SCUDDER
- ------------------------
EQUITY/GLOBAL
- ------------------------
Scudder International
Growth and Income
Fund
Fund #300
Annual Report
August 31, 1999
A fund seeking long-term growth of capital and current
income through investment primarily in foreign equity
securities.
A no-load fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
Contents
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4 Letter from the Fund's Chairman
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
16 Glossary of Investment Terms
17 Investment Portfolio
21 Financial Statements
24 Financial Highlights
25 Notes to Financial Statements
31 Report of Independent Accountants
32 Tax Information
33 Officers and Directors
34 Investment Products and Services
36 Scudder Solutions
2
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Scudder International Growth and Income Fund
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ticker symbol SIGIX fund number 300
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Date of o Scudder International Growth and Income Fund
Inception: outperformed its benchmark, the MSCI EAFE + Canada
6/30/97 Index, by a significant margin in the second calendar
quarter as value stocks returned to favor and an
increased emphasis in Japan produced strong results.
Total Net o The fund's 9.47% return for the six-month fiscal period
Assets as of that ended August 31, 1999 was roughly in keeping with
8/31/99: the 10.58% return of its benchmark.
$39.8 million
o Management reduced the fund's holdings of European
telecommunications companies and increased its
weightings of Japanese exporters and cyclicals to take
advantage of the country's improved economic outlook.
3
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Letter from the Fund's Chairman
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Dear Shareholders,
Around the beginning of the fund's fiscal period an environment of change was
well underway. After years of lackluster performance, the Japanese equity market
was rallying strongly. Meanwhile, European bourses -- which had provided
excellent returns to investors over the last few years -- were marking time.
Signs of accelerating global growth and rising commodity prices served as the
backdrop for this new turn of events for international investors.
The changing environment proved beneficial to Scudder International Growth and
Income Fund, which surpassed the performance of its benchmark in the second
calendar quarter. The fund's performance is attributed to a rebound in stocks
with above-average dividends and an increased weighting in selected Japanese
companies. Lead portfolio manager Sheridan Reilly and portfolio manager Lauren
Lambert provide a detailed discussion of the fund's investment strategy and the
market environment that led to this performance beginning on page 5. We
encourage you to read it.
With this report, we have changed the fund's fiscal year-end from February 28th
to August 31st as part of a larger effort to create efficiencies and reduce the
costs of producing Scudder reports and prospectuses. Going forward, you will
receive the fund's semiannual report after its February 28th period end and the
annual report after its August 31st period end.
4
<PAGE>
Finally, it should be noted that Daniel Pierce retired in June of this year as
chairman of Scudder International Growth and Income Fund, at which time I
assumed that role and its responsibilities. We are fortunate that Dan's
longstanding affiliation with Scudder is ongoing, and that we will continue to
benefit from his counsel. I am pleased to join the fund's team in this capacity,
and look forward to serving your interests.
Thank you for your continued investment in Scudder International Growth and
Income Fund. For periodic updates on the fund visit our Web site at
www.scudder.com, or call us at 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
Chairman,
Scudder International Growth and Income Fund
5
<PAGE>
Performance Update
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August 31, 1999
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Growth of a $10,000 Investment
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Scudder International Growth and Income Fund
MSCI EAFE plus Canada Index*
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder
International Growth MSCI EAFE plus
and Income Fund Canada Index*
6/97** 10000 10000
8/97 9708 9433
11/97 9608 9108
2/98 10580 10211
5/98 11682 10573
8/98 9874 9332
11/98 10384 10516
2/99 10030 10646
5/99 10484 10982
8/99 10981 11773
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 8/31/1999 $10,000 Cumulative Annual
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Scudder International Growth and Income Fund
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1 year $ 11,121 11.21% 11.21%
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Life of Fund** $ 10,981 9.81% 4.41%
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MSCI EAFE plus Canada Index*
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1 year $ 12,616 26.16% 26.16%
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Life of Fund** $ 11,773 17.73% 7.81%
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* The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far
East (EAFE) plus 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.
** The Fund commenced operations on June 30, 1997. Index comparisons begin June
30, 1997.
6
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Returns and Per Share Information
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Scudder International Growth and Income Fund
MSCI EAFE plus Canada Index*
Yearly periods ended August 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
1997** 1998 1999(a)
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Fund Total
Return (%) -3.00 1.70 11.21
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Index Total
Return (%) -5.67 -1.08 26.16
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Net Asset Value
($) 11.64 11.79 12.99
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Income
Dividends ($) -- .07 .12
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* The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far
East (EAFE) plus 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.
** The Fund commenced operations on June 30, 1997. Index comparisons begin
June 30, 1997.
(a) On June 7, 1999, the Board of Trustees of the Fund changed the fiscal year
end from February 28 to August 31.
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 would have been lower.
7
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Portfolio Summary
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August 31, 1999
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Geographical
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 1% Cash Equivalents) With prospects for
growth improving in
Europe 66% Japan, management
Japan 28% significantly increased
Pacific Basin 5% the fund's Japanese
U.S. & Canada 1% holdings in the first
- ------------------------------------ half of 1999.
100%
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Sectors
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 1% Cash Equivalents) In Japan, the fund
emphasized undervalued
Financial 29% financial stocks,
Manufacturing 18% large-cap exporters, and
Consumer Discretionary 11% undervalued domestic
Service Industries 9% companies -- purchases
Energy 8% that were funded, in
Communications 6% part, by taking profits
Metals & Materials 4% in European
Construction 4% telecommunications
Transportation 4% companies.
Other 7%
- ------------------------------------
100%
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8
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Ten Largest Equity Holdings
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(28% of Portfolio) Management's relative
dividend yield strategy
1. Sony Corp. focuses on buying stocks
Manufacturer of consumer electronic products whose yields are at
least 25% higher than
2. Sakura Bank, Ltd. that of the local market
Bank median or 25% higher
than the stock's own
3. HSBC Holdings PLC average three-year yield.
Bank
4. SAP AG
Computer software manufacturer
5. Accor S.A.
Catering, hotel and travel services
6. UPM-Kymmene OYJ
Manufacturer of paper and pulp products
7. MBL International Finance Bermuda
Bank
8. Lasmo PLC
Oil production and exploration
9. Dexia France
Municipal and local development financing
10. Avesta-Sheffiled AB
Manufacturer of stainless steel products
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
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August 31, 1999
Lead portfolio manager Sheridan Reilly and portfolio manager Lauren Lambert
discuss the performance and strategy of Scudder International Growth and Income
Fund for the six-month period ended August 31, 1999.
Q: High growth, high p/e stocks -- which dominated performance both in the U.S.
and abroad into the first few months of this year -- gave way to stocks with
more attractive valuations in the second calendar quarter. How did this help the
fund's performance over the six-month period?
A: Since we invest in international stocks with yields that are higher than the
local market yield or higher than the stock's own average three-year yield, the
fund tends to have value characteristics. As value stocks returned to favor in
the second quarter, the fund outperformed its benchmark during this three-month
period with a return of 5.11% versus 2.89% for the unmanaged MSCI EAFE (Morgan
Stanley Capital International Europe, Australia, and Far East) + Canada Index.
The international markets have been dominated in recent years by a fairly narrow
group of the largest capitalization stocks as the scarcity of growth, low
inflation, and low interest rates in most economies caused investors to bid
growth stock prices up. However, over the last 12 months, we have begun to see
the environment change.
Q: What changed the environment?
A: Basically, prospects for an upturn in global economic growth improved. The
clearest example is Japan where we witnessed three significant events: real
restructurings began in the banking system, which included acknowledging massive
credit losses embedded in the financial statements of banks; economic growth
jumped to an annualized rate of 7.9% in the first calendar quarter; and,
significantly, market liquidity improved as foreign investors returned. Some of
the momentum from these positive events carried over into other Pacific Rim
markets, which had been
10
<PAGE>
languishing since the Russian debt and currency crisis of August 1998.
We've also seen a pickup in selected commodity prices, particularly oil. At the
beginning of the six-month period, oil was about $12 a barrel. By the end of the
period it had risen to over $21 a barrel. While the price increase has not
impacted all economic indicators yet, it is there -- another sign of the
changing global economic environment.
Q: Large-cap growth stocks -- the big winners in the deflationary environment --
returned to favor in July and August. Was the outperformance of value stocks a
short-term event?
A: We don't think so. The evidence of accelerating global growth that we've
already discussed has been building for some time. This leads us to believe that
strategies that emphasize stocks with attractive dividend yields and valuations
- -- such as the strategy we employ in this fund -- are well positioned to
benefit. Stocks that fit our criteria for investment include cyclical
industries, which tend to be among the first to benefit when growth accelerates.
These stocks also have downside protection because they are already selling at
attractive valuations, and typically decline less when the market goes down.
Q: How did the fund perform in this environment?
A: The fund's 9.47% return for the six-month period that ended August 31st
nearly matched the 10.58% return of its benchmark, the MSCI EAFE + Canada Index.
While we seek to outperform this benchmark over the long-term, we regard these
results as a welcome comeback after a disappointing 1998. Most of the fund's
return is attributed to the rebound in value stocks during the second calendar
quarter and our increased commitment to Japan, a market which rallied
dramatically in the first half of 1999. As growth stocks returned to favor
somewhat in July and August, the fund gave back some of its gains prior to
period end.
11
<PAGE>
In addition, our absence from the technology sector has been a drag on
performance as tech stocks -- which are a significant component of our benchmark
index -- moved up strongly. Our focus on stocks with above-average dividends
tends to preclude investment in many tech stocks, which typically pay little if
any dividends. At the same time, our absence from the life insurance and
pharmaceutical areas helped performance as these sectors underperformed.
Q: The fund's stock selection principles are based on tested concepts that have
generally resulted in attractive returns with less risk over time. Please
explain your selection process.
A: We use a strict investment discipline that is based on relative dividend
yields to buy stocks whose yields are at least 25% higher than the median of the
local market, or 25% higher than the stock's own average three-year yield.
Conversely, we consider selling those holdings that have appreciated to the
point where they have a yield 25% lower than that of their home market or their
own three-year average. Since a higher yield is indicative of a stock that is
depressed (and decreasing yields characterize a stock whose price is rising),
this strategy compels us to buy companies that are reasonably valued, and to
sell those whose valuations are becoming expensive.
After narrowing the investment universe in this way, we apply fundamental
analysis to select the strongest companies from among those that meet our
criteria. Each individual company's financial strength, projected profitability,
competitive positioning, and management ability are reviewed to uncover the
stocks with the strongest long-term growth potential. In addition, we pursue
sector diversification in order to reduce the risks associated with interest
rates changes and economic conditions in the countries where we invest.
Similarly, we seek to minimize currency risk and political risk by diversifying
among a large number of countries. Our
12
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ultimate goal of this intensive process is to provide superior risk-adjusted
returns over the long term.
Q: With Japan heating up and the global environment changing, how did you
position the portfolio over the period?
A: We continued to increase our position in Japan based on the improving
environment and our identification of a number of attractive opportunities
there. By the end of the period the fund's Japanese holdings totaled 28% of
assets, up from 16% six months ago. Historically, the fund has been
underweighted in Japan with an 8% to 12% weighting. Now the portfolio is
overweighted versus its benchmark, which has a 24% weighting in Japan.
We increased the fund's exposure by adding undervalued financial stocks, common
stock of large-cap exporters, and undervalued domestic companies. Some of the
names we added included Matsushita Electric, Canon, Sony, and NTT. We also
increased our commodity exposure using highly competitive regional producers
with leverage to improve pricing, such as Pohang Iron & Steel (Korea). We also
increased our exposure to the emerging markets by adding Hong Kong
Telecommunications and ABB, a Swiss engineering company with substantial
infrastructure projects in developing countries.
Q: The fund's European holdings constituted 66% of assets at the end of the
period. Did you make any changes to this portion of the portfolio?
A: Essentially we funded our move into Japan with sales of European financial
and telecom stocks that had reached our price targets. Our reduction does not
necessarily imply a negative outlook for the region, but reflected opportunities
to harvest some holdings that had performed well. We are still maintaining a
market weight and diversification with our European holdings.
As we survey the foreign markets with our relative dividend yield discipline, we
must always weigh the relative attractiveness of each stock, market, or region.
13
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With a cyclical recovery partially priced into valuations and growth uncertain
in Europe in the near term, Japan became compelling with its more attractive
valuations and improving economic and investment environment.
Q: Oil companies with their typically generous dividend yields are prime
candidates for this fund in the right environment. Were you able to take
advantage of the jump in world oil prices?
A: We held a number of big integrated oil companies at the beginning of the
period and increased our weighting over the six months. Our holdings included
Elf Aquitane, which appreciated nicely leading up to its takeover by TotalFina.
We reinvested the proceeds from Elf in Repsol, a Spanish oil and gas producer.
We also increased our position in Royal Dutch Petroleum and the U.K. oil
exploration and production company Lasmo.
Q: What is your outlook?
A: With the global economy heating up, there is a possibility that inflation and
higher interest rates may be around the corner. Key issues center on whether the
U.S. economy can remain strong without overheating, whether European growth can
gradually accelerate and pick up the baton from a decelerating U.S., and whether
Japan is really headed out of its protracted recession. In this environment we
continue to believe that investing in attractive, defensive valuations will be
on our side. In the meantime we intend to avoid any regional bets and remain
diversified while sticking to our investment discipline.
14
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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, each of whom plays an
important role in the fund's management process. Team members work together to
develop investment strategies and select securities for the fund's portfolio.
They are supported by the Adviser's large staff of economists, research
analysts, traders, and other investment specialists who work in our offices
across the United States and abroad. We believe our team approach benefits fund
investors by bringing together many disciplines and leveraging our extensive
resources.
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 11 years of
industry experience focusing on strategies for global portfolios, currency
hedging, and foreign equity markets.
Portfolio manager Lauren C. Lambert joined the Adviser in 1994 and has over five
years of experience as an equity analyst.
15
<PAGE>
Glossary of Investment Terms
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Cyclical Stocks Companies whose earnings are closely tied to the business
cycle. Cyclical industries include steel, cement, paper,
machinery, and autos.
Disinflation The slowing down of the rate at which prices increase.
This phenomenon is generally associated with a slowing
economy, and is distinct from deflation, which is an
outright decline in prices.
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 $20, the yield would fall to 5%.
Fundamental Analysis of companies based on the projected impact of
Research management, products, sales, and earnings on their balance
sheets and income statements. Distinct from technical
analysis, which evaluates the attractiveness of a stock
based on historical price and trading volume movements,
rather than the financial results of the
underlying company.
Growth Stock Stock of a company that has displayed above-average
earnings growth and is expected to continue to
increase profits rapidly going forward. Stocks of
such companies usually trade at higher multiples to
earnings and experience more price volatility than
the market as a whole. Distinct from value stock.
Value Stock A company whose stock price does not fully reflect its
intrinsic value, as indicated by price/earnings ratio,
price/book value ratio, dividend yield, or some other
valuation measure, relative to its industry or the market
overall. Value stocks tend to display less price
volatility and may carry higher dividend yields. Distinct
from growth stock.
Weighting Refers to the allocation of assets -- usually in terms of
(over/under) sectors, industries, or countries -- within a portfolio
relative to the portfolio's benchmark index or investment
universe.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Investment
Terms)
An expanded list of terms is located at our Web site, www.scudder.com.
16
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<TABLE>
<CAPTION>
Investment Portfolio as of August 31, 1999
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Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Repurchase Agreements 0.6%
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<S> <C> <C>
Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 8/31/1999 at
5.42%, to be repurchased at $217,033
on 9/1/1999, collateralized by a
$220,000 U.S. Treasury Bond, 3.875%,
4/15/2029 (Cost $217,000) ................................... 217,000 217,000
- -------------------------------------------------------------------------------------------
Convertible Bonds 4.7%
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Japan 2.7%
MBL International Finance Bermuda, 3%, 11/30/2002
(Bank) ...................................................... 904,000 1,062,200
----------
United Kingdom 2.0%
Diageo, 2%, 4/14/2004 (Operator in food, alcoholic
beverages, fast food restaurants and property
management) ................................................. 899,000 782,130
----------
Total Convertible Bonds (Cost $1,977,610) 1,844,330
Shares
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- -------------------------------------------------------------------------------------------
Currency Protected Securities 9.8%
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Japan
Canon, Inc. (Manufacturer of laser copiers and video
equipment) (c) .............................................. 657 856,385
Matsushita Electric Industrial, Ltd. (Manufacturer of
consumer electronic products) (c) ........................... 636 786,969
Nippon Telegraph & Telephone Corp. (Telecommunication
services) (c) ............................................... 420 839,470
Sony Corp. (Manufacturer of consumer electronic
products) (c) ............................................... 614 1,397,894
----------
Total Currency Protected Securities (Cost $3,689,595) 3,880,718
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Common Stocks 84.9%
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Austria 2.1%
Bank Austria AG (Provider of commercial and corporate
banking services) ........................................... 15,370 817,100
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Canada 1.0%
BCE, Inc. (Telecommunication services) .................... 8,139 379,293
-----------
Finland 2.7%
UPM-Kymmene OYJ (Manufacturer of paper and pulp
products) .............................................. 30,800 1,067,154
-----------
France 9.6%
Accor S.A. (Catering, hotel and travel services) .......... 4,520 1,089,325
Dexia France (Municipal and local development
financing) ............................................. 7,820 1,020,082
Lafarge S.A. (Producer of cement, concrete and
aggregates) ............................................ 6,395 688,061
Scor S.A. (Property, casualty and life reinsurance company) 19,674 982,842
-----------
3,780,310
-----------
Germany 9.7%
Adidas-Salomon AG (Manufacturer of sport shoes, clothing
and equipment) ......................................... 8,660 806,243
Bayer AG (Chemical producer) .............................. 22,348 972,912
RWE AG (pfd.)* (Producer of petroleum and chemical
products) .............................................. 22,010 951,212
SAP AG (Computer software manufacturer) ................... 3,177 1,115,888
-----------
3,846,255
-----------
Hong Kong 3.8%
HSBC Holdings PLC (Bank) .................................. 93,200 1,155,255
Hong Kong Telecommunications, Ltd. (Telecommunication
services) .............................................. 155,600 352,682
-----------
1,507,937
-----------
Italy 3.1%
Ente Nazionale Idrocarburi (Exploration and production of
oil, natural gas and chemicals) ........................ 65,600 394,895
La Rinascente SpA (Department store chain) ................ 223,000 830,449
-----------
1,225,344
-----------
Japan 15.4%
East Japan Railway Co. (Railroad operator) ................ 64 387,401
Nintendo Co., Ltd. (Game equipment manufacturer) .......... 5,100 884,689
Nomura Securities Co., Ltd. (Financial advisor, securities
broker and underwriter) ................................ 58,000 849,904
Sakura Bank, Ltd. (Bank) .................................. 233,000 1,233,817
Sekisui House, Ltd. (Home builder) ........................ 75,000 805,944
Sumitomo Trust & Banking Co., Ltd. (Commercial Bank) ...... 139,000 926,413
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Market
Shares Value ($)
- -------------------------------------------------------------------------------
Teijin Ltd. (Manufacturer of polyester products) ....... 232,000 984,936
-----------
6,073,104
-----------
Korea 1.6%
Pohang Iron & Steel Co., Ltd. (Steel producer) (b) ..... 4,600 621,828
-----------
Netherlands 4.8%
Elsevier NV (International publisher of scientific,
professional, business, and consumer information
books) .............................................. 47,400 546,601
Koninklijke KPN NV (Provider of telecommunications
services) ........................................... 12,700 569,685
Royal Dutch Petroleum Co. (Owner of 60% of Royal
Dutch/Shell Group) .................................. 12,980 799,214
-----------
1,915,500
-----------
Spain 2.2%
Repsol S.A. (Manufacturer of crude oil and natural gas) 41,500 867,562
-----------
Sweden 4.8%
Avesta-Sheffield AB* (Manufacturer of stainless steel
products) ........................................... 206,400 1,018,944
Investor AB "B" (Investment company with holdings in
listed shares of industrial companies) .............. 72,900 888,669
-----------
1,907,613
-----------
Switzerland 6.0%
ABB Ltd. (Manufacturer of equipment for power generation
and distribution) ................................... 9,948 1,015,169
Novartis AG (Registered) (Pharmaceutical company) ...... 334 480,925
Swisscom AG (Registered) (Operator of telecommunication
networks and network application services) .......... 900 296,929
UBS AG (Registered) (Provider of banking and asset
management services) ................................ 2,105 594,377
-----------
2,387,400
-----------
United Kingdom 18.1%
Allied Domecq PLC (International food, drink and
hospitality group) .................................. 82,700 759,945
EMI Group PLC (Music recording and retailing company) .. 110,313 937,926
J Sainsbury PLC (Retail distributor of food through
supermarkets) ....................................... 144,547 995,041
Lasmo PLC (Oil production and exploration) ............. 419,129 1,036,930
National Power PLC (Electricity generation company) .... 88,800 629,475
Peninsular and Oriental Steam Navigation Co. (Shipping
and transportation company) ......................... 60,930 978,841
Rentokil Intitial PLC (Environmental services company) . 203,200 812,838
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Royal & Sun Alliance Insurance Group PLC (Multi-line
insurance holding company) ........................... 119,980 997,468
----------
7,148,464
----------
- ------------------------------------------------------------------------------------
Total Common Stocks (Cost $31,972,884) 33,544,864
- ------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $37,857,089) (a) 39,486,912
- ------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security
(a) The cost for federal income tax purposes was $37,881,886. At August 31,
1999, net unrealized appreciation for all securities based on tax cost was
$1,605,026. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $3,257,926 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,652,900.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees amounted to $621,828 (1.56% of net assets). Their values have been
estimated by the Board of Trustees 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 August 31,
1999 was $405,170. These securities may also have certain restrictions as
to resale.
(c) Currency Protected Securities are Medium Term Notes of Morgan Stanley Dean
Witter & Co. These securities permit the investor to participate in the
price fluctuation of the common stock of the underlying company without the
effects of future changes in the Japanese Yen exchange rate.
- --------------------------------------------------------------------------------
Transactions in written options for the six months ended August 31, 1999 were:
Options on Securities
----------------------------
Premiums
Received
Contracts ($)
------------ -----------
Outstanding at February 28, 1999 ....... 480 109,967
Closed ................................. (480) (109,967)
Outstanding at August 31, 1999 ......... -- --
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of August 31, 1999
- ---------------------------------------------------------------------------------------------
Assets
- ---------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $37,857,089) ........................ $39,486,912
Cash ........................................................................ 325
Receivable for investments sold ............................................. 200,426
Dividends and interest receivable ........................................... 66,290
Receivable for Fund shares sold ............................................. 184,061
Foreign taxes recoverable ................................................... 80,734
Deferred organization expenses .............................................. 20,248
-----------
Total assets ................................................................ 40,038,996
Liabilities
- ---------------------------------------------------------------------------------------------
Payable for Fund shares redeemed ............................................ 35,051
Management fee payable ...................................................... 47,308
Other payables and accrued expenses ......................................... 117,111
-----------
Total liabilities ........................................................... 199,470
Net assets, at market value $39,839,526
Net Assets
- ---------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ......................................... 100,862
Unrealized appreciation (depreciation) on:
Investment securities ..................................................... 1,629,823
Foreign currency related transactions ..................................... 506
Accumulated net realized gain (loss) ........................................ 938,943
Paid-in capital ............................................................. 37,169,392
Net assets, at market value $39,839,526
Net Asset Value
- ---------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($39,839,526 /
3,065,900 shares of capital stock outstanding, $.01 par value, 100,000,000
shares authorized) ....................................................... $ 12.99
The accompanying notes are an integral part of the financial statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Statement of Operations
- ------------------------------------------------------------------------------------
Six Months
Ended Year Ended
August 31, February 28,
Investment Income 1999 (Note A) 1999
- ------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends (net foreign taxes withheld of $107,985,
and $157,532, respectively) ...................... $ 779,242 $ 1,322,125
Interest ............................................ 48,739 216,020
----------- -----------
827,981 1,538,145
----------- -----------
Expenses:
Management fee ...................................... 221,586 539,119
Services to shareholders ............................ 145,887 302,200
Custodian and accounting fees ....................... 81,549 174,281
Directors' fees and expenses ........................ 24,886 46,974
Registration fees ................................... 20,700 23,967
Auditing ............................................ 22,950 36,121
Reports to shareholders ............................. 6,364 29,065
Legal ............................................... 4,756 13,656
Amortization of organization expense ................ 3,605 6,591
Other ............................................... 4,771 6,542
----------- -----------
Total expenses before reductions .................... 537,054 1,178,516
Expenses reductions ................................. (149,253) (234,812)
----------- -----------
Expenses, net ....................................... 387,801 943,704
Net investment income $ 440,180 $ 594,441
Realized and unrealized gain (loss) on
investment transactions
- ------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................... 2,432,728 633,316
Written options ..................................... 44,900 148,425
Foreign currency related transactions ............... (43,759) (136,499)
----------- -----------
2,433,869 645,242
Net unrealized appreciation (depreciation) during the
period on:
Investments ......................................... 1,385,126 (4,792,082)
Written options ..................................... (41,417) 90,750
Foreign currency related transactions ............... (8,303) 9,368
----------- -----------
1,335,406 (4,691,964)
Net gain (loss) on investment transactions 3,769,275 (4,046,722)
Net increase (decrease) in net assets resulting
from operations $ 4,209,455 $(3,452,281)
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------
For the Period
Six Months June 30, 1997
Ended Year Ended (commencement of
August 31, 1999 February 28, operations) to
Increase (Decrease) in Net Assets (Note A) 1999 February 28, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income .............. $ 440,180 $ 594,441 $ 50,381
Net realized gain (loss) from
investment transactions ......... 2,433,869 645,242 (2,566,283)
Net unrealized appreciation
(depreciation) on investment
transactions during the period .. 1,335,406 (4,691,964) 4,986,888
------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations ...................... 4,209,455 (3,452,281) 2,470,986
------------ ------------ ------------
Distributions to shareholders
from net investment income ...... (230,332) (427,107) (59,796)
------------ ------------ ------------
Fund share transactions:
Proceeds from shares sold .......... 8,670,160 36,802,035 64,146,242
Net asset value of shares issued
to shareholders in
reinvestment of distributions ... 216,720 397,892 55,470
Cost of shares redeemed ............ (18,910,219) (36,316,961) (17,733,938)
------------ ------------ ------------
Net increase (decrease) in net
assets from Fund share
transactions .................... (10,023,339) 882,966 46,467,774
------------ ------------ ------------
Increase (decrease) in net assets .. (6,044,216) (2,996,422) 48,878,964
Net assets at beginning of period .. 45,883,742 48,880,164 1,200
------------ ------------ ------------
Net assets at end of period
(including undistributed net
investment income of $100,862,
and accumulated distributions in
excess of net investment income of
$66,834, and $213,599, respectively) $ 39,839,526 $ 45,883,742 $ 48,880,164
Other Information
- --------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning
of period ....................... 3,845,661 3,854,083 100
------------ ------------ ------------
Shares sold ........................ 682,226 2,826,965 5,333,375
Shares issued to shareholders in
reinvestment of distributions ... 16,762 30,294 4,745
Shares redeemed .................... (1,478,749) (2,865,681) (1,484,137)
------------ ------------ ------------
Net increase (decrease) in Fund
shares .......................... (779,761) (8,422) 3,853,983
Shares outstanding at end of
period .......................... 3,065,900 3,845,661 3,854,083
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<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>
- -----------------------------------------------------------------------------------------------
1999(b) 1999(c) 1998(d)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.93 $12.68 $12.00
-------------------------------
- -----------------------------------------------------------------------------------------------
Income from investment operations:
- -----------------------------------------------------------------------------------------------
Net investment income .13(f) .14 .01
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 1.00 (.79) .69
-------------------------------
- -----------------------------------------------------------------------------------------------
Total from investment operations 1.13 (.65) .70
- -----------------------------------------------------------------------------------------------
Less distributions from:
- -----------------------------------------------------------------------------------------------
Net investment income (.07) (.10) (.02)
-------------------------------
- -----------------------------------------------------------------------------------------------
Total distributions (.07) (.10) (.02)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $12.99 $11.93 $12.68
-------------------------------
- -----------------------------------------------------------------------------------------------
Total Return (%) (e) 9.47** -5.20 5.80**
- -----------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- -----------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 40 46 49
- -----------------------------------------------------------------------------------------------
Ratio of operating expenses, net to average daily net
assets (%) 1.75* 1.75 1.75*
- -----------------------------------------------------------------------------------------------
Ratio of operating expenses before expense reductions, to
average daily net assets (%) 2.42* 2.19 2.65*
- -----------------------------------------------------------------------------------------------
Ratio of net investment income to average daily net
assets (%) 1.99* 1.10 .17*
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 140.8* 131.3 50.2*
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended August 31, 1999 (See Note A).
(c) For the year ended February 28, 1999.
(d) For the period June 30, 1997 (commencement of operations) to February 28,
1998.
(e) Total return would have been lower had certain expenses not been reduced.
(f) Net investment income per share includes non-recurring dividend income
amounting to .04 per share.
* Annualized
** Not annualized
24
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
August 31, 1999
A. Significant Accounting Policies
Scudder International Growth and Income Fund (the "Fund") is a diversified
series of Scudder International Fund, Inc. (the "Corporation") which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company organized as a Maryland
Corporation.
On June 7, 1999, the Fund changed its fiscal year end for financial reporting
and federal income tax purposes to August 31 from February 28.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. 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 ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. 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, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Corporation,
whose quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
25
<PAGE>
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
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.
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
prices or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations. Gain or loss is recognized when the
option contract expires or is closed.
If 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 above the exercise price. If the
Fund writes a put option it accepts the risk of a decline in the
26
<PAGE>
market value of the underlying security 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.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made semiannually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. 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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis. All discounts
are accreted for both tax and financial 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.
27
<PAGE>
B. Purchases and Sales of Securities
For the six months ended August 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $29,041,112 and
$34,798,166, respectively. For the year ended February 28, 1999, purchases and
sales of investment securities (excluding short-term investments) aggregated
$66,535,959 and $68,680,896, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment 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 Agreement. The management fee
payable under the Agreement is equal to an annual rate of 1.00% of the Fund's
average daily net assets computed and accrued daily and payable monthly. In
addition, the Adviser and certain of its subsidiaries have agreed to reimburse
or not to impose, respectively, all or a portion of their fees payable by the
Fund until June 30, 2000 in order to maintain the annualized expenses of the
Fund at not more than 1.75% of average daily net assets. For the six months
ended August 31, 1999, the Adviser did not impose a portion of its management
fee which amounted to $149,253, and the amount imposed amounted to $72,333, of
which $47,308 is unpaid at August 31, 1999. For the year ended February 28,
1999, the Adviser did not impose a portion of its management fee which amounted
to $234,812, and the amount imposed amounted to $304,307.
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 August 31, 1999, the amount charged to the Fund by SSC
aggregated $89,344, of which $14,274 is unpaid at August 31, 1999. For the year
ended February 28, 1999, the amount charged to the Fund by SSC aggregated
$216,638.
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 August 31,
1999, the amount charged to the Fund by STC aggregated $3,886, of which $1,356
is unpaid at August 31, 1999. For the year ended
28
<PAGE>
February 28, 1999, the amount charged to the Fund by STC aggregated $5,789.
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 August 31, 1999, the amount charged to the Fund by SFAC aggregated
$26,029, of which $13,499 is unpaid at August 31, 1999. For the year ended
February 28, 1999, the amount charged to the Fund by SFAC aggregated $55,490.
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 Fund 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
the potential to be invested in the Underlying Funds. For the six months ended
August 31, 1999, the Special Servicing Agreement expense charged to the Fund
amounted to approximately $37,920, of which $8,525 is unpaid. For the year ended
February 28, 1999, the Special Servicing Agreement expense charged to the Fund
amounted to approximately $41,215.
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 August 31, 1999, Directors' fees and expenses aggregated $24,886.
For the year ended February 28, 1999, Directors' fees and expenses aggregated
$46,974.
29
<PAGE>
D. Line of Credit
The Fund and several 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, pro rata based on net assets, among each of the
Participants. Interest is calculated based on the market rates at the time of
the borrowing. The Fund may borrow up to a maximum of 33 percent of its net
assets under the agreement.
30
<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:
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 International Growth and
Income Fund (the "Fund") at August 31, 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 August
31, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
October 15, 1999
31
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
August 31, 1999
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$1,060,000 as capital gain dividends for the six months ended August 31, 1999,
of which 100% represents 20% rate gains.
The Fund paid foreign taxes of $108,000 and earned $542,000 of foreign source
income during the six months ended August 31, 1999. Pursuant to Section 853 of
the Internal Revenue Code, the Fund designates $0.04 per share as foreign taxes
paid and $0.18 per share as income earned from foreign sources for the six
months ended August 31, 1999.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
32
<PAGE>
Officers and Directors
- --------------------------------------------------------------------------------
Lynn S. Birdsong* Elizabeth J. Allan*
o Chairman of the Board and o Vice President
Director
Irene T. Cheng*
Nicholas Bratt* o Vice President
o President
Joyce E. Cornell*
Paul Bancroft III o Vice President
o Director; Venture Capitalist and
Consultant Susan E. Dahl*
o Vice President
Sheryle J. Bolton
o Director; Chief Executive Officer, Philip S. Fortuna*
Scientific Learning Corporation o Vice President
William T. Burgin Carol L. Franklin*
o Director; General Partner, o Vice President
Bessemer Venture Partners
Edmund B. Games, Jr.*
Keith R. Fox o Vice President
o Director; Private Equity Investor
Theresa Gusman*
William H. Luers o Vice President
o Director; Chairman and President,
U.N. Association of America Ann M. McCreary*
o Vice President
Kathryn L. Quirk*
o Director; Vice President and Sheridan Reilly*
Assistant Secretary o Vice President
Joan E. Spero Shahram Tajbakhsh*
o Director; President, Doris Duke o Vice President
Charitable Foundation
John Millette*
Thomas J. Devine o Vice President and Secretary
o Honorary Director; Consultant
John R. Hebble*
William H. Gleysteen, Jr. o Treasurer
o Honorary Director; Consultant;
Guest Scholar, Brookings Richard W. Desmond*
Institution o Assistant Secretary
Wilson Nolen Caroline Pearson*
o Honorary Director; Consultant o Assistant Secretary
Robert G. Stone, Jr. *Scudder Kemper Investments, Inc.
o Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
33
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Scudder Global High Income Fund, Inc.
The Brazil Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Montgomery Street Income Securities, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
+++ Funds within categories are listed in order from expected least
risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder'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.
35
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank acount.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in
securities regardless of price fluctuations and does not
assure a profit or protect against loss in declining
markets. Investors should consider their ability to
continue such a plan through periods of low price
levels.
Around-the- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
36
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1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distrbution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
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Notes
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Notes
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About the Fund's Adviser
SCUDDER
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations 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.
