary 11%
Health 9%
Media 8%
Communications 7%
Consumer Staples 6%
Utilities 5%
Other 11%
--------------------------------------
100%
--------------------------------------
Holdings in the financial sector were reduced in favor of
media, defense, and pharmaceutical stocks.
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Ten Largest Equity Holdings
(16% of Portfolio)
- ---------------------------
1. Societe Lyonnaise des Eaux SA
Water utility in France
2. Marschollek Lautenschlaeger und Partner AG (pfd)
Leading German independent life insurance
company
3. Vedior NV CVA
Temporary employment services in
the Netherlands
4. Elan Corp. PLC
Research and development of drug
delivery technology operating in
Ireland
5. British Telecom PLC
British telecommunications
services
6. Allianz AG
Multi-line insurance company in
Germany
7. Aegis Group PLC
Leading independent media
services group in the United
Kingdom
8. Television Francaise
Television broadcasting in France
9. Nokia AB "A"
Finnish manufacturer of
telecommunication systems and
equipment
10. Zeneca Group PLC
British manufacturer of
pharmaceutical and agrochemical
products and specialty chemicals
Top holdings reflect a continued emphasis on companies
positioned for growth in new or growing markets.
For more complete details about the Fund's investment portfolio, see page 11. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Greater Europe Growth Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Greater Europe Growth Fund posted a 24.68% return for the twelve months
ended October 31, 1998, beating the 23.06% return of its unmanaged benchmark,
the MSCI Europe Index. The Fund also performed well relative to its peers,
outpacing the 15.45% average return of European region funds, as calculated by
Lipper Analytical Services.
During the first half of 1998, European markets climbed steadily higher, setting
new records on the basis of positive fundamental factors such as low interest
rates, upward revisions in earnings, ongoing merger activity, and signs of an
economic recovery in core Europe. Despite the favorable outlook locally, the
region could not escape unscathed from the global market correction of August
and September. In Europe, concern about bank loans to the emerging markets and a
series of profit warnings from several global corporations combined to fuel
fears of a liquidity crunch and a possible recession. These concerns roiled the
equity markets by raising questions about the region's ability to sustain its
nascent recovery. In the third quarter, stocks fell in Germany and France on
concerns about excessive bank lending to the emerging markets, while the United
Kingdom, which had trailed continental markets all year, held up relatively
well. For the full twelve-month period, however, all of Europe's major markets
posted stellar returns.
The European Environment
Despite the volatility in the financial markets, the fundamentals of the
European economy remained quite sound. Although growth for 1998 and 1999 should
fall short of expectations as global demand slows and a stronger euro puts
pressure on exports, Europe is likely to show economic growth of over 2% in
1999, which is relatively attractive on a global basis. In addition, consumer
confidence is high, and resilient household spending should offset weakness in
exports and capital investment. The rise of more Social Democratic parties in
Europe and new, left-of-center governments in Germany and Italy may amplify the
policy bias in favor of the consumer through a possible relaxation of fiscal
policy. Additionally, monetary policy appears favorable as central banks
aggressively cut interest rates ahead of the launch of the euro.
Corporations continue to take the lead in transforming the European landscape.
As the continent moves toward an integrated market, the need to consolidate
production and gain economies of scale will become more pressing in an
increasingly competitive environment. The accelerating pace of change is
affecting a wide range of sectors, including banking, retailing, defense, and
the media. European companies tend to have little or no debt, providing them
with the financial strength necessary to pursue growth and acquisition activity,
or to buy back shares as a more shareholder-oriented perspective develops.
6 - Scudder Greater Europe Growth Fund
<PAGE>
The EMU Outlook
The outlook for the European Monetary Union ("EMU") remains stable despite
political crosscurrents, setting the stage for a stronger, more efficient
economy in continental Europe. The EMU block survived a serious test when
historically volatile currencies such as the Spanish peseta and the Italian lira
remained stable against the deutschemark through the recent market turbulence.
The end of the Kohl era in Germany in September and the recent election of an
ex-communist to the prime minister post in Italy has shifted the tone of
macroeconomic debate, with politicians now calling for the new European Central
Bank ("ECB") to lower interest rates throughout Europe. We do not believe that
the independence of the ECB is threatened by these pressures. Indeed, for the
core countries of Europe, specifically Germany, one of the risks of integration
is a rate policy that is set too tight to contain potential inflationary
"bubbles" in the more rapidly growing economies of the European periphery. Given
an environment of slower economic growth, it is likely that the ECB -- with or
without political urging -- will lower rates next year to give core countries
the breathing room they need, while affording the peripheral nations the
latitude to continue their expansion. We are hopeful that the EMU will act as a
positive catalyst for many of the changes that Europe needs by providing an
impetus for deregulation and liberalization. Additionally, a successful launch
stands to reduce the expenses associated with currency exchange, and create new
opportunities for scale and efficiency.
Portfolio Strategy
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 displaying an interest in the enhancement of
shareholder value.
Over the past several months, the structure of the portfolio has evolved in a
number of ways, reflecting our focus on growth trends and constructive changes.
Earlier in 1998 we were overweighed in the financial sector, as the combination
of low interest rates and strengthening economies propelled returns in bank bond
portfolios, increased loan volumes, and decreased loan losses. Many of these
banks were committed to restructuring their balance sheets, and were benefiting
from new opportunities in asset management. In addition, continued consolidation
acted as a catalyst for rising stock prices across the entire industry. However,
when the ramifications of the emerging markets crises overwhelmed the positives
for Fund holdings in United Bank of Switzerland, Credit Suisse, Deutsche Bank,
and Banco Bilbao y Vizcaya, we eliminated these holdings at favorable prices. In
this period, we retained most of our insurance holdings, as well as those banks
with a predominantly European focus.
In recent months, we have substantially increased the Fund's weighting in the
United Kingdom by purchasing several new companies and adding to existing
positions. In the media sector, new holdings include Flextech, a leading
provider of basic channel programming with core exposure to the fledgling
digital television industry, and Reed International PLC, which holds important
7 - Scudder Greater Europe Growth Fund
<PAGE>
franchises in professional, business, and scientific publishing. We have built
up our position in Aegis, a media strategy specialist that is profiting from
advertisers' need to target customers via an increasingly fragmented media
reach. We also added British Aerospace to the portfolio, based on the prospects
for European wide consolidation and restructuring in the defense industry. In
the pharmaceutical sector, we increased positions in SmithKline Beecham, Zeneca,
and Glaxo in the second half of the year. The Fund emphasized these three
sectors -- media, defense, and pharmaceuticals -- in other countries as well.
Companies that are positioned to benefit from recovering European consumer
demand have been added to the Fund. A number of these firms are restructuring
their businesses by eliminating poor retailing concepts and closing unprofitable
locations and investing in new markets or geographic areas. Consolidation
prospects are also offering enhanced profit potential for many of these
companies. Among newer additions to the portfolio in the retailing sector are
Laurus (Netherlands), Casino (France), Vendex (Netherlands), Castorama (France),
Douglas (Germany), and Galeries Lafayette (France).
Outlook
Concerns about the global market environment remain in place despite several
policy responses to the crisis in the United States and Europe, and moderate
progress toward reform in Japan and Brazil. Although volatility remains high and
valuations have risen again in the October rally, the macroeconomic and
corporate fundamentals in Europe continue to be attractive relative to other
8 - Scudder Greater Europe Growth Fund
<PAGE>
global markets. Despite the risks, long-term investors stand to benefit from a
number of ongoing developments such as the potential for further restructuring
across a wide range of industries, the increasing corporate focus on shareholder
returns, and the eventual fruits of European monetary integration.
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 Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an
important role in the Fund's management process. Team members work together to
develop investment strategies and select securities for the Fund's portfolio.
They are supported by the Adviser's large staff of economists, research
analysts, traders, and other investment specialists who work in our offices
across the United States and abroad. We believe our team approach benefits Fund
investors by bringing together many disciplines and leveraging our extensive
resources.
Carol L. Franklin, Lead Portfolio Manager, sets Fund investment strategy and
oversees its daily operation. Ms. Franklin joined the Adviser 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 the Adviser since 1976. Joan R. Gregory, Portfolio Manager, focuses on
stock selection, a role she has played since she joined the Adviser 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
EUROPEAN CENTRAL BANK The bank founded to oversee monetary policy for the
(ECB) eleven countries that converted their local
currencies to the euro on January 1, 1999. The ECB's
primary mission is to maintain price stability and
issue euro currency.
EUROPEAN MONETARY An integration of European economies involving among
UNION (EMU) other changes a move to a single currency for member
nations. To qualify for EMU membership, nations are
required to meet certain guidelines concerning total
governmental debt and annual budget deficits,
designed to ensure a strong common currency.
FISCAL POLICY Decisions concerning government spending
policies typically designed to level out the business
cycle, promote price stability, and achieve sustained
economic growth.
LIQUIDITY A characteristic of an investment or an asset
referring to the ease of convertibility into cash
within a reasonably short period of time. 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.
MONETARY POLICY The decision of a central bank to control the level
of economic activity by either supplying credit
through lower 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 clam
inflationary forces.
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 Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
10 - Scudder Greater Europe Growth Fund
<PAGE>
Investment Portfolio as of October 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 4.4%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/30/1998 at 5.4%, to be
repurchased at $49,250,153 on 11/2/1998, collateralized by a $48,615,000 U.S. Treasury -------------
Note, 3.625%, 1/15/2008 (Cost $49,228,000) ............................................. 49,228,000 49,228,000
-------------
Short-Term Notes 4.4%
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United States
Ford Motor Credit Co., 5.13%, 12/10/1998** ............................................... 25,000,000 24,862,146
Madison Funding Corp., 5.28%, 11/6/1998** ................................................ 25,000,000 24,981,701
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Total Short-Term Notes (Cost $49,843,847) 49,843,847
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Shares
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Common Stocks 91.2%
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Finland 3.2%
Nokia AB "A" (Manufacturer of telecommunication systems and equipment) ................... 187,900 17,102,164
Pohjola Insurance Co., Ltd. "B" (Insurance company) ...................................... 158,300 6,473,409
Sampo Insurance Co., Ltd. "A" (Multi-line insurance company) ............................. 100,000 3,116,625
Tieto Corp. (Manufacturer of computer software) .......................................... 339,600 9,849,243
-------------
36,541,441
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France 24.9%
Accor SA (Catering, hotels, travel services) ............................................. 63,200 13,273,536
Altran Technologies, SA (Engineering and consulting services for aerospace,
telecommunications and electronics fields) ............................................. 57,591 11,266,340
Assurances Generales de France -- CVG Shares* (Multi-line insurance company) ............. 21,236 244,597
AXA SA (Insurance group providing insurance, finance and real estate services) ........... 115,100 13,008,693
Canal Plus (Leading pay television network) .............................................. 44,700 10,844,164
Cap Gemini Sogeti SA (Software consultants) .............................................. 107,166 16,104,225
Castorama-Dubois Investissements (Retailer, wholesaler and distributor) .................. 77,700 13,857,770
Compagnie de Saint-Gobain (Glass manufacturer) ........................................... 65,600 9,704,526
Dassault Systemes SA (Developer of computer aided design, manufacturing and engineering
software) .............................................................................. 244,087 9,312,777
Etablissements Economiques du Casino Guichard-Perrachon SA (Operator of supermarkets and
convenience stores) .................................................................... 133,200 13,256,474
Galeries Lafayette (Group of department stores and supermarkets chains) .................. 4,770 5,288,077
Groupe Danone (Producer of packaged foods and beverages) ................................. 62,950 16,642,410
L'Air Liquide (World's leading producer of industrial gases) ............................. 69,900 11,699,271
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lagardere S.C.A. (Holding company with interests in publishing, defense, audiovisual
production and services, telecommunications and media) ................................. 308,400 12,410,373
Pinault-Printemps-Redoute SA (Operator of department stores) ............................. 51,150 8,561,055
Publicis SA (International advertising company) .......................................... 46,574 7,376,068
Rexel SA (Distributor of electrical equipment) ........................................... 68,500 6,287,231
Rhone-Poulenc SA "A" (Medical, agricultural and consumer chemicals) ...................... 225,467 10,306,599
Sanofi SA (Researcher and manufacturer of health care products and beauty aids) .......... 33,900 5,307,838
Scor SA (Property, casualty and life reinsurance company) ................................ 264,400 15,160,234
Societe Lyonnaise des Eaux SA (Water utility) ............................................ 102,900 18,426,258
Societe Nationale Elf Aquitaine (Petroleum company) ...................................... 88,850 10,281,751
Sommer-Allibert (Manufacturer of plastic products for automotive industry) ............... 101,771 2,928,675
Synthelabo SA (Pharmaceutical and biomedical company) .................................... 36,400 6,943,940
Television Francaise (Television broadcasting) ........................................... 104,125 17,202,691
Total SA "B" (International oil and gas exploration, development and production) ......... 86,900 10,024,818
Vivendi (Water utility) .................................................................. 22,200 5,070,062
-------------
280,790,453
-------------
Germany 11.0%
Allianz AG (Multi-line insurance company) ................................................ 51,100 17,521,763
Douglas Holdings AG (Marketer of a broad range of high-end retail products) .............. 224,960 12,901,419
Hoechst AG (Chemical producer) ........................................................... 243,200 10,159,638
Mannesmann AG (Diversified construction and technology company) .......................... 139,300 13,707,154
Marschollek Lautenschlaeger und Partner AG (pfd) (Leading independent life insurance
company) ............................................................................... 36,050 18,389,526
Metro AG (Operator of building, clothing and food stores and supermarkets) ............... 204,100 12,567,582
Schering AG (Pharmaceutical and chemical producer) ....................................... 107,145 12,625,840
Siemens AG (Leading electrical engineering and electronics company) ...................... 193,900 11,658,581
VEBA AG (Electric utility, distributor of oil and chemicals) ............................. 87,800 4,902,807
VIAG AG (Provider of electrical power and natural gas services, aluminum products,
chemicals, ceramics and glass) ......................................................... 13,830 9,392,545
-------------
123,826,855
-------------
Greece 2.5%
Delta Informatics SA (Corporate information services) .................................... 354,000 6,591,429
Hellenic Telecommunication Organization SA (OTE) (Telecommunication services) ............ 206,666 4,699,959
National Bank of Greece SA (Full service bank) ........................................... 69,780 9,918,272
STET Hellas Telecommunications SA* (Provider of mobile telecommunication services) ....... 113,302 2,974,178
Titan Cement Co. SA (Cement producer) .................................................... 61,100 3,777,770
-------------
27,961,608
-------------
</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>
Ireland 2.8%
Elan Corp. PLC (ADR)* (Research and development of drug delivery technology) ............. 256,200 17,950,013
Irish Life PLC (Provider of life and disability insurance and pensions) .................. 1,476,100 13,085,265
-------------
31,035,278
-------------
Italy 8.9%
Aeroporti di Roma SpA (Management of Fiumicino and Ciampino airports) .................... 754,000 4,715,519
Alleanza Assicurazioni (Life insurance company) .......................................... 607,640 7,489,141
Assicurazioni Generali SpA (Life and property insurance company) ......................... 294,100 10,533,372
Banca Popolare di Brescia SpA (Cooperative bank) ......................................... 608,900 14,340,608
Banca di Roma SpA* (Commercial and savings bank) ......................................... 5,078,000 8,861,210
Gruppo Editoriale L'Espresso (Publisher) ................................................. 917,200 8,170,548
Istituto Bancario San Paolo di Torino (Commercial bank) .................................. 653,800 9,613,826
Istituto Nazionale delle Assicurazione (Insurance company) ............................... 2,223,500 6,125,326
La Rinascente SpA (Department store chain) ............................................... 363,300 3,502,328
La Rinascente SpA di Risparmio ........................................................... 1,971,100 8,917,726
Seat Pagine Gialle SpA (Publisher of telecommunications directories and provider of
advertising services) .................................................................. 13,103,000 8,194,622
Telecom Italia SpA (Telecommunications, electronics, network construction) ............... 550,000 2,771,897
Telecom Italia SpA di Risparmio ......................................................... 1,033,000 7,468,837
-------------
100,704,960
-------------
Netherlands 5.1%
Akzo Nobel NV (Producer and marketer of healthcare products, coatings, chemicals and
fibers) ................................................................................ 299,800 11,649,885
Getronics NV (Provider of computer installation and maintenance services) ................ 227,235 9,426,062
Laurus NV (International food retailer) .................................................. 47,440 1,193,427
Laurus NV Scrips* (b) .................................................................... 1,842,700 4,635,599
Tas Groep NV* (Software developer) ....................................................... 1,260,000 5,732,484
Vedior NV CVA (Temporary employment services) ............................................ 715,700 18,234,395
Vendex NV (Operator of department stores and specialty stores) ........................... 246,300 6,261,976
-------------
57,133,828
-------------
Portugal 2.0%
Banco Portugues do Investimento (Bank) ................................................... 203,400 6,236,730
Electricidade de Portugal (Electric utility) ............................................. 397,850 10,000,396
Portugal Telecom SA (Telecommunication services) ......................................... 131,400 6,225,289
-------------
22,462,415
-------------
</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>
Spain 8.9%
Argentaria SA (Bank) ..................................................................... 694,188 15,104,971
Autopistas del Mare Nostrum SA (Builder and operator of toll motorways) .................. 426,000 10,690,828
Banco Popular Espanol (Bank) ............................................................. 142,600 8,807,468
Cia Sevillana de Electricidad (Supplier of electrical power and services in southern
Spain) ................................................................................. 411,000 5,237,434
Compania Telefonica Nacional de Espana SA (Telecommunication services) ................... 292,000 13,184,154
Cortefiel, SA (Owner and operator of various retail clothing stores) ..................... 457,000 11,290,359
Empresa Nacional de Electricidad SA (Electric power utility) ............................. 192,600 4,853,968
Gas Natural SDG, SA (Natural and manufactured gas distributor) ........................... 57,400 4,942,936
Tabacalera SA "A" (Manufacturer and distributor of tobacco products) ..................... 674,400 16,278,291
TelePizza, SA* (Operator of fast food restaurants) ....................................... 1,200,000 9,796,962
-------------
100,187,371
-------------
Switzerland 2.6%
Novartis AG (Bearer) (Pharmaceutical company) ............................................ 938 1,687,210
Novartis AG (Registered) ................................................................. 8,400 15,121,735
Sika Finanz AG "B" (Bearer) (Manufacturer of water management products and systems) ...... 21,400 6,994,393
Swisscom AG* (Operator of telecommunication networks and network application services) ... 15,568 5,272,032
-------------
29,075,370
-------------
United Kingdom 19.3%
Aegis Group PLC (Leading independent media services group) ............................... 11,297,500 17,492,576
Avis Europe PLC (Car rental services) .................................................... 3,125,000 13,652,753
Bank of Scotland (Bank) .................................................................. 599,400 6,511,651
British Aerospace PLC (Producer of military aircraft) .................................... 1,752,100 12,963,159
British Petroleum PLC (Major integrated world oil company) ............................... 1,368 20,082
British Telecom PLC (Telecommunication services) ......................................... 1,382,600 17,866,667
Compass Group PLC (International catering group) ......................................... 1,630,800 16,515,274
Flextech PLC* (Broadcaster of entertainment programs) .................................... 1,544,500 14,477,902
General Electric Co., PLC (Manufacturer of power, communications and defense equipment
and other various electrical components) ............................................... 1,639,834 13,038,367
Glaxo Wellcome PLC (Pharmaceutical company) .............................................. 471,400 14,645,265
Granada Group PLC (Television systems and broadcast, travel and leisure services,
entertainment and theme park operator) ................................................. 496,500 7,483,981
Misys PLC (Provider of computer, support and data services) .............................. 2,045,525 14,346,584
Orange PLC* (Operator of digital mobile telephone network) ............................... 1,336,500 12,427,470
Pearson PLC (Diversified media and entertainment holding company) ........................ 723,189 12,613,895
Reed International PLC (Publisher of scientific, professional and business to
business materials) .................................................................... 1,548,800 13,105,277
</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>
SmithKline Beecham PLC (Manufacturer of ethical drugs and healthcare products) ........... 1,054,000 13,179,255
WPP Group PLC (Advertising agency) ....................................................... 135,171 667,475
Zeneca Group PLC (Manufacturer of pharmaceutical and agrochemical products and
specialty chemicals) ................................................................... 442,600 16,995,522
-------------
218,003,155
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $958,804,948) 1,027,722,734
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,057,876,795) (a) 1,126,794,581
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate. (Unaudited)
(a) The cost for federal income tax purposes was $1,063,564,679. At October
31, 1998, net unrealized appreciation for all securities based on tax cost
was $63,229,902. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $102,729,801 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$39,499,899.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $4,635,599 (0.41% of net assets).
Their values have been estimated by the Board of Directors in the absence
of readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at October 31, 1998 aggregated $4,521,135. These
securities may also have certain restrictions as to resale.
Transactions in written call options on currencies during the year ended October
31, 1998 were:
Principal Amount (000s) Premiums ($)
--------------------------------------------------
Outstanding at
October 31, 1997 .... FRF 213,000 670,950
Contracts written ... FRF -- --
Contracts closed .... FRF (213,000) (670,950)
--------------------------------------------------
Outstanding at
October 31, 1998 .... FRF -- --
========== ==========
Currency Abbreviations: FRF French Franc
The accompanying notes are an integral part of the financial statements.
15 - Scudder Greater Europe Growth Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1998
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $1,057,876,795) ............ $1,126,794,581
Foreign currency holdings, at market (cost $2,553,251) ............. 2,454,565
Receivable for investments sold .................................... 10,817,666
Receivable for Fund shares sold .................................... 25,479,930
Dividends and interest receivable .................................. 683,967
Foreign taxes recoverable .......................................... 1,595,267
Deferred organization expenses ..................................... 10,981
Other assets ....................................................... 1,189
----------------
Total assets ....................................................... 1,167,838,146
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................. 21,628,870
Payable for Fund shares redeemed ................................... 12,473,352
Accrued management fee ............................................. 874,097
Other payables and accrued expenses ................................ 495,800
----------------
Total liabilities .................................................. 35,472,119
-------------------------------------------------------------------------------------------
Net assets, at market value $1,132,366,027
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................ 2,510,550
Unrealized appreciation (depreciation) on:
Investments ..................................................... 68,917,786
Foreign currency related transactions ........................... 66,469
Accumulated net realized gain (loss) ............................... (61,378,527)
Paid-in capital .................................................... 1,122,249,749
-------------------------------------------------------------------------------------------
Net assets, at market value $1,132,366,027
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($1,132,366,027 / 46,726,102 shares of capital stock ----------------
outstanding, $.01 par value, 100,000,000 shares authorized) ..... $ 24.23
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Greater Europe Growth Fund
<PAGE>
Statement of Operations
year ended October 31, 1998
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $1,643,333) ............ $ 10,917,537
Interest ........................................................... 4,439,197
----------------
15,356,734
----------------
Expenses:
Management fee ..................................................... 7,269,950
Services to shareholders ........................................... 1,913,887
Custodian and accounting fees ...................................... 855,434
Directors' fees and expenses ....................................... 65,331
Auditing ........................................................... 104,137
Reports to shareholders ............................................ 95,655
Amortization of organization expense ............................... 11,855
Registration fees .................................................. 440,934
Legal .............................................................. 22,508
Other .............................................................. 13,518
----------------
10,793,209
-------------------------------------------------------------------------------------------
Net investment income 4,563,525
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................ (61,480,538)
Futures ............................................................ (533,153)
Written options .................................................... (55,167)
Foreign currency related transactions .............................. (1,233,170)
----------------
(63,302,028)
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................ 31,550,439
Written options .................................................... 1,072,061
Foreign currency related transactions .............................. 60,412
----------------
32,682,912
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (30,619,116)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (26,055,591)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Greater Europe Growth Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ................................. $ 4,563,525 $ 273,770
Net realized gain (loss) from investment transactions.. (63,302,028) 17,401,800
Net unrealized appreciation (depreciation) on
investment transactions during the period .......... 32,682,912 18,752,867
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ......................................... (26,055,591) 36,428,437
---------------- ----------------
Distributions to shareholders from:
Net investment income ................................. (5,194,972) (490,975)
---------------- ----------------
Net realized gains .................................... (12,506,412) (1,145,609)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ............................. 2,795,798,253 279,382,379
Net asset value of shares issued to shareholders in
reinvestment of distributions ...................... 16,979,895 1,574,869
Cost of shares redeemed ............................... (1,832,169,481) (240,534,824)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ....................................... 980,608,667 40,422,424
---------------- ----------------
Increase (decrease) in net assets ..................... 936,851,692 75,214,277
Net assets at beginning of period ..................... 195,514,335 120,300,058
Net assets at end of period (including undistributed
net investment income of $2,510,550 and $5,207,695, ---------------- ----------------
respectively) ...................................... $1,132,366,027 $ 195,514,335
---------------- ----------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ............. 9,234,823 6,993,392
---------------- ----------------
Shares sold ........................................... 108,247,834 14,311,846
Shares issued to shareholders in reinvestment of
distributions ...................................... 824,267 88,625
Shares redeemed ....................................... (71,580,822) (12,159,040)
---------------- ----------------
Net increase (decrease) in Fund shares ................ 37,491,279 2,241,431
---------------- ----------------
Shares outstanding at end of period ................... 46,726,102 9,234,823
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - 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
Years Ended October 31, operations) to
1998(a) 1997(a) 1996(a) 1995 October 31, 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------- ------- ------- ------- -------
Net asset value, beginning of period ..................... $ 21.17 $ 17.20 $ 13.99 $ 12.18 $ 12.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) ............................. .16 .03 .13 .13 .01
Net realized and unrealized gain (loss) on investment
transactions ........................................... 4.74 4.14 3.33 1.70 .17
------- ------- ------- ------- -------
Total from investment operations ......................... 4.90 4.17 3.46 1.83 .18
------- ------- ------- ------- -------
Less distributions from:
Net investment income .................................... (.54) (.06) (.11) (.02) --
Net realized gains on investment transactions ............ (1.30) (.14) (.14) -- --
------- ------- ------- ------- -------
Total distributions ...................................... (1.84) (.20) (.25) (.02) --
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net asset value, end of period ........................... $ 24.23 $ 21.17 $ 17.20 $ 13.99 $ 12.18
------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) ......................................... 24.68 24.47(b) 25.11(b) 15.06(b) 1.50(b)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................... 1,132 196 120 41 8
Ratio of operating expenses, net to average daily net
assets (%) ............................................. 1.48 1.66 1.50 1.50 1.50*
Ratio of operating expenses before expense reductions, to
average daily net assets (%) ........................... 1.48 1.72 1.97 2.74 11.46*
Ratio of net investment income to average daily net assets
(%) .................................................... .63 .16 .82 1.25 2.40*
Portfolio turnover rate (%) .............................. 92.7 88.8 39.0 27.9 --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
19 - Scudder Greater Europe Growth Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Greater Europe Growth Fund 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 Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on such system. If there are no such sales, the value is the most
recent bid quotation. Securities which are not quoted on Nasdaq 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 mean
between the most recent bid and asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation shall be used.
Portfolio debt securities other than money market instruments with an original
maturity over sixty days are valued by pricing agents approved by the officers
of the Fund, 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.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased securities index futures as a temporary substitute for purchasing
selected investments.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to hedge, the
Fund gives up the opportunity to profit from favorable price movements in the
hedged positions during the term of the contract.
20 - Scudder Greater Europe Growth Fund
<PAGE>
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 held put options and written 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.
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 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.
21 - Scudder Greater Europe Growth Fund
<PAGE>
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.
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, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $55,700,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2006.
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 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.
22 - Scudder Greater Europe Growth Fund
<PAGE>
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, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,481,147,359 and
$610,210,259, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1998 was $76,192,772.
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Directors and by the Fund's Shareholders. The
Management Agreement, which was effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, the Fund has agreed to pay
to the Adviser a fee equal to an annualized rate of 1.00% of the Fund's average
daily net assets up to and including $1,000,000,000, and 0.90% of such net
assets in excess of $1,000,000,000, computed and accrued daily and payable
monthly. The Adviser determines the securities, instruments, and other contracts
relating to investments to be purchased, sold or entered into by the Fund. In
addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Management Agreement. For the
year ended October 31, 1998, the fees pursuant to these agreements amounted to
$7,269,950. In addition, during the year ended October 31, 1998, the Adviser
reimbursed the Fund $472,104 for the losses incurred in connection with equity
securities trading.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. The Board of Directors of the
Fund has approved a new investment management agreement with Scudder Kemper,
which is substantially identical to the former Management Agreement, except for
the dates of execution and termination. The Board of Directors of the Fund have
obtained shareholder approval of the new investment management agreement.
23 - Scudder Greater Europe Growth Fund
<PAGE>
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, 1998, the amount charged by SSC aggregated $1,225,507, of
which $145,942 was unpaid at October 31, 1998.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1998, the amount charged by STC aggregated $44,190, of which $4,833 was unpaid
at October 31, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Fund. For the year ended
October 31, 1998, the amount charged by SFAC aggregated $356,679, of which
$83,925 was unpaid at October 31, 1998.
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,
1998, the Special Servicing Agreement expense charged to the Fund amounted to
$20,550.
The Fund pays each Director not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1998, Directors' fees and expenses aggregated $65,331.
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 1/3 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:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Greater Europe Growth Fund
(the "Fund") at October 31, 1998, 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 four 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. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 21, 1998
25 - Scudder Greater Europe Growth Fund
<PAGE>
Tax Information
The Fund paid distributions of $1.03 per share from net long-term capital gains
during its fiscal year ended October 31, 1998 of which 52.4% represents 20% rate
gains.
The Fund paid foreign taxes of $1,644,000 and earned $3,563,000 of foreign
source income during the fiscal year ended October 31, 1998. Pursuant to section
853 of the Internal Revenue Code, the Fund designates $.04 per share as foreign
taxes paid and $.08 per share as income earned from foreign sources for the year
ended October 31, 1998.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
26 - Scudder Greater Europe Growth Fund
<PAGE>
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intentionally
left blank.
27 - Scudder Greater Europe Growth Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board and
Director
Nicholas Bratt*
President
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Chief Executive Officer,
Scientific Learning Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter
Capital Management
Corporation
William H. Gleysteen, Jr.
Director; Consultant; 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
Joan Spero
Director; President, Doris Duke
Charitable Foundation
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Elizabeth J. Allan*
Vice President
Irene T. Cheng*
Vice President
Joyce E. Cornell*
Vice President
Susan E. Dahl*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Theresa Gusman*
Vice President
Thomas W. Joseph*
Vice President
Sheridan P. Reilly*
Vice President
Thomas F. McDonough*
Vice President and Secretary
John R. Hebble*
Treasurer
Richard W. Desmond*
Assistant Secretary
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
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--
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered
by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
29 - Scudder 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder 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 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
800 no-load funds from well-known companies--with no 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 funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
31 - Scudder Greater Europe Growth Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
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