Scudder
Emerging Markets
Growth Fund
Semiannual Report
April 30, 1999
No-Load Funds
A fund seeking long-term growth of capital primarily through equity investment
in emerging markets around the globe.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Emerging Markets Growth Fund
- --------------------------------------------------------------------------------
Date of Inception: 5/8/96 Total Net Assets as of Ticker Symbol: SEMGX
4/30/99: $110.2 million
- --------------------------------------------------------------------------------
o The war in the Balkans led to underperformance in the three of the Fund's top
country holdings -- Hungary, Poland, and Greece. Brazil and Egypt both
contributed positively in the period.
o While management remains cautious on Asia's prospects, pockets of reform are
providing investment opportunities.
o Emerging markets stocks are trading at substantial discounts to both global
markets and their own histories. Believing that these discounts are not
sustainable, we feel that the April rally in emerging markets equities may mark
the beginning of a period of outperformance.
Table of Contents
3 Letter from the Fund's Chairman 21 Financial Highlights
4 Performance Update 22 Notes to Financial Statements
5 Portfolio Summary 26 Report of Independent Accountants
6 Portfolio Management Discussion 27 Shareholder Meeting Results
9 Glossary of Investment Terms 28 Officers and Directors
10 Investment Portfolio 29 Investment Products and Services
18 Financial Statements 30 Scudder Solutions
2 - Scudder Emerging Markets Growth Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
Stock markets in the developing countries have undergone nerve-wracking
fluctuations in the past two years. Currency crises in Asia, an economic
collapse in Russia, fears of instability in the Latin economies, and, most
recently, a war in the Balkans have all taken a toll on emerging markets stocks.
Even though many individual countries have a long road ahead before they will be
fully recovered from these difficulties, emerging markets equities have managed
to rebound in the past six months. Now that relative stability appears to have
returned to the global economy, investors have once again begun to focus on the
many reasonably valued growth opportunities that have become available in the
emerging markets.
Although it is natural for investors to become concerned about the dramatic
short-term swings in the markets, Fund management seeks to use down markets to
its advantage by establishing long-term holdings in stocks that they believe are
selling at unjustifiably low prices. Focusing on stocks with reliable cash flows
and capable management teams, the Fund invests in growing companies based in
countries with sound economies and stable political leadership. While the
emerging markets are likely to experience additional setbacks in the years
ahead, we feel that the evolution of the global business environment will
ultimately have positive long-term implications for patient investors. For more
information on the ways Fund management is seeking to capitalize on the
evolution of the business environment in the emerging markets, please see the
Portfolio Management Discussion on page 6.
For those of you who are interested in new Scudder products, we are pleased
to introduce Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both
funds are managed with the goal of pursuing long term outperformance compared to
their benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Thank you for your continued investment in Scudder Emerging Markets 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 Emerging Markets Growth Fund
3 - Scudder Emerging Markets Growth Fund
<PAGE>
Performance Update as of April 30, 1999
- ---------------------------------
Fund Index Comparisons
- ---------------------------------
Total Return
-------------------------------------------------
Period
Ended Growth of Average
4/30/1999 $10,000 Cumulative Annual
-------------------------------------------------
Scudder Emerging Markets Growth Fund
-------------------------------------------------
1 Year $ 7,670 -23.30 -23.30
Life of Fund* $ 9,531 -4.69 -1.60
------------------------------------------------
IFC Emerging Markets Investable Index
------------------------------------------------
1 Year $ 9,137 -8.63 -8.63
Life of Fund* $ 8,236 -17.64 -6.44
-------------------------------------------------
* The Fund commenced operations on May 8, 1996.
Index comparisons begin May 31, 1996.
- ---------------------------------
Growth of a $10,000 Investment
- ---------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
IFC Emerging Markets Scudder Emerging Markets
Investable Index Growth Fund
5/96* 10000 10000
10/96 9676 10559
4/97 10621 12727
10/97 8711 11985
4/98 9013 12252
10/98 6182 8565
4/99 8236 9398
IFC Emerging Markets Investable Index is an unmanaged capitalization weighted
measure of stock markets in emerging market countries worldwide. Index returns
assume reinvestment of dividends 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:
1997* 1998 1999
- --------------------------------------------------------------
Net Asset Value $ 15.46 $ 14.82 $ 11.33
- --------------------------------------------------------------
Income Dividends $ .03 $ .06 $ .04.
- --------------------------------------------------------------
Fund Total Return (%) 29.07** -3.73 -23.30
- --------------------------------------------------------------
Index Total Return (%) 5.72 -15.13 -8.63
- --------------------------------------------------------------
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 one year and life of Fund periods would have been
lower.
**Fund total return does not reflect the effect of applicable redemption fees.
4 - Scudder Emerging Markets Growth Fund
<PAGE>
Portfolio Summary as of April 30, 1999
- ---------------------------------
Geographical
(Excludes 1% Cash Equivalents)
- ---------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Europe 34%
Latin America 21%
Pacific Basin 19%
Africa 18%
Other 8%
--------------------------------------
100%
--------------------------------------
Believing that significant opportunities exist to take advantage of reform,
management increased the Fund's weighting in the Pacific Basin.
- ---------------------------------
Sectors
(Excludes 1% Cash Equivalents)
- ---------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Financial 27%
Consumer Staples 17%
Communications 15%
Construction 6%
Energy 5%
Consumer Discretionary 5%
Health 5%
Manufacturing 5%
Technology 4%
Other 11%
--------------------------------------
100%
--------------------------------------
During the reporting period, weightings in communications and energy stocks
increased, while holdings in financials, health, and metals and minerals
decreased.
- ---------------------------------
Ten Largest Equity Holdings
(24% of Portfolio)
- ---------------------------------
1. Fomento Economico Mexicano
S.A. de C.V.
Producer of beer and soft drinks
in Mexico
2. Pliva D.D.
Pharmaceutical company in Croatia
3. OTP Bank Rt
Savings and commercial bank in
Hungary
4. Samsung Securities Co., Ltd.
Securities company in Korea
5. Alpha Credit Bank A.E.
Commercial bank in Greece
6. Netia Holdings BV
Telecommunication services in
Poland
7. Magyar Olaj-es Gazipari Rt
Integrated domestic oil and gas
company in Hungary
8. Al Ahram Beverages Co.
Beverage producer in Egypt
9. National Bank of Greece S.A.
Full service bank in Greece
10. Wielkopolski Bank Kredytowy S.A.
Commercial bank in Poland
The Fund's top holdings were diversified across a wide range of countries and
industries.
For more complete details about the Fund's investment portfolio, see page 10. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Emerging Markets Growth Fund
<PAGE>
Portfolio Management Discussion
We asked Joyce Cornell, Lead Portfolio Manager of Scudder Emerging Markets
Growth Fund, to discuss the recent market environment and the Fund's current
investment strategy.
Q: How did the Fund perform in the six-month period ended April 30, 1999?
A: The Fund rose 9.72% over the six-month period, trailing the 33.23% return of
its unmanaged benchmark, the IFC Emerging Markets Index. While in the short term
the Fund's sharp divergence from the benchmark's country weightings hurt
relative performance, our approach has proven beneficial over the long term.
Over its lifetime, the Fund has returned -4.69%, versus -17.64% for the
benchmark.
Q: What was the primary cause of the Fund's underperformance in this period?
A: The outbreak of war in the Balkans shortly before the end of March dashed
what had previously been highly respectable performance. The Fund is heavily
weighted in the Central and Eastern European markets, which offer outstanding
value and long-term growth potential. We believe that the Kosovo crisis has not
impaired, and is highly unlikely to impair, these prospects. Hungary and Greece,
which each represent close to 8% of the portfolio, both plummeted at the outset
of hostilities. Poland, where we held close to 10% of assets, also fell sharply.
While Poland is not geographically near Kosovo, fear of shareholder redemptions
had Eastern European fund managers selling whatever they could. Croatia, where
we held nearly 3% of assets, dropped 30%. The majority of our Croatian holding
is in Pliva, a pharmaceutical company whose sales are dominated by the patented
antibiotic azythromycin. Azythromycin sales are mostly in the U.S. (Zithromax,
marketed by Pfizer) and in Western Europe. Since the war has virtually no impact
on Pliva's sales, we added to our holdings during the sell-off on the
expectation that the stock will resume its price appreciation in due course.
Q: How did the Fund's holdings in Mexico impact performance?
A: Mexico, one of our five largest weightings at 11% of assets, detracted
significantly from relative performance. The Fund was hurt by the high quality
and defensive nature of our holdings. As interest rates fell and the fear of
contagion from Brazil abated, weak banking stocks and highly leveraged companies
performed especially well. We continue to hold a favorable view of Mexico's
economic prospects and believe that our solid companies with admirable balance
sheets will give superior performance over time. We have been adding gradually
to our Mexican position and in March began to buy Banorte, the first bank to see
non-performing loans actually decrease since the Mexican crisis of 1994-95. Its
need to take additional reserves is past, and its business is starting to grow.
Additionally, Mexico recently relaxed foreign ownership restrictions on banks,
and we believe that Banorte is one of the most attractive Mexican banks from an
acquisition standpoint.
6 - Scudder Emerging Markets Growth Fund
<PAGE>
Q: Brazil's devaluation crushed the market early in the year, but it has
since recouped those losses. Do you think the upward move is sustainable?
A: On a fundamental basis, we are still negative on Brazil. The country is
in a recession, corporate earnings are likely to continue their downtrend, and
the ongoing debt crisis spells trouble on a medium- and longer-term basis. Fatal
structural flaws have yet to be dealt with. The new central bank governor,
Arminio Fraga, has staved off the immediate crisis by buoying hope and
confidence. Can this hope continue to support or drive the market? Our answer is
yes, for a while, because he has bought a bit of time. However, Brazil always
backs away from significant reform as soon as the crisis passes, and it appears
as though the country's difficulties are indeed over for the moment. Barring
external shocks, we expect the market to "see no evil, hear no evil, speak no
evil" for some months before the reality of the debt trap bites again. Abundant
liquidity and the market's amnesia about Brazil's debt issues may well drive
stock prices higher, but in our view, a belief in the greater fool theory would
be the only reason to buy now. Our strategy for Brazil is to have a core holding
(below the index weight) comprised of high quality companies that will continue
to flourish over the long term even in the face of economic volatility and
interest rate fluctuations.
Q: How did our weighting in Brazil affect Fund performance?
A: Despite these difficulties, Brazil contributed significantly to
performance on the positive side. We were underweight in Brazil, holding 5% of
the portfolio there versus an index weight of 11%. Due to strong individual
stock selection, our holdings performed twice as well as the index. The engine
of our performance was Aracruz, a cash-rich eucalyptus pulp company that
appreciated 81% in U.S. dollars in the first quarter alone. Brazil provided a
wild ride for investors in the period, plunging nearly 30% from the first of the
year to its late-January low before rebounding 58%. Why didn't we play this
volatility with a larger position? First, because that demands precision market
timing, and we are investors, not market timers, and second, because Brazil's
market is relatively expensive to trade. We will reserve our larger allocations
for the countries that manage their economies well and promote growth rather
than crowding it out with bloated government borrowing.
Q: The Fund has held an overweighted position in Egypt for some time. What
is your current outlook for that country?
A: Egypt added to performance as the market rose 20% over the
period. We can think of few markets that have such compelling fundamentals.
Driven by domestic consumption and investment, GDP growth in 1999 will likely
exceed last year's 5.7%. In contrast to the misguided policies of many Asian
countries, Egypt is not relying on exports for growth. And unlike many of the
non-European emerging markets, Egypt is not relying upon an upturn in commodity
prices. Egypt still has much to do to clear up statist impediments to growth,
but it is their liberalization policies to date that have encouraged the boom in
private sector development and set off the growth of a middle class. We expect
that the Egyptian market, still cheap at a
7 - Scudder Emerging Markets Growth Fund
<PAGE>
price-to-earnings ratio of 9x and a dividend yield of 10% will continue to
appreciate nicely this year.
Q: What impact did our small position in Asia have on performance?
A: Our weightings in Korea, Indonesia, and Thailand were beneficial, as
these countries outperformed during the period, while our positions in Taiwan,
the Philippines, and India fell. In the aggregate, the Fund's positions in these
countries had only a limited impact on overall performance. Since February, we
have been methodically building up our positions in Korea, Indonesia, and the
Philippines, where we feel that the prospects are best for significant reform
and sustainable growth. Very recently we have been adding to Taiwan, which has
declined to relatively attractive valuation levels over the course of the
spring.
The stricken economies of Asia are still in fragile condition. Reform
efforts meet with entrenched resistance, and the banking systems in Korea and
Indonesia are dysfunctional and not yet sufficiently recapitalized. Because
overcapacity from the years of massive malinvestment still exists, recovery
cannot be led by investment. Instead, it must be carried by consumers, but with
unemployment still rising and the region potentially vulnerable to a slowdown in
the U.S. economy, a turnaround in these areas may not be forthcoming. While
caution remains the order of the day, there are pockets of reform creating
investment opportunities, particularly in Korea, where 10% of the Fund's assets
were invested as of the end of the reporting period.
Q: What is your overall outlook for the emerging markets?
A: Liquidity is abundant as interest rates continue to fall in Europe and
nearly all of the emerging markets, a trend that should support stock prices.
Earnings in many sound emerging markets economies are now trading at massive
discounts both to global earnings and their own historical levels. We believe
that these discounts are not sustainable. The evident surfeit of liquidity
provides kindling for a fire, and only a spark is needed. It is never possible
to pinpoint exact timing in the markets, but we believe that the long period of
underperformance is about to reverse for the emerging markets. April registered
the best emerging markets performance in years; indeed, it may mark the
beginning of the long awaited turnaround.
8 - Scudder Emerging Markets Growth Fund
<PAGE>
Glossary of Investment Terms
CURRENCY DEVALUATION A significant decline of a currency's value relative
to other currencies, such as the U.S. dollar,
typically resulting from the cessation of a
country's central bank intervention in the currency
markets. For U.S. investors who are investing
overseas, a devaluation of a foreign currency can
reduce the total return of their investment.
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 $20, the yield would fall to
5%.
LIQUIDITY A characteristic of an investment or an asset
referring to the ease of convertibility into cash
within a reasonably short period of time. A stock
that is liquid has enough shares outstanding and a
substantial enough market capitalization to allow
large purchases and sales to occur without causing a
significant move in its market price as a result
PRICE/EARNINGS RATIO (P/E) A widely used gauge of a stock's valuation that
(also "earnings multiple") indicates what investors are paying for a company's
earning power at the current stock price. A P/E ratio
may be based on a company's projected earnings
for the coming 12 months. A higher "earnings
multiple" indicates higher expected earnings growth,
along with greater risk of earnings disappointment.
WEIGHTING (OVER/UNDER) Refers to the allocation of assets -- usually
in terms of sectors, industries, or countries
-- within a portfolio relative to the portfolio's
benchmark index or investment universe.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
9 - Emerging Markets Growth Fund
<PAGE>
Investment Portfolio as of April 30, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 1.2%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 4/30/1999, 4.87%, to be
repurchased at $1,325,538 on 5/3/1999, collateralized by a $1,340,000 U.S. Treasury ---------
Inflationary Index Bond, 3.875%, 4/15/2029 (Cost $1,325,000) ................................ 1,325,000 1,325,000
---------
Shares
- -------------------------------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks 0.3%
Thailand
Siam Commercial Bank Public Company Ltd., 5.25% (Provider of financial services) (b) ---------
(Cost $317,228) .............................................................................. 451,500 316,671
---------
Common Stocks 98.5%
- -------------------------------------------------------------------------------------------------------------------------------
Bahrain 0.2%
Arab Insurance Group (Insurance company) ....................................................... 216,690 210,189
---------
Bolivia 0.3%
Corriente Resources, Inc.* (Mining and processing of gold, bismuth, tin and tungsten in
South America) ............................................................................... 405,900 278,395
---------
Botswana 0.6%
Sechaba Investment Trust Co. (Brewery) ......................................................... 620,000 668,050
---------
Brazil 5.3%
Aracruz Celulose S.A. (ADR) (Producer of eucalyptus kraft pulp) ................................ 77,300 1,546,000
Companhia Paranaense de Energia-Copel (pfd.) (ADR) (Electric power utility) .................... 119,700 980,044
Companhia Vale do Rio Doce (Diverse mining and industrial complex) ............................. 26,825 507,107
Petroleo Brasileiro S.A. (pfd.) (Petroleum company) ............................................ 4,552,300 737,248
Souza Cruz S.A. (voting) (Holding company for cigarettes, tobacco, and fiber cellulose) ........ 13,000 86,875
Tele Centro Sul Participacoes S.A. (pfd.)* (Provider of local telecommunications in Southwestern
region of Brazil) ............................................................................ 38,328,000 415,355
Tele Centro Sul Participacoes S.A. (pfd.) (ADR) ................................................ 5,760 306,000
Telecomunicacoes de Minas Gerais S.A. (voting)* (Telecommunication services) ................... 15,530 131
Telecomunicacoes de Minas Gerais S.A. "B" (pfd.) ............................................... 395 10
Telecomunicacoes de Minas Gerais S.A. "C" (pfd.)* .............................................. 395 5
Telesp Participacoes S.A. (ADR) (Provider of local telecommunication services in Sao Paulo) .... 21,900
547,500
Uniao de Bancos Brasileiros SA (GDR) (Major bank) .............................................. 20,400 506,175
Votorantim Celulose e Papel S.A. (Producer and exporter of printing, writing and other
special papers) .............................................................................. 4,700,000 118,844
---------
5,751,294
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Emerging Markets Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bulgaria 0.1%
Bulgartabak Holding* (Tobacco company) ..................................................... 6,500 119,534
----------
Canada 0.1%
Etruscan Enterprises Ltd.* (Exploration and development of gold prospect in Niger) ......... 90,300 54,502
----------
Chile 1.9%
Laboratorio Chile S.A. (ADR) (Manufacturer and distributor of off-patent
pharmaceutical products) ................................................................. 20,750 370,906
Vina Concha y Toro S.A. (ADR) (Wine producer) .............................................. 53,300 1,728,919
----------
2,099,825
China 0.3%
Shanghai Petrochemical Co., Ltd. (Manufacturer of petrochemical and petroleum products) .... 1,884,000 352,456
----------
Croatia 3.3%
Pliva D.D. (GDR) (Pharmaceutical company) .................................................. 212,120 3,362,102
Zagrebacka Banka (GDR)* (Commercial bank) .................................................. 22,000 193,050
----------
3,555,152
----------
Czech Republic 1.2%
Ceske Radiokomunikace* (TV and radio signal transmission services) ......................... 35,800 1,315,650
----------
Egypt 10.6%
Al Ahram Beverages Co. (GDR)* (Beverage producer) .......................................... 70,000 2,240,000
EFG Hermes Holdings, S.A.E. (GDR)* (Brokerage firm) ........................................ 50,000 527,500
Eastern Tobacco Co. (Maker of tobacco products) ............................................ 49,220 1,258,202
Egyptian Financial & Industrial Co. (Fertilizer producer) .................................. 13,000 197,502
Egyptian International Pharmaceutical Co. (Pharmaceutical company) ......................... 10,600 533,464
Egyptian Mobile Phone Network, Ltd.* (Cellular telecommunication services) ................. 73,766 984,832
International Foods Co.* (Food producer) (b) ............................................... 34,000 379,556
Madinet Nasser City Housing Co. (Real estate development company) .......................... 13,670 410,993
Misr International Bank (Commercial and foreign bank) ...................................... 31,810 728,234
Misr International Bank (GDR) .............................................................. 16,400 186,960
Olympic Group Financial (Manufacturer of stoves) ........................................... 125,000 500,363
Orascom Projects & Touristic Development* (Developer of touristic areas and resorts) ....... 45,024 331,615
ORASCOM Hotel Holdings* (Hotel and resort developer) (b) ................................... 116,000 289,789
Oriental Weavers Corp. (Carpet manufacturer) ............................................... 18,600 384,913
Suez Cement Co. (Cement producer) .......................................................... 70,677 1,207,206
Suez Cement Co. (GDR) ...................................................................... 24,600 412,050
Torrah Portland Cement Co. (Cement producer) ............................................... 47,005 935,184
----------
11,508,363
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Emerging Markets Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Estonia 0.6%
AS Eesti Telekom (GDR)* (Provider of telecommunication services) ............................ 32,500 687,375
----------
Finland 0.5%
Nokia AB Oy "A" (ADR) (Leading cellular telephone manufacturer) ............................. 7,300 541,569
----------
Ghana 0.5%
Social Security Bank Ltd. (Full service commercial bank) .................................... 804,000 550,053
----------
Greece 7.3%
Alpha Credit Bank A.E. (Commercial bank) .................................................... 38,533 2,751,082
Delta Informatics S.A. (Corporate information services) ..................................... 28,600 942,072
Ethniki General Insurance Co. (Insurance and reinsurance company) ........................... 6,000 286,818
Hellenic Bottling Co. S.A. (Soft drink distributor) ......................................... 8,200 242,695
Hellenic Telecommunication Organization S.A. (OTE) (Telecommunication services) ............. 28,000 649,705
National Bank of Greece S.A. (Full service bank) ............................................ 31,000 2,113,179
National Bank of Greece S.A. (Rights)* (b) .................................................. 31,000 90,040
Panafon Hellenic Telecom S.A.* (Provider of mobile telephone services) ...................... 21,600 575,505
STET Hellas Telecommunications S.A. (ADR)* (Mobile telecommunication services) .............. 10,000 270,000
----------
7,921,096
----------
Hungary 8.2%
Demasz Rt (Distributor of electricity) ...................................................... 5,500 421,772
EGIS Rt (Pharmaceutical company) ............................................................ 15,600 316,377
Gedeon Richter Rt (Pharmaceutical company) .................................................. 3,000 110,275
Graboplast Rt (Producer of home improvement materials, artificial leather and book bindings) 2 13
Magyar Olaj-es Gazipari Rt (Integrated domestic oil and gas company) ........................ 102,400 2,282,238
Magyar Tavkozlesi Rt (ADR) (Telecommunications company) ..................................... 6,700 188,438
Matav Rt Ordinary "A" (Telecommunication services) .......................................... 306,600 1,709,954
OTP Bank Rt (Savings and commercial bank) ................................................... 74,000 3,118,768
Pick Szeged Rt (Processor, marketer, and distributor of meat products) ...................... 15,265 484,368
Synergon Information Systems (GDR)* (Computer systems integrator) ........................... 14,000 177,800
----------
8,810,003
----------
India 0.3%
HDFC Bank Ltd. (Corporate banking and financial services) (b) ............................... 21,900 32,013
Hindustan Petroleum Corp., Ltd (Oil refining, manufacturer of petroleum products) (b) ....... 58,400 233,791
Housing Development Finance Corp. Ltd. (Housing finance provider to individuals, corporations
and developers) (b) ....................................................................... 1,400 64,773
----------
330,577
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Emerging Markets Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Indonesia 2.8%
Asia Pulp & Paper Co., Ltd. (ADR)* (Producer of pulp and paper) .................................. 76,400 802,200
Gudang Garam (Manufacturer and distributor of cigarettes) ........................................ 257,500 467,312
Indonesia Satellite Corp. (ADR) (International telecommunication services) ....................... 5,800 109,475
PT Bank Pan Indonesia Bank Tbk Warrants (expire 6/26/2000)* (Commercial bank) .................... 148,628 2,209
PT Indah Kiat Pulp & Paper Corp., Tbk (Foreign registered)* (Manufacturer of pulp and
paper products) ................................................................................ 1,400,000 585,321
PT Indofood Sukses Makmur Tbk* (Manufacturer of food products) ................................... 562,000 445,562
PT LippoBank, Tbk (Commercial and foreign exchange bank) ......................................... 4,700,000 232,889
PT Ramayana Lestari Sentosa Tbk (Operator of department stores) .................................. 955,000 360,824
----------
3,005,792
----------
Israel 1.1%
Check Point Software Technologies Ltd.* (Developer, marketer and supporter of management
solutions for active networks) ................................................................. 8,900 313,725
ECI Telecommunications Ltd. (Telecommunication services) ......................................... 15,900 586,313
Matav-Cable Systems Media Ltd. (Operator and provider of broadband cable television services) .... 19,700 315,693
----------
1,215,731
----------
Jordan 0.9%
Arab Bank PLC (Commercial bank) .................................................................. 630 185,502
Aramex International Ltd.* (Express delivery and freight forwarding in the Middle East and India) 35,700 321,300
Hikma* (Pharmaceutical company) (b) (c) .......................................................... 68,000 492,200
----------
999,002
----------
Kenya 2.2%
James Finlay PLC (Tea producer) .................................................................. 715,000 989,127
Sasini Tea & Coffee Ltd. (Tea and coffee grower and processor) ................................... 1,000,000 857,354
Uchumi Supermarket Ltd. (Supermarket operator) ................................................... 708,000 502,350
----------
2,348,831
----------
Korea 10.0%
Hankook Tire Co., Ltd. (Manufacturer of tires, tire tubes, batteries, and aluminum
alloy wheels) .................................................................................. 63,500 536,958
Hite Brewery Co., Ltd. (Brewery) ................................................................. 5,200 122,507
Housing & Commercial Bank (Bank) ................................................................. 32,500 765,671
Hyundai Motor Co., Ltd. (Auto manufacturer) ...................................................... 6,300 105,221
Kookmin Bank (Major commercial bank) ............................................................. 28,510 388,609
Korea Telecom Corp. (Provider of telecommunication services) (b) ................................. 21,100 1,098,585
Pohang Iron & Steel Co., Ltd. (Steel producer) (b) ............................................... 2,510 215,562
Samchully (Producer and distributor of anthracite and gas) ....................................... 6,210 276,929
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Emerging Markets Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Samsung Corp., Ltd. (Trading company) .......................................................... 80,820 1,135,628
Samsung Electro-Mechanics Co., (Electronics parts company) ..................................... 13,500 318,048
Samsung Electronics Co., Ltd. (Electronics manufacturer) ....................................... 18,950 1,457,324
Samsung Securities Co., Ltd. (Securities company) .............................................. 74,473 2,882,422
Shinhan Bank (GDR)* (Bank) ..................................................................... 39,900 952,613
Shinsegae Department Store Co. (Major department store chain) .................................. 16,100 555,406
-----------
10,811,483
-----------
Lebanon 0.2%
Banque Audi (GDR) (Commercial bank) ............................................................ 11,800 227,740
-----------
Malawi 0.5%
African Lakes Corp. PLC* (Motor trading, agriculture, mining, engineering, computer supplies and
general trading) ............................................................................. 264,928 210,952
Press Corp., Ltd. (GDR)* (Conglomerate, industrial holding company) ............................ 54,550 361,667
-----------
572,619
-----------
Mexico 10.6%
CIFRA S.A. de C.V. "C"* (Discount retailer) .................................................... 56,000 104,848
Consorcio ARA, S.A. de C.V.* (Low-income housing developer) .................................... 290,000 1,063,961
Controladora Comercial Mexicana S.A. de C.V. (GDR) (Operator of supermarkets
and warehouses) .............................................................................. 5,500 114,813
Fomento Economico Mexicano S.A. de C.V. "B" (Producer of beer and soft drinks) ................. 957,500 3,419,643
Gruma S.A. de C.V. "B"* (Producer and distributor of corn flour) ............................... 535,665 1,027,271
Grupo Financiero Banorte S.A. de C.V. "B"* (Financial services holding company) ................ 746,700 968,124
Grupo Industrial Bimbo, S.A. de C.V. "A" (Producer of bread and other baked goods) ............. 575,900 1,240,304
Grupo Modelo S.A. "C" (Leading brewery) ........................................................ 178,000 469,080
Industrias Penoles S.A. de C.V. (Exploration and marketing of minerals and non-ferrous metals
such as lead, zinc and silver) ............................................................... 102,000 344,968
Organizacion Soriana S.A. de C.V. "A" (Retailer) ............................................... 179,600 808,589
Telefonos de Mexico S.A. de C.V. "L" (ADR) (Telecommunication services) ........................ 19,100 1,446,825
Tubos de Acero de Mexico S.A. (ADR) (Manufacturer of various types of pipes, casings
and tubing) .................................................................................. 41,700 461,306
-----------
11,469,732
-----------
Morocco 1.6%
Societe Nationale d'Investissements (Conglomerate, various joint ventures) ..................... 6,100 634,840
Societe des Brasseries du Nord Marocain (Distributor of beer and carbonated beverages) (b) ..... 1,600
381,024
WAFABANK (Commercial bank) ..................................................................... 7,307 721,951
-----------
1,737,815
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements
14 - Scudder Emerging Markets Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oman 2.0%
Bank Muscat Al Ahla Al Omani (Commercial bank) .............................................. 5,250 49,091
Muscat Marriott* (Hotel operator) (b) (c) ................................................... 100,000 135,065
National Bank of Oman Ltd.* (Commercial bank) ............................................... 109,353 979,916
Oman Cable Industry SAOG* (Manufacturer of electrical and power cables) (b) ................. 28,685 213,089
Oryx Fund, Ltd.* (Mutual fund domiciled in Guernsey, investing in the Middle East) .......... 61,500 784,125
----------
2,161,286
----------
Peru 3.1%
Cementos Lima S.A. "T" (Cement producer) .................................................... 81,000 1,286,708
Enrique Ferreyros y Cia. (Machinery manufacturer) ........................................... 1,412,908 986,523
Gitennes Exploration Inc.* (Exploration and development of gold mining properties in Peru) .. 54,000
9,259
Minas Buenaventura S.A. "B" (Mining company) ................................................ 108,100 842,241
Telefonica del Peru S.A.A. (ADR) (Telecommunication services) ............................... 15,000 225,938
----------
3,350,669
----------
Philippines 2.1%
Bank of the Philippine Islands (Commercial bank) ............................................ 464,000 1,464,300
International Container Terminal Services, Inc.* (Containerized cargo handling firm) ........ 5,555,375 555,172
Metropolitan Bank and Trust (Commercial bank and trust company) ............................. 27,070 270,522
----------
2,289,994
----------
Poland 9.7%
Bank Przemyslowo Handlowy (Bank) ............................................................ 11,498 586,024
Cersanit-Krasnystaw S.A. (Producer of ceramic sanitation and porcelain products) ............ 140,000 488,681
Computerland Poland S.A.* (Provider of computer services and systems) ....................... 6,800 106,640
Elektrim Spolka Akcyjna S.A. (Manufacturer of power equipment, electrical machinery
and apparatus) ............................................................................ 121,700 1,446,794
ITI Group S.A.* (Telecommunication services) (b) ............................................ 4,100 1,020,900
KGHM Polska Miedz S.A. (Producer of copper and silver) ...................................... 150 956
Kutnowskie Zaklady Farmaceutyczne Polfa S.A. (Producer of pharmaceuticals, veterinary
medicines, food components) ............................................................... 7,400 96,396
Mostostal Krakow S.A.* (Heavy construction company) ......................................... 69,007 115,201
Mostostal Zabrze Holding S.A. (Construction company) ........................................ 140,205 400,738
Netia Holdings BV* (Telecommunication services) (b) (c) ..................................... 96,742 1,934,840
Netia Holdings BV "O"* (b) (c) .............................................................. 8,729 174,580
Netia Holdings BV "P"* (b) (c) .............................................................. 7,330 146,600
Netia Holdings BV "R"* (b) (c) .............................................................. 3,980 79,600
Orbis S.A.* (Hotel owner and operator) ...................................................... 68,800 555,133
Telekomunikacja Polska S.A.* (Owner and operator of telecommunication networks) ............. 226,800 1,399,752
</TABLE>
The accompanying notes are an integral part of the financial statements
15 - Scudder Emerging Markets Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wielkopolski Bank Kredytowy S.A. (Commercial bank) ........................................... 344,700 1,926,867
Zaklady Lentex (Producer of PVC products used in cars, footwear, housing and
public construction) ....................................................................... 25,800 94,625
----------
10,574,327
----------
Portugal 1.9%
Banco Comercial Portugues, S.A. (Commercial bank) ............................................ 13,200 372,231
Brisa-Auto Estradas de Portugal, S.A. (Builder and operator of motorways) .................... 11,400 482,991
Jeronimo Martins SGPS, S.A. (Food producer and retailer) ..................................... 11,500 378,483
SIVA-SGPS S.A. (Importer of automobiles) ..................................................... 31,200 432,492
Semapa Cement S.A. (Cement producer) ......................................................... 24,200 388,641
----------
2,054,838
----------
Russia 0.8%
LUKoil Holdings (ADR) (Extracter, transporter, refiner, and provider of oil and gas) ......... 8,000 302,000
Surgutneftegaz (ADR) (Extracter of oil and gas) .............................................. 72,800 582,400
----------
884,400
----------
Sri Lanka 0.1%
Tea Plantations Investment Trust PLC (Trust investing in regional plantations) ............... 100,700 99,621
----------
Taiwan 2.4%
Hon Hai Precision Industry Co., Ltd.* (Manufacturer of electronic connectors, cable assemblies
and memory chips) .......................................................................... 286,000 1,556,820
Siliconware Precision Industries Co.* (Manufacturer of packaging for integrated circuits) .... 123,000 220,046
Taiwan Semiconductor Manufacturing Co.* (Manufacturer of integrated circuits) ................ 170,000 574,465
Yang Ming Marine Transport* (Marine transportation) .......................................... 317,000 224,905
----------
2,576,236
----------
Thailand 0.5%
Siam Cement Co., Ltd. (Foreign registered)* (Construction materials and industrial
conglomerate) (b) .......................................................................... 19,500 576,531
----------
Tunisia 0.1%
Banque International Arabe Tunisia (GDR)* (Bank) ............................................. 10,500 108,675
----------
Turkey 3.3%
Akbank T.A.S. (Banking and investment organization) .......................................... 25,632,000 817,639
Koc Holding A.S. (Holding company with interests in the automotive and durable
goods industries) .......................................................................... 2,221,000 402,417
Migros Turkey (Retailer) ..................................................................... 860,000 1,185,117
Tupras-Turkiye Petrol Rafinerileri A.S. (Petroleum refinery) ................................. 15,649,000 1,218,023
----------
3,623,196
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Emerging Markets Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C>
United States 0.1%
Benton Oil & Gas Co.* (Oil and gas exploration, development and production) 34,000 142,375
------------
Zimbabwe 1.2%
Delta Corp., Ltd. (Brewery) ............................................... 863,647 224,059
Meikles Africa Ltd. (Hotel operator) ...................................... 525,400 420,320
Tanganda Tea Co., Ltd. (Tea producer and distributor) ..................... 2,461,212 654,646
------------
1,299,025
- -------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $103,255,627) 106,884,001
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $104,897,855) (a) 108,525,672
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $106,202,925. At April 30,
1999, net unrealized appreciation for all securities based on tax cost was
$2,322,747. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $15,923,057 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$13,600,310.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $7,875,209 (7.15% of net assets). Their
values have been estimated by the Valuation Committee 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 April 30, 1999 aggregated $7,729,123. These securities may
also have certain restrictions as to resale.
(c) These securities have certain restrictions as to resale. Information
concerning such securities at April 30, 1999 is as follows:
<TABLE>
<CAPTION>
Security Acquisition Date Cost ($) Market Value % of Net Assets
----------------------- ------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Hikma 10/19/98 497,930 492,200 0.4%
Muscat Marriott 3/5/98 135,073 135,065 0.1%
Netia Holdings BV 5/8/97 1,934,840 1,934,840 1.8%
Netia Holdings BV "O" 5/16/97 97,818 174,580 0.2%
Netia Holdings BV "P" 6/6/97 82,126 146,600 0.1%
Netia Holdings BV "R" 12/10/97 44,592 79,600 0.1%
------------ ----
2,962,885 2.7%
============ ====
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Emerging Markets Growth Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 1999
Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $104,897,855) .......... $ 108,525,672
Cash ........................................................... 112,708
Foreign currency, at market (identified cost $678,999) ......... 677,122
Receivable for investments sold ................................ 2,709,522
Dividends and interest receivable .............................. 458,036
Receivable for Fund shares sold ................................ 36,194
Foreign taxes recoverable ...................................... 9,716
Deferred organization expenses ................................. 6,994
Other assets ................................................... 1,479
-------------
Total assets ................................................... 112,537,443
Liabilities
- --------------------------------------------------------------------------------------------------
Payable for investments purchased .............................. 1,848,224
Payable for Fund shares redeemed ............................... 148,330
Accrued management fee ......................................... 53,610
Other payables and accrued expenses ............................ 313,569
-------------
Total liabilities .............................................. 2,363,733
--------------------------------------------------------------------------------
Net assets, at market value $ 110,173,710
--------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ... (1,167,456)
Unrealized appreciation (depreciation) on:
Investment securities ....................................... 3,627,817
Foreign currency related transactions ....................... (13,001)
Accumulated net realized loss .................................. (48,163,617)
Paid-in capital ................................................ 155,889,967
--------------------------------------------------------------------------------
Net assets, at market value $ 110,173,710
--------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($110,173,710 / 9,725,931 shares of capital stock outstanding, -------------
$.01 par value, 100,000,000 shares authorized) ............... $11.33
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Emerging Markets Growth Fund
<PAGE>
Statement of Operations
six months ended April 30, 1999
<TABLE>
<CAPTION>
Investment Income (Loss)
- --------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $56,712) ........... $ 1,027,873
Interest ....................................................... 99,060
------------
1,126,933
------------
Expenses:
Management fee ................................................. 720,823
Custodian and accounting fees .................................. 359,884
Services to shareholders ....................................... 366,867
Directors' fees and expenses ................................... 24,472
Registration fees .............................................. 31,792
Auditing ....................................................... 34,346
Reports to shareholders ........................................ 53,897
Legal .......................................................... 11,169
Amortization of organization expenses .......................... 1,711
Other .......................................................... 9,228
------------
Total expenses before reductions ............................... 1,614,189
Expense reductions ............................................. (316,707)
------------
Expenses, net .................................................. 1,297,482
---------------------------------------------------------------------------------
Net investment income (loss) (170,549)
---------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... (14,258,012)
Foreign currency related transactions .......................... (332,684)
------------
(14,590,696)
------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... 25,240,340
Foreign currency related transactions .......................... (11,411)
------------
25,228,929
---------------------------------------------------------------------------------
Net gain (loss) on investment transactions 10,638,233
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 10,467,684
---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder Emerging Markets Growth Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Six Months Year Ended
Ended October 31,
April 30, 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ........................ $ (170,549) $ 872,361
Net realized gain (loss) ............................ (14,590,696) (33,020,863)
Net unrealized appreciation (depreciation) on
investment transactions during the period............ 25,228,929 (26,379,850)
------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 10,467,684 (58,528,352)
Distributions to shareholders from ------------- -------------
net investment income............................... (387,561) (862,031)
------------- -------------
Fund share transactions:
Proceeds from shares sold ........................... 12,986,718 57,798,973
Net asset value of shares issued to shareholders in
reinvestment of distributions........................ 324,120 731,288
Cost of shares redeemed ............................. (38,131,293) (94,348,182)
Redemption fees ..................................... 112,139 385,726
------------- -------------
Net increase (decrease) in net assets from Fund share
transactions......................................... (24,708,316) (35,432,195)
------------- -------------
Increase (decrease) in net assets ................... (14,628,193) (94,822,578)
Net assets at beginning of period ................... 124,801,903 219,624,481
Net assets at end of period (including accumulated
distributions in excess of net investment income of ------------- -------------
$1,167,456 and $609,346, respectively) ............ $ 110,173,710 $ 124,801,903
------------- -------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........... 12,048,140 15,080,532
------------- -------------
Shares sold ......................................... 1,214,131 4,313,252
Shares issued to shareholders in
reinvestment of distributions...................... 30,551 52,272
Shares redeemed ..................................... (3,566,891) (7,397,916)
------------- -------------
Net increase (decrease) in Fund shares .............. (2,322,209) (3,032,392)
------------- -------------
Shares outstanding at end of period ................. 9,725,931 12,048,140
------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Emerging Markets Growth Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
May 8, 1996
(commencement) of
Six Months Ended Years Ended operations) to
April 30, 1999 October 31, October 31,
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
---------------------------------------------------------
Net asset value, beginning of period ............................. $ 10.36 $ 14.56 $ 12.85 $ 12.00
---------------------------------------------------------
Income from investment operations:
Net investment income (loss) ..................................... (.02) .06 .02 (.02)
Net realized and unrealized gain (loss) on investments ........... 1.02 (4.23) 1.67 .86
---------------------------------------------------------
Total from investment operations ................................. 1.00 (4.17) 1.69 .84
---------------------------------------------------------
Less distributions from net investment income .................... (.04) (.06) (.03) --
Redemption fees .................................................. .01 .03 .05 .01
---------------------------------------------------------
Net asset value, end of period ................................... $ 11.33 $ 10.36 $ 14.56 $ 12.85
---------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................................... 9.72** (28.54) 13.51 7.08**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................... 110 125 220 76
Ratio of operating expenses, net, to average daily net assets (%) 2.25* 2.16 2.00 2.00*
Ratio of operating expenses, before expense reductions, to average 2.80* 2.31 2.33 3.79*
daily net assets (%)
Ratio of net investment income (loss) to average daily net assets (.30)* .48 .11 (.32)*
Portfolio turnover rate (%) ...................................... 85.0* 44.8 61.5 19.5*
</TABLE>
(a) Based on monthly average of shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 2%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
21 - Scudder Emerging Markets Growth Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Emerging Markets 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 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 Nasdaq. 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 purchased 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.
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.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a negotiated rate. During the period,
the Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
22 - Scudder Emerging Markets Growth Fund
<PAGE>
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-dividend and payment dates on
dividends, interest, and foreign withholding taxes.
Taxation. The Fund's policy is to comply with the requirements of the Internal
Revenue Code of 1986, as amended, which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders. 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 $33,200,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2004 ($400,000) and October 31, 2006 ($32,800,000), the expiration
dates, whichever occurs first.
Redemption Fees. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 2% of the current net asset value of the shares
will be assessed and retained by the Fund for the benefit of the remaining
shareholders. The redemption fee is included as an addition to paid-in capital.
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. Earnings
and profits distributed to shareholders on redemption of Fund shares ("tax
equalization") may be utilized by the Fund, to the extent permissible, as part
of the Fund's dividends paid deduction on its federal income tax return.
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 passive foreign investment companies 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.
23 - Scudder Emerging Markets Growth Fund
<PAGE>
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 six months ended April 30, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $46,704,412 and
$61,955,244, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Management Agreement") with
Scudder Kemper Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Fund
pays the Adviser a fee equal to an annual rate of 1.25% 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. The Adviser agreed to
maintain the annualized expenses of the Fund at 2.25% until December 31, 1999.
For the six months ended April 30, 1999, the Adviser did not impose a portion of
its management fee amounting to $316,707, and the amount imposed amounted to
$404,116.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended April 30,
1999, the amount charged to the Fund by STC aggregated $60,531, of which $10,550
is unpaid at April 30, 1999.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 1999, the amount charged to the Fund by SFAC aggregated $67,186,
of which $22,643 is unpaid at April 30, 1999.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 1999 the amount charged by SSC aggregated $188,186,
of which $30,340 is unpaid at April 30, 1999.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. For the six months ended April
30, 1999, the Special Servicing Agreement expense charged to the Fund amounted
to $70,360, of which $26,854 was unpaid at April 30, 1999.
24 - Scudder Emerging Markets Growth Fund
<PAGE>
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 1999, Directors' fees and expenses aggregated $24,472.
D. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $850
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of borrowing. The Fund may borrow up to a
maximum of 25 percent of its net assets under the agreement.
25 - Scudder Emerging Markets Growth Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder Emerging Markets 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 Emerging Markets Growth
Fund (the "Fund") at April 30, 1999, the results of its operations, the changes
in its net assets, and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at April
30, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
June 14, 1999
26 - Scudder Emerging Markets Growth Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Emerging Markets
Growth Fund (the "Fund") was held on December 15, 1998, at the office of Scudder
Kemper Investments, Inc., Two International Place, Boston, Massachusetts 02110.
At the Meeting the following matters were voted upon by the shareholders (the
resulting votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,462,158 107,473 123,487 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,252,260 148,210 183,014 109,634
- --------------------------------------------------------------------------------
* 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.
27 - Emerging Markets 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
Keith R. Fox
Director; Private Equity
Investor
William H. Luers
Director; Chairman and
President, U.N. Association of
the U.S.A.
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Joan E. Spero
Director; President, Doris Duke
Charitable Foundation
Thomas J. Devine
Honorary Director; Consultant
William H. Gleysteen, Jr.
Honorary Director; Consultant;
Guest Scholar, Brookings
Institute
Wilson Nolen
Honorary Director; Consultant
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
Philip S. Fortuna*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Theresa Gusman*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Sheridan P. Reilly*
Vice President
Shahram Tajbakhsh*
Vice President
John R. Hebble*
Treasurer
Richard W. Desmond*
Assistant Secretary
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Emerging Markets 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 GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *A class of
shares of the Fund. **Not available in all states. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. ++Only the International
Shares of the Fund are part of the Scudder Family of Funds. +++ +++A no-load
variable annuity contract provided by Charter National Life Insurance Company
and its affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold by Scudder's
insurance agencies, 1-800-225-2470. #These funds, advised by Scudder Kemper
Investments, Inc., are traded on the New York Stock Exchange and, in some cases,
on various other stock exchanges.
29 - Emerging Markets 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
Personal Investment Organizer: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Emerging Markets 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
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
31 - Emerging Markets 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 $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
