Scudder
International
Growth and
Income Fund
Annual Report
February 28, 1998
Pure No-Load(TM) Funds
A fund seeking long-term growth of capital and current income primarily from
foreign equity securities.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder International Growth and Income Fund
- --------------------------------------------------------------------------------
Date of Inception: 6/30/97 Total Net Assets as of Ticker Symbol: SIGIX
2/28/98: $49 million
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o For the abbreviated annual period beginning with the Fund's start of
operations on June 30, 1997, and ending February 28, 1998, Scudder International
Growth and Income Fund provided a total return of 5.80%, versus a 2.11% total
return for the unmanaged MSCI EAFE plus Canada Index for the same period.
o The Fund's country allocations contributed to its strong relative performance,
with an underweighting in Japan and a significant overweighting in Western
Europe.
o In pursuit of its objective of long-term growth of capital and current income,
the Fund maintained its "relative yield" approach of seeking to purchase
companies that have high yields relative to the median for their market.
Table of Contents
3 Letter from the Fund's Chairman 19 Notes to Financial Statements
4 Performance Update 23 Report of Independent Accountants
5 Portfolio Summary 24 Tax Information
6 Portfolio Management Discussion 25 Shareholder Meeting Results
9 Glossary of Investment Terms 28 Officers and Directors
11 Investment Portfolio 29 Investment Products and Services
15 Financial Statements 30 Scudder Solutions
18 Financial Highlights
2 - Scudder International Growth and Income Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the first annual report for Scudder International
Growth and Income Fund, covering the abbreviated fiscal period beginning with
the Fund's inception on June 30, 1997, and ending February 28, 1998. The
eight-month period was rewarding for investors since the Fund significantly
outperformed its benchmark index during an especially volatile period marked by
the Southeast Asian currency crisis.
The state of the Pacific Rim economies remains a crucial consideration for
investors going forward. Securities of Asian companies were largely absent from
the Fund's portfolio during this troubled period for that region. Moreover, the
Fund was able to identify issuers that were beneficiaries of the weakened Asian
markets, such as some companies in Western Europe. Continued volatility is
anticipated in the international markets in the near future, but we believe that
the Fund's conservative, yield-oriented approach has positioned it well for
investors who wish to keep some of their portfolio invested abroad, but with
less risk than more aggressive international funds.
At the beginning of 1998, the Fund's investment adviser changed its name to
Scudder Kemper Investments, Inc., from Scudder, Stevens & Clark, Inc., pursuant
to the acquisition of a majority interest in Scudder, Stevens & Clark by Zurich
Insurance Company, and the combining of Scudder's business with that of Zurich
Kemper Investments, Inc. We think these changes are positive and broaden our
resources in managing the Fund.
For those of you who are interested in new Scudder products, we recently
introduced three new industry sector funds as a part of our Choice Series funds:
Scudder Financial Services Fund, which seeks long-term growth by investing in
financial services companies in the U.S. and abroad; Scudder Health Care Fund,
which seeks long-term growth from health care companies located around the
world; and Scudder Technology Fund, which pursues long-term growth by investing
in companies that develop, produce, or distribute technology. In addition, April
6, 1998 marked the debut of our newest entrant in the growth and income
category: Scudder Real Estate Investment Fund, investing in equity securities of
companies in the real estate industry. For further information on these new
funds, please call 1-800-225-2470.
Thank you for your continued investment in Scudder International Growth and
Income Fund. If you have any questions about your account, please call Scudder
Investor Relations at the toll-free number above, or visit our Internet Web site
at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Growth and Income Fund
3 - Scudder International Growth and Income Fund
<PAGE>
PERFORMANCE UPDATE as of February 28, 1998
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FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
--------------
Period Ended Growth of Average
2/28/98 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER INTERNATIONAL GROWTH AND INCOME FUND
- --------------------------------------------
Life of Fund* $ 10,580 5.80% --
- --------------------------------------------
MSCI EAFE PLUS CANADA INDEX
- --------------------------------------------
Life of Fund* $ 10,211 2.11% --
* The Fund commenced operations on June 30, 1997.
Index comparisons begin June 30, 1997.
- -----------------------------------------------------------------
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 INTERNATIONAL GROWTH AND INCOME FUND
Date Amount
- ----------------------
6/97* $10,000
7/97 $10,158
8/97 $ 9,708
9/97 $10,342
10/97 $ 9,725
11/97 $ 9,608
12/97 $ 9,771
1/98 $ 9,996
2/98 $10,580
MSCI EAFE PLUS CANADA INDEX
Year Amount
- ----------------------
6/97* $10,000
7/97 $10,184
8/97 $ 9,433
9/97 $ 9,963
10/97 $ 9,211
11/97 $ 9,108
12/97 $ 9,195
1/98 $ 9,587
2/98 $10,211
The Morgan Stanley Capital International (MSCI) Europe, Australia, the
Far East (EAFE) & Canada Index is an unmanaged capitalization-weighted
measure of stock markets in Europe, Australia, the Far East and Canada.
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
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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 PERIOD ENDED FEBRUARY 28
1998*
--------
NET ASSET VALUE $12.68
INCOME DIVIDENDS $ .02
FUND TOTAL RETURN (%) 5.80
INDEX TOTAL RETURN (%) 2.11
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the total return for the life of Fund
period would have been lower.
4 - Scudder International Growth and Income Fund
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PORTFOLIO SUMMARY as of February 28, 1998
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GEOGRAPHICAL
(Excludes 2% Cash Equivalents)
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Europe 77%
Japan 12%
Pacific Basin 6%
Canada 4%
Latin America 1%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
We view Europe as well
positioned to profit from the
implementation of the European
Monetary Union.
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SECTORS
(Excludes 2% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 32%
Manufacturing 18%
Communications 9%
Consumer Discretionary 6%
Transportation 6%
Service Industries 6%
Consumer Staples 5%
Durables 5%
Construction 5%
Other 8%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Sector weightings in banks and
consumer non-durables
contributed to the
outperformance of the Fund
versus its benchmark index.
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TEN LARGEST EQUITY HOLDINGS
(26% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. BANK AUSTRIA AG
Commercial and corporate banking and
financial services in Austria
2. ALLIED IRISH BANK PLC
Bank in Ireland
3. BCE, INC.
Telecommunication services in Canada
4. CREDIT SUISSE GROUP
Provider of bank services, management services
and life insurance in Switzerland
5. SCOR SA
Property, casualty and life reinsurance
company in France
6. LA RINASCENTE SPA
Department store chain in Italy
7. RWE AG
Producer and marketer of petroleum and
chemical products in Germany
8. MBL INTERNATIONAL FINANCE BERMUDA
Bank in Japan
9. BHF-BANK AG
Universal banking services in Germany
10.TELECOM ITALIA SPA
Telecommunications, electronics, and network
construction in Italy
Bank Austria and Allied Irish
Bank illustrate the Fund's
concentrations in Western
European companies and the
banking sector.
For more complete details about the Fund's investment portfolio,
see page 11. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - Scudder International Growth and Income Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Lead Portfolio Manager Sheridan Reilly discusses
Scudder International Growth and Income Fund's strategy and the market
environment during the period June 30, 1997 through February 28, 1998.
Q: Could you discuss the Fund's performance over the eight months since it began
operations?
A: The last eight months were characterized by significant problems in many of
the Asian and Pacific Rim economies and encouraging signs of strength in some
Western European markets.
The currency and banking problems and the subsequent IMF (International Monetary
Fund) intervention in many of the Asian economies have created a difficult
investment environment there. The problems in these economies also warrant a
critical look at the Japanese banking system, since these banks have invested
heavily in their neighboring Pacific Rim economies. In Western Europe conditions
have been more benign, as many companies are realizing the benefits of recent
consolidations and restructurings and consumer demand has been relatively
strong. For the period, the Scudder International Growth and Income Fund
realized a total return of +5.80% versus a +2.11% total return for the unmanaged
MSCI EAFE plus Canada Index. Once again, our relatively conservative value
approach to investing has served us well in this difficult environment.
Q: Could you give an overview of the Fund's investment discipline?
A: In pursuit of its objective of long-term growth of capital and current
income, the Fund invests primarily in dividend-paying common stocks and
preferred stocks of companies listed on foreign stock exchanges. We generally
look for well-capitalized, established companies in mature overseas markets.
In selecting stocks for purchase, one of the first criteria we look for are
companies that have high yields relative to the median for their market. This
"relative yield" approach has been applied previously by Scudder's domestic
Growth and Income team. We look to purchase companies whose dividend yields are
more than 25% above their respective market median. On the flip side, if the
yield of a stock we are holding falls to 25% below its market median, we will
consider selling that stock.
Once we have identified companies with the requisite relative yields, we
undertake an extensive company analysis. This fundamental analysis is integral
to our investment decision process. It entails a review of the companies'
financial statements and earnings estimates, as well as an evaluation of the
quality and tenure of management.
As a complement to the fundamental company analysis discussed above, extensive
consideration is also given to country and sector diversification. Sector
diversification can reduce investment risk as well as position the portfolio to
accommodate changes in economic factors such as inflation, GDP growth and
interest rate levels in the countries where we invest. Country diversification
allows us to pursue a broader range of investment opportunities and reduce
currency exchange risk.
Q: The Fund outperformed the MSCI EAFE plus Canada Index in this period. To what
investment decisions do you attribute this?
A: Perhaps the most significant factor in our strong relative performance was
our country allocation. Relative to EAFE we were underweighted in Japan, which
6 - Scudder International Growth and Income Fund
<PAGE>
represents roughly 10% of our portfolio. The difficulties experienced by the
Pacific Rim economies have been the prevalent economic story. These problems
affected Japan for two reasons: its trading partners were seriously weakened and
Japanese banks have lent heavily to these economies. The magnitude of these
problems was reflected in the EAFE over much of this period. Because of our
underweighting in Japan, these problems had significantly less effect on our
portfolio than they did on the index.
While we were underweighted in Japan, we were overweighted in Western Europe.
These holdings were not greatly affected by the problems in Asia and performed
well for us over most of this period. Given its concentration of established
companies with strong balance sheets that operate in mature markets, Western
Europe aligns nicely with the Fund's investment objectives. Additionally, many
of these companies are undergoing the consolidation and restructuring that so
many U.S. companies experienced in the past decade. Consequently, we find many
of these companies to be attractive at these valuations. These factors are
reflected in our portfolio weightings with Western European countries
representing nearly 80% of the portfolio.
Our pursuit of value in Western Europe also afforded us some protection against
the extremely volatile Asian currency markets during this period. The European
currencies held up extremely well and some even benefited from the problems in
Asia as there was a flight from the weaker currencies of the Far East to the
stronger, more stable currencies of the U.S. and Western Europe.
Beyond country allocation, our sector weightings also worked well. Two sectors
which performed well for the Fund were consumer-nondurables and banks.
Q: Could you tell us about any specific companies that demonstrate the Fund's
investment approach?
A: I mentioned above that the portfolio is heavily weighted in Western Europe,
so I suppose it's not too surprising that a few companies that best illustrate
our approach would be located there. As the European economies strengthen, so
will the demand for consumer goods, and we are positioned well in that industry
sector. One consumer stock we bought was the Italian retailer Rinascente. The
company has been modernizing its approach to marketing, as well as making
excellent gains in increasing sales per square foot in existing stores and
finding attractive sites for opening new stores. It has also been helped by an
increase in consumer spending.
Bank of Austria and Allied Irish Bank are two other good examples of our
investment approach. European banks are established, well regulated, and,
because they are active in the capital markets, they will benefit from the
strengthening economies there. Bank of Austria offers an attractive yield and we
feel it is undervalued at these levels. Allied Irish Bank offers an attractive
yield and we believe it has strong prospects for growth. The Irish economy
continues to strengthen with further integration with the European Union and
Dublin is becoming an increasingly important financial center. Allied Irish Bank
is well positioned to take advantage of these changes.
7 - Scudder International Growth and Income Fund
<PAGE>
Q: What is your outlook for International Equities?
A: We think the markets will continue to be volatile. The problems in the
Pacific Rim are still not completely worked out. Bank lending there will have to
be monitored for improvements in lending practices and the creditworthiness of
debtors. In Japan, needed government policies to encourage economic growth are
meeting political resistance, and the banking system is still fragile because of
its dependence on Pacific Rim neighbors. By contrast, Europe seems poised to
realize the benefits of closer integration of its economies and the
restructuring and consolidation of its industries.
In this environment we will seek to adhere to our investment discipline of
investing in well-run companies that offer high "relative yields" and strong
balance sheets. We will continue our rigorous fundamental analysis and closely
monitor our sector and country allocations. We intend to remain fully invested
and to take profits as stocks reach their target prices and yields and to
purchase stocks that meet our yield and other valuation criteria.
We are confident in the long-term value of our approach and believe Scudder
International Growth and Income Fund will continue to be appropriate for
investors who wish to allocate assets overseas in a relatively conservative
fashion as compared to other international investments, or for investors to add
balance to the international portion of their portfolios.
Scudder International
Growth and Income Fund:
A Team Approach to Investing
Scudder International Growth and Income Fund is managed by a team of Scudder
Kemper Investments, Inc. (the "Adviser") 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 a 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 the Adviser's extensive
resources.
Lead Portfolio Manager Sheridan Reilly joined the Adviser in 1995 and is a
member of the Adviser's Global Equity Group. Mr. Reilly has over 10 years of
industry experience focusing on strategies for global portfolios, currency
hedging, and foreign equity markets. Portfolio Manager Irene T. Cheng joined
the Adviser in 1993. Ms. Cheng, who has over 13 years of industry experience,
focuses on portfolio management, research, and equity analysis for the
Adviser's institutional international equity accounts. Deborah A. Chaplin,
Portfolio Manager, joined the Adviser in 1996 and has over five years of
experience as a securities analyst and portfolio manager.
8 - Scudder International Growth and Income Fund
<PAGE>
Glossary of Investment Terms
CURRENCY EXCHANGE RATE The price at which one country's currency can
be exchanged into another country's 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 UNION) A proposed integration of European economies
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.
9 - Scudder International Growth and Income 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 Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
10 - Scudder International Growth and Income Fund
<PAGE>
Investment Portfolio as of February 28, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 2.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 2/27/98 at 5.63%,
to be repurchased at $1,127,529 on 3/2/98, collateralized by a $906,000 U.S. -----------
Treasury Bond, 8.125%, 8/15/19 (Cost $1,127,000) ...................................... 1,127,000 1,127,000
-----------
Convertible Bonds 5.5%
- ------------------------------------------------------------------------------------------------------------------------------
Hong Kong 1.4%
Hysan Development Finance Co., Ltd., 6.75%, 6/1/00 (Investment holding company) ......... 680,000 663,000
-----------
Japan 2.3%
MBL International Finance Bermuda, 3%, 11/30/02 (Bank) .................................. 1,046,000 1,127,065
-----------
Netherlands 1.8%
BPH Finance Co., 3%, 5/22/02 (Finance company) .......................................... 700,000 854,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $2,654,782) 2,644,065
- ------------------------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks 3.7%
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Austria
Bank Austria AG* (Commercial and corporate banking and financial services) -----------
(Cost $1,004,633) ..................................................................... 27,490 1,801,737
-----------
Common Stocks 88.0%
- ------------------------------------------------------------------------------------------------------------------------------
Australia 2.8%
Commonwealth Bank of Australia (Bank) ................................................... 52,267 647,537
Foster's Brewing Group, Ltd. (Leading brewery) .......................................... 321,810 709,998
-----------
1,357,535
-----------
Brazil 1.0%
Aracruz Celulose S.A. (ADR) "B" (Producer of eucalyptus kraft pulp) ..................... 37,400 511,912
-----------
Canada 4.4%
BCE, Inc. (Telecommunication services) .................................................. 34,300 1,217,038
Moore Corp. Ltd. (Manufacturer of business communication products) ...................... 58,400 910,929
-----------
2,127,967
-----------
Finland 2.0%
Merita Ltd. "B" (Financial services group) .............................................. 179,210 976,125
-----------
France 10.5%
Accor S.A. (Catering, hotels, travel services) .......................................... 2,361 545,847
Dexia France (Municipal and local development financing) ................................ 7,820 999,119
Havas S.A. (Advertising, publishing and broadcasting conglomerate) ...................... 11,535 900,760
Scor S.A. (Property, casualty and life reinsurance company) ............................. 23,167 1,198,063
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Societe Nationale Elf Aquitaine (Petroleum company) ..................................... 5,550 632,434
Sommer-Allibert (Manufacturer of plastic products for automotive industry) .............. 21,529 840,415
-----------
5,116,638
-----------
Germany 9.3%
BHF-Bank AG (Universal banking services) ................................................ 36,930 1,054,416
Bayer AG (Leading chemical producer) .................................................... 21,656 913,151
Dyckerhoff AG (pfd.) (Producer of cement, ready-mixed concrete and finishing
products) ............................................................................. 2,508 688,430
Hochtief AG (Construction and civil engineering services) ............................... 19,214 667,208
RWE AG (Producer and marketer of petroleum and chemical products) ....................... 20,990 1,161,001
-----------
4,484,206
-----------
Ireland 3.2%
Allied Irish Bank PLC (Bank) ............................................................ 119,460 1,556,906
-----------
Italy 5.7%
Banca Commerciale Italiana SpA (Commercial bank) ........................................ 126,000 575,915
La Rinascente SpA di Risparmio (Department store chain) ................................. 237,000 1,180,061
Telecom Italia SpA di Risparmio (Telecommunications, electronics, network
construction) ......................................................................... 207,000 1,005,788
-----------
2,761,764
-----------
Japan 9.5%
East Japan Railway Co. (Railroad operator) .............................................. 86 407,088
Matsushita Electric Works, Inc. (Leading maker of building materials and
lighting equipment) ................................................................... 65,000 649,382
Nintendo Co., Ltd. (Game equipment manufacturer) ........................................ 10,200 938,154
Nippon Meat Packers, Inc. (Leading meat processor) ...................................... 69,000 908,183
Sakura Bank Ltd. (Full service bank) .................................................... 207,000 866,603
Teijin Ltd. (Manufacturer of polyester products) ........................................ 268,000 822,360
-----------
4,591,770
-----------
Netherlands 4.9%
KLM Royal Dutch Air Lines NV (World-wide full service airline) .......................... 24,970 904,892
Koninklijke Nedlloyd Groep NV (Container shipping and transportation) ................... 28,570 666,482
Royal Dutch Petroleum Co. (Owner of 60% of Royal Dutch/Shell Group) ..................... 14,900 815,410
-----------
2,386,784
-----------
New Zealand 1.4%
Telecom Corp. of New Zealand (Telecommunication services) ............................... 140,800 675,014
-----------
Portugal 1.5%
Portugal Telecom S.A. (Telecommunication services) ...................................... 13,950 732,037
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Spain 5.7%
Autopistas del Mare Nostrum S.A. (Builder and operator of toll motorways) ............... 34,000 729,709
Banco Bilbao Vizcaya S.A. (Commercial bank) ............................................. 15,150 692,667
Compania Telefonica Nacional de Espana S.A. (Telecommunication services) ................ 19,100 657,121
Iberdrola S.A. (Electric utility) ....................................................... 46,100 667,095
-----------
2,746,592
-----------
Sweden 4.8%
AssiDoman AB (Forestry group) ........................................................... 20,540 505,861
OM Gruppen AB (Free) (Operator of financial exchanges and clearing organizations) ....... 17,390 786,996
Skanska AB "B" (Free) (International construction company) .............................. 11,900 538,542
Svedala Industri AB (Manufacturer of machinery for construction, mineral
processing and materials handling) .................................................... 26,670 473,452
-----------
2,304,851
-----------
Switzerland 6.5%
Credit Suisse Group (Registered) (Provider of bank services, management services
and life insurance) ................................................................... 6,716 1,213,432
Georg Fischer AG (Bearer) (Manufacturer of automotive products and piping systems) ...... 557 938,017
Sika Finanz AG (Registered) (Manufacturer of water management products and systems) ..... 18,160 990,523
-----------
3,141,972
-----------
United Kingdom 14.8%
Albright & Wilson PLC (Manufacturer of phosphates, surfactants and specialty
chemicals) ............................................................................ 246,420 648,775
Courtaulds Textiles PLC (Producer of clothing, fabrics and home furnishings) ............ 133,440 742,165
Dorling Kindersley Holdings PLC (Book publisher) ........................................ 165,700 567,131
Elementis PLC (Producer of specialty performance chemicals) ............................. 174,762 365,215
Energy Group PLC (Electricity generation and distribution) .............................. 68,640 878,729
General Electric Co., PLC (Manufacturer of power, communications and defense
equipment and other various electrical components) .................................... 92,450 603,942
Laporte PLC (Producer of specialty chemicals) ........................................... 47,225 514,238
Man (ED&F) Group PLC (Commodities trading company) ...................................... 1,150 4,636
Rank Group PLC (Diversified leisure services: hotels, amusement machines,
restaurants, film and television) ..................................................... 110,710 606,698
Royal & Sun Alliance Insurance Group PLC (Multi-line insurance holding company) ......... 75,000 954,596
Tomkins PLC (Manufacturer of fluid controls, industrial products, garden and
leisure products) ..................................................................... 116,150 670,848
Transport Development Group PLC (Distribution, leasing, storage and transport
services) ............................................................................. 157,230 602,822
-----------
7,159,795
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $38,481,565) 42,631,868
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Contracts Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased Options 0.5%
- ------------------------------------------------------------------------------------------------------------------------------
Call on Japan Stock Index, strike price 180 JPY, expire 6/20/98 (Cost $131,598) ......... JPY 337 231,687
-----------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $43,399,578) (a) 48,436,357
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
Currency abbreviations:
JPY Japanese Yen
(a) The cost for federal income tax purposes was $43,409,492. At February 28,
1998, net unrealized appreciation for all securities based on tax cost was
$5,026,865. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $6,763,725 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,736,860.
At February 28, 1998, outstanding written options were as follows:
<TABLE>
<CAPTION>
Expiration Strike Price Market
Call Options Shares Date (GBP) Value($)
------------ -------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Electric Co. ................. 78,453 4/15/98 4.27 8,649
Royal & Sun Alliance ................. 48,536 4/15/98 6.943 66,688
---------
Total outstanding written options (Premiums received $26,005) .............................. 75,337
=========
</TABLE>
Transactions in written options for the period June 30, 1997 (commencement
of operations) to February 28, 1998 were:
Options on Securities
--------------------------------
Premiums
Shares Received ($)
--------------- ----------------
Outstanding at June 30, 1997 ....... -- --
--------------- ----------------
Written:
General Electric Co. ............... 78,453 11,052
Royal & Sun Alliance ............... 48,536 14,953
-----------
Outstanding at February 28, 1998 26,005
===========
The accompanying notes are an integral part of the financial statements.
14 - Scudder International Growth and Income Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of February 28, 1998
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $43,399,578) ................ $ 48,436,357
Receivable for investments sold ..................................... 445,269
Dividends, distributions and interest receivable .................... 336,307
Receivable for Fund shares sold ..................................... 216,762
Foreign taxes recoverable ........................................... 8,540
Deferred organization expenses ...................................... 35,571
----------------
Total assets ........................................................ 49,478,806
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed .................................... 164,846
Written options, at value (premiums received $26,005) ............... 75,337
Accrued management fee .............................................. 36,407
Other payables and accrued expenses ................................. 322,052
----------------
Total liabilities ................................................... 598,642
-------------------------------------------------------------------------------------------
Net assets, at market value $ 48,880,164
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ........ (213,599)
Unrealized appreciation (depreciation) on:
Investments ...................................................... 5,036,779
Written options .................................................. (49,332)
Foreign currency related transactions ............................ (559)
Accumulated net realized gain (loss) ................................ (2,320,425)
Paid-in capital ..................................................... 46,427,300
-------------------------------------------------------------------------------------------
Net assets, at market value $ 48,880,164
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($48,880,164 / 3,854,083 shares of capital stock outstanding, ----------------
$.01 par value, 100,000,000 shares authorized) .................... $12.68
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder International Growth and Income Fund
<PAGE>
Statement of Operations
For the period June 30, 1997 (commencement of operations)
to February 28, 1998
<TABLE>
<CAPTION>
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends (net of foreign taxes withheld of $46,905) ................ $ 361,482
Interest ............................................................ 199,255
-----------------
560,737
-----------------
Expenses:
Management fee ...................................................... 291,842
Services to shareholders ............................................ 227,627
Custodian and accounting fees ....................................... 91,692
Directors' fees and expenses ........................................ 25,767
Registration fees ................................................... 57,786
Auditing ............................................................ 37,180
Reports to shareholders ............................................. 20,721
Legal ............................................................... 13,477
Amortization of organization expense ................................ 3,873
Other ............................................................... 7,492
-----------------
Total expenses before reductions .................................... 777,457
Expense reductions .................................................. (267,101)
-----------------
Expenses, net ....................................................... 510,356
--------------------------------------------------------------------------------------------
Net investment income 50,381
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................................... (2,371,165)
Options ............................................................. (140,134)
Foreign currency related transactions ............................... (54,984)
-----------------
(2,566,283)
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ......................................................... 5,036,779
Options ............................................................. (49,332)
Foreign currency related transactions ............................... (559)
-----------------
4,986,888
--------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 2,420,605
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 2,470,986
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder International Growth and Income Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
June 30, 1997
(commencement
of operations) to
Increase (Decrease) in Net Assets February 28, 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................ $ 50,381
Net realized gain (loss) from investment transactions ............ (2,566,283)
Net unrealized appreciation (depreciation) on investment
transactions during the period ................................. 4,986,888
Net increase (decrease) in net assets resulting from -----------------------
operations ..................................................... 2,470,986
-----------------------
Distributions to shareholders from net investment income ......... (59,796)
-----------------------
Fund share transactions:
Proceeds from shares sold ........................................ 64,146,242
Net asset value of shares issued to shareholders in
reinvestment of distributions .................................. 55,470
Cost of shares redeemed .......................................... (17,733,938)
Net increase (decrease) in net assets from Fund share -----------------------
transactions ................................................... 46,467,774
-----------------------
Increase (decrease) in net assets ................................ 48,878,964
Net assets at beginning of period ................................ 1,200
Net assets at end of period (including accumulated -----------------------
distributions in excess of net investment income of $213,599) .. $ 48,880,164
-----------------------
Other Information
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................ 100
-----------------------
Shares sold ...................................................... 5,333,375
Shares issued to shareholders in reinvestment of
distributions .................................................. 4,745
Shares redeemed .................................................. (1,484,137)
-----------------------
Net increase (decrease) in Fund shares ........................... 3,853,983
-----------------------
Shares outstanding at end of period .............................. 3,854,083
-----------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder International Growth and Income Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
June 30, 1997
(commencement
of operations) to
February 28,
1998
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ............................................. $12.00
-------------------
Income from investment operations:
Net investment income ............................................................ .01
Net realized and unrealized gain (loss) on investment transactions ............... .69
-------------------
Total from investment operations ................................................. .70
-------------------
Less distributions from:
Net investment income ............................................................ (.02)
-------------------
Total distributions .............................................................. (.02)
-------------------
-------------------
Net asset value, end of period ................................................... $12.68
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (c) ............................................................. 5.80**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................... 49
Ratio of operating expenses, net to average daily net assets (%) ................. 1.75*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ..................................................................... 2.65*
Ratio of net investment income to average daily net assets (%) ................... .17*
Portfolio turnover rate (%) ...................................................... 50.2*
Average commission rate paid (b) ................................................. $.0201
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
18 - Scudder International Growth and Income Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder International Growth and Income Fund ("the Fund") is a 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 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 high or "inside" 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.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which 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.
Short-term investments having a 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 securities and
currencies as a hedge against potential adverse price movements in the value of
portfolio assets. In addition, during the period, the Fund purchased call
options on currencies as a temporary substitute for purchasing selected
investments and to enhance potential gain.
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
19 - Scudder International Growth and Income Fund
<PAGE>
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 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 other
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.
20 - Scudder International Growth and Income Fund
<PAGE>
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. The Fund paid no federal income taxes and no federal income tax
provision was required. In addition, from November 1, 1997 through February 28,
1998, the Fund incurred approximately $1,901,000 and $122,000 in net realized
capital losses and currency losses, respectively. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
arising in the fiscal year ending February 28, 1999.
At February 28, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $309,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until February 28,
2006, whichever occurs first.
Distribution of Income and Gains. Distributions of net investment income are
made semiannually. 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 differences
primarily relate to investments in forward contracts, passive foreign investment
companies, 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 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 period June 30, 1997 (commencement of operations) to February 28, 1998,
purchases and sales of investment securities (excluding short-term investments)
aggregated $57,280,007 and $12,507,385, respectively.
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
21 - Scudder International Growth and Income Fund
<PAGE>
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 is 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 Fund's Management Agreement with Scudder Kemper, the Fund pays the
Adviser a fee equal to an annual 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 objective, 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 Management Agreement. In addition, the Adviser has agreed not to impose
all or a portion of its management fee until June 30, 1998 in order to maintain
the annualized expenses of the Fund at not more than 1.75% of average daily net
assets. For the period June 30, 1997 (commencement of operations) to February
28, 1998, the Adviser did not impose a portion of its management fee which
amounted to $255,434, and the amount imposed amounted to $36,408.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period June 30, 1997 (commencement of operations) to February 28, 1998, the
amount charged to the Fund by SSC aggregated $196,689, which is unpaid at
February 28, 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 period June 30, 1997
(commencement of operations) to February 28, 1998, the amount charged to the
Fund by STC aggregated $452, of which $242 is unpaid at February 28, 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 of the Fund. For the period June
30, 1997 (commencement of operations) to February 28, 1998, the amount charged
to the Fund by SFAC aggregated $36,039, of which $25,000 is unpaid.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the period
June 30, 1997 (commencement of operations) to February 28, 1998, the Trustees
did not impose a portion of their fee amounting to $11,667, and the fee imposed
amounted to $14,100.
22 - Scudder International Growth and Income Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder International Growth and Income Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
International Growth and Income Fund, including the investment portfolio, as of
February 28, 1998, and the related statement of operations, the statement of
changes in net assets and the financial highlights for the period June 30, 1997
(commencement of operations) to February 28, 1998. 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 audit.
We conducted our audit 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 February 28, 1998 by
correspondence with the custodian. 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
audit provides 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 International Growth and Income Fund as of February 28, 1998, the
results of its operations, the changes in its net assets and the financial
highlights for the period June 30, 1997 (commencement of operations) to February
28, 1998 in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
April 23, 1998
23 - Scudder International Growth and Income Fund
<PAGE>
Tax Information
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid foreign taxes of $46,905 and recognized $690,635 of foreign source
income during the period ended February 28, 1998. Pursuant to Section 853 of the
Internal Revenue Code, the Fund designates $0.0122 per share of foreign taxes
and $0.0403 per share of income from foreign sources as having been paid in the
period ended February 28, 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 Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
24 - Scudder International Growth and Income Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder International
Growth and Income Fund (the "Fund") was held on October 27, 1997, at the office
of Scudder Kemper Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.),
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
shareholders (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 shareholders 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 Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Paul Bancroft III 2,105,903 95,360
Sheryle J. Bolton 2,107,750 93,513
William T. Burgin 2,105,350 95,913
Thomas J. Devine 2,105,404 95,859
Keith R. Fox 2,107,309 93,954
William H. Gleysteen 2,104,593 96,670
William H. Luers 2,106,070 95,193
Wilson Nolen 2,104,557 96,706
Daniel Pierce 2,106,509 94,754
Kathryn L. Quirk 2,106,177 95,086
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*
--- ------- ------- -----------------
2,054,951 99,018 47,294 66,309
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*
--- ------- ------- -----------------
1,962,859 170,445 82,900 66,309
25 - Scudder International Growth and Income Fund
<PAGE>
4. To approve the revision of 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 1,895,353 150,756 88,845 66,309
4.2 Borrowing 1,879,399 166,710 88,845 66,309
4.3 Senior securities 1,891,519 154,590 88,845 66,309
4.4 Purchase of physical commodities 1,887,873 158,236 88,845 66,309
4.5 Concentration 1,891,350 154,759 88,845 66,309
4.6 Underwriting of securities 1,893,509 152,600 88,845 66,309
4.7 Investment in real estate 1,893,747 152,362 88,845 66,309
4.8 Lending 1,889,440 136,271 109,243 66,309
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
2,100,660 40,239 60,364
* 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.
26 - Scudder International Growth and Income Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder International Growth and Income Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board and
Director
Nicholas Bratt*
President 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
William H. Luers
Director; President, The
Metropolitan Museum of Art
Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
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 of the Board and
Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Irene T. Cheng*
Vice President
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Sheridan Reilly*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder International Growth and Income Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
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
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 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care FUnd
Scudder Technology 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. +++ +++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 International Growth and Income Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- 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 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 International Growth and Income Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 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
</TABLE>
31 - Scudder International Growth and Income Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 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
U.S.
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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