SCUDDER
INVESTMENTS(SM)
[LOGO]
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EQUITY/GLOBAL
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Scudder Emerging
Markets Growth Fund
Fund #079
Annual Report
October 31, 1999
The fund seeks long-term growth of capital.
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 President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
15 Glossary of Investment Terms
17 Investment Portfolio
26 Financial Statements
29 Financial Highlights
30 Notes to Financial Statements
36 Report of Independent Accountants
37 Tax Information
38 Officers and Directors
39 Investment Products and Services
41 Scudder Solutions
2 SCUDDER EMERGING MARKETS GROWTH FUND
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Scudder Emerging Markets Growth Fund
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ticker symbol SEMGX fund number 079
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Date of Inception: 5/8/96
o Over the past year, liquidity-driven gains in the
emerging markets have favored the large companies that
tend to be heavily represented in the indices. However,
higher interest rates in the United States have started
to have a negative impact on markets that are highly
dependent on external liquidity and least supported by
fundamentals.
o We continue to believe that fundamentally sound,
undervalued markets will be able to weather a reduction
in excess liquidity, and will outperform over the long
term.
Total Net Assets as of 10/31/99:
$103 million
o We continue to hold an optimistic view on the prospects
for Eastern European stocks, which stand to benefit from
the economic recovery in Western Europe. We are also
encouraged by the fact that firmer oil prices have begun
to buoy the fund's holdings in the Middle East.
SCUDDER EMERGING MARKETS GROWTH FUND 3
<PAGE>
Letter from the Fund's President
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[PHOTO]
Nicholas Bratt,
President,
Scudder Emerging
Markets Growth Fund
Dear Shareholders,
Investing in foreign markets has long been considered a way to achieve
meaningful portfolio diversification. While this notion was called into question
when the global markets plummeted in unison during the crisis last fall, the
events of 1999 have shown that investors who place a portion of their assets
overseas may be able to take advantage of important developments occurring
outside of the United States. Most recently, emerging markets equities have
surged on the strength of improved liquidity conditions and a better outlook for
global growth.
Lead portfolio manager Joyce Cornell and her team of analysts seek to take
advantage of overseas opportunities by investing in growing companies that are
based in countries with sound economies and stable political leadership. In
addition, they focus on those companies with strong management teams and the
ability to generate reliable cash flows. While this approach has led to
underperformance in a period when market participants have focused on the
largest, most liquid companies in the indices regardless of their fundamentals,
we remain confident that the fund's approach will lead to outperformance over
time. Fundamentals will likely be the key driver of performance in emerging
markets over the long term, even though liquidity factors and developments in
the world's major markets may have a short-term impact on market levels. As a
result, we encourage
4 SCUDDER EMERGING MARKETS GROWTH FUND
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investors to look past short-term fluctuations and instead concentrate on the
advantages that a long-term investment in some of the world's fastest-growing
economies has to offer. For more information on recent market conditions and the
fund's investment strategy, please turn to the Portfolio Management Discussion
that begins on page 10.
Finally, it should be noted that Daniel Pierce retired in June of this year as
President of Scudder Emerging Markets Growth 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 going forward. I am pleased to join the Emerging Markets Growth
Fund's team in this capacity, and look forward to serving your interests.
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-SCUDDER (1-800-728-3337), or visit our Web site at
www.scudder.com.
Sincerely,
/s/ Nicholas Bratt
Nicholas Bratt
President,
Scudder Emerging Markets Growth Fund
SCUDDER EMERGING MARKETS GROWTH FUND 5
<PAGE>
Performance Update
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October 31, 1999
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE:
LINE CHART DATA:
Scudder Emerging IFC Emerging
Markets Growth Markets Investable
Fund Index*
5/96** 10000 10000
10/96 10559 9676
4/97 12727 10621
10/97 11986 8711
4/98 12252 9013
10/98 8565 6182
4/99 9398 8236
10/99 9754 8833
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 10/31/1999 $10,000 Cumulative Annual
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Scudder Emerging Markets Growth Fund
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1 year $ 11,389 13.89% 13.89%
Life of Fund** $ 9,893 -1.07% -0.31%
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IFC Emerging Markets Investable Index*
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1 year $ 14,290 42.90% 42.90%
Life of Fund** $ 8,833 -11.67% -3.56%
* 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.
** The Fund commenced operations on May 8, 1996. Index comparisons begin May
31, 1996.
6 SCUDDER EMERGING MARKETS GROWTH FUND
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Returns and Per Share Information
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Yearly periods ended October 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
IFC Emerging Scudder Emerging
Markets Markets Growth
Investable Index* Fund
7.08 -3.24
13.51 -9.97
-28.54 -29.04
13.89 42.90
1996** 1997 1998 1999
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Fund Total Return (%) 7.08 13.51 -28.54 13.89
Index Total Return (%) -3.24 -9.97 -29.04 42.90
Net Asset Value ($) 12.85 14.56 10.36 11.75
Income Dividends ($) -- .03 .06 .04
* 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.
** The Fund commenced operations on May 8, 1996. Index comparisons begin May
31, 1996.
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.
SCUDDER EMERGING MARKETS GROWTH FUND 7
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Portfolio Summary
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October 31, 1999
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Geographical
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THE ORIGINAL DOCUMENT CONTAINS A PIE CHART REFLECTING THE INFORMATION LISTED
BELOW:
(Excludes 6% Cash Equivalents) Management continued to
raise its weighting in
Pacific Basin 30% Asian countries that have
demonstrated a
Europe 27% commitment to structural
reform.
Latin America 20%
Africa 18%
Other 5%
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100%
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Sectors
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THE ORIGINAL DOCUMENT CONTAINS A PIE CHART REFLECTING THE INFORMATION LISTED
BELOW:
(Excludes 6% Cash Equivalents) Over the last six months,
the Fund's weightings in
Financial 23% the technology and
communications sectors
Communications 19% has increased.
Consumer Staples 18%
Technology 11%
Consumer Discretionary 5%
Construction 5%
Energy 5%
Metals & Minerals 4%
Health 3%
Other 7%
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100%
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8 SCUDDER EMERGING MARKETS GROWTH FUND
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Ten Largest Equity Holdings
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The Fund's top holdings reflect a focus on well-managed companies in countries
that have exhibited favorable growth characteristics.
(24% of Portfolio)
1. Samsung Electronics Co., Ltd.
Electronic manufacturer in Korea
2. Fomento Economico Mexicano S.A. de C.V.
Producer of beer and soft drinks in Mexico
3. Samsung Securities Co., Ltd.
Securities company in Korea
4. Hon Hai Precision Industry Co., Ltd.
Manufacturer of electronic connectors, cable assemblies
and memory chips in Taiwan
5. Korea Telecom Corp.
Telecommunication services in Korea
6. Taiwan Semiconductor Manufacturing Co.
Manufacturer of integrated circuits in Taiwan
7. Egyptian Mobile Phone Network, Ltd.
Cellular telecommunication services in Egypt
8. Alpha Credit Bank A.E.
Commercial bank in Greece
9. Pliva D.D.
Pharmaceutical company in Croatia
10. Matav Rt
Telecommunication services in Hungary
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
SCUDDER EMERGING MARKETS GROWTH FUND 9
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Portfolio Management Discussion
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October 31, 1999
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 twelve-month period ended October
31, 1999?
A: The fund's return rose 13.89% over the last twelve months, and
has gained 3.70% since we last issued a report on April 30. In
contrast, the fund's unmanaged benchmark, the IFC Emerging Markets
Index, rose 42.90% and 7.26% over the same periods.
Q: Why did the fund underperform over the period?
A: The fund has lost considerable ground because of its discipline
of investing in companies with strong fundamental merits. It is now
clear that the tidal wave of liquidity released by major central
banks last fall (to forestall a global financial meltdown) was a
more important driver of stock prices than fundamentals. The wall of
money found its way into the largest, most familiar companies across
all of the global markets. In those countries with broken banking
systems and overcapacity, the surge of liquidity went full force
into the stock markets since the real economies could not absorb the
capital, and banks were incapable of financial intermediation. On
the individual stock level, consequently, the ability to absorb
liquidity was a primary concern of investors, and fundamentals were
of secondary importance. This description most aptly fits the
stricken Asian economies. In hindsight, we did not sufficiently
recognize the magnitude of the liquidity that was released.
As money heads for the easy target of the large-cap stocks that are
heavily represented in the Index, the momentum becomes
self-reinforcing. Index stocks outperform, drawing more money to
themselves, which further expands their investability and
outperformance. Thai banks are a perfect example. They started the
year insolvent by Western standards and became more insolvent as the
year progressed. However, their dreadful fundamentals proved
10 SCUDDER EMERGING MARKETS GROWTH FUND
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to be no impediment to 100% gains in their stock prices. At one
point in the feeding frenzy, foreigners were willing to pay a 75%
premium over the local share price to own a share of Bangkok Bank.
Q: Do you see any signs that the emphasis on liquidity is waning?
A: Yes, it appears as though a renewed focus on fundamentals has
begun. This has arguably been triggered by the recent rate increases
by the U.S. Federal Reserve, which are capping liquidity growth.
Another contributing factor may be the realization that the road to
structural reform in Asia is both difficult and bumpy. It is now
evident that Southeast Asian countries are making very slow
progress. These markets dropped significantly in the third quarter.
We are aware that there may be an additional focus on liquidity in
the months ahead if retail investors get the Y2K jitters. However,
any further movement into the large-caps is not likely to come close
to what we saw earlier this year. The ability of retail investors to
generate cash is, after all, dramatically less than that of the G-7
Central Banks'.
Looking beyond the New Year's noise, where does money go next? We
firmly believe that fundamentals will matter again next year,
primarily because there will not be a huge excess of liquidity
looking for a home. Second, the optimists and momentum investors
have seen some of the potholes in the road to structural reform,
causing some of the momentum to reverse in the last three months.
Third, many dramatic valuation anomalies have emerged. Astoundingly
cheap companies in well-run economies are plentiful at this time.
However, we have observed this condition earlier this year only to
see many of these markets get cheaper. One can never call a reversal
with certainty ahead of time, but with a curtailment of the
liquidity that is necessary to maintain the momentum of the indices,
a reversal cannot be far away. If liquidity shrinks, what can be
easily sold? Index stocks, of course.
SCUDDER EMERGING MARKETS GROWTH FUND 11
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Thus begins the unwinding of a self-feeding mechanism. Money comes
out of index stocks, they fall, other investors then trim their
benchmark holdings because they are "overweight," and the process
unwinds. In our view, it is quite likely that in a year or two
benchmarking will not be such a fad.
Q: How is the fund currently positioned?
A: The fund is positioned in the most attractive growth markets with
the most compelling valuations. We favor markets that generate their
own sources of liquidity, thus buffering them from contractions in
global liquidity. Economies in the Middle East with large oil
exports are a good example. Egypt, for example, started to perform
well as soon as the price of oil began to rise, tacking on 10% over
the final six weeks of the period. Nearly 11% of the fund's net
assets are invested there, and we believe that Egypt's market could
double from its recent lows over the next year. Three of our
holdings recently reported earnings growth faster than 70% for the
first half of 1999, but are still selling at less than ten times
2000 earnings.
In Asia, we particularly like Korea, where we hold 15% of the fund's
net assets. Korea, unlike its stricken Asian brethren, is making
profound structural changes. The market sold off heavily in the
third quarter over the potential effects of Daewoo's restructuring
efforts on the financial sector. We believe that the anxiety is
largely misplaced, and that this process will be responsibly
managed. Investor confidence levels will likely be much higher by
the end of the year. If the market continues to drop, we will add to
the position. We just returned from our fourth trip to Korea this
year, and are becoming more convinced that structural reform is
opening huge growth potential in its economy, and is paving the way
for a more efficient allocation of capital. Part and parcel of this
is the newfound focus on profit growth among the companies in the
vanguard of change.
In Central Europe, the accession of new members to the EMU
approaches with the milennium. As the better
12 SCUDDER EMERGING MARKETS GROWTH FUND
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managed economies progressively converge their legal, regulatory,
and monetary systems to Western European standards, their risk
profiles converge as well. Portugal's and Greece's markets enjoyed
huge re-ratings as they became viewed as developed, rather than
developing, nations. We believe that the same phenomenon will occur
in Hungary, Poland, and Estonia, our favored markets. Aiding the
process will be the economic boost provided by stronger Western
European economies. We believe that Central Europe is a truly
leveraged play in the rebound Western Europe is now experiencing.
Q: The fund remains underweight in Latin America. Why?
A: We remain concerned about the large deficits that are weighing on
Brazil, a country that is heavily represented in the benchmark
index. The government has effectively managed the economy through
the aftermath of the currency devaluation, but it has failed to
address the issue of the country's growing trade and budget
deficits. Since Brazil's savings rate is too low to make up for the
shortfall, the economy is dependent on external sources to finance
growth. This dynamic puts additional pressure on exchange rates and
leaves highly-leveraged companies vulnerable to shifts in sentiment.
Consequently, we have held on to a core holding of high quality
companies that we believe will continue to flourish over the long
term even in the face of economic volatility. However, we have
generally found better investment opportunities elsewhere.
Q: What would you tell investors at this point?
A: We urge investors to maintain a focus on the long-term trends
developing in emerging markets. We believe that over time, those
markets that display strong, self-sustaining growth will shine. The
massive discounts at which many of these markets trade, compared to
both their own histories as well as global norms, are unsustainable.
Once the emphasis on fundamentals returns, we feel that the fund
will be well-positioned for outperformance.
SCUDDER EMERGING MARKETS GROWTH FUND 13
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Scudder Emerging Markets Growth Fund:
A Team Approach to Investing
Scudder Emerging Markets Growth Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an important
role in the fund's management process. Team members work together to develop
investment strategies and select securities for the fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits fund investors
by bringing together many disciplines and leveraging our extensive resources.
[PHOTO]
Joyce E. Cornell
Lead portfolio manager Joyce E. Cornell has overall responsibility for the
fund's day-to-day management and investment strategies. Ms. Cornell has been a
portfolio manager with the Adviser since 1993, and joined the Adviser in 1991
after eight years of investment experience as a research analyst.
[PHOTO]
Tara C. Kenney
Portfolio manager Tara C. Kenney joined the Adviser in 1995 and has over eleven
years of financial industry experience.
[PHOTO]
Andre J. DeSimone
Portfolio manager Andre J. DeSimone joined the Adviser in 1997 after three years
as Chief Executive Officer of a stock brokerage company in Kenya. Mr. DeSimone
also has six years of experience in investment banking.
14 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
Glossary of Investment Terms
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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.
EMU (European Monetary Union)
The integration of European economies involving, among other changes, a move to
a single currency for member nations. To qualify for EMU membership, nations
will be required to meet certain guidelines concerning total governmental debt
and annual budget deficits, designed to ensure a strong common currency.
Fiscal Deficit
The difference between a country's income and its expenditures. Governments
generally issue debt to finance this shortfall. A low rate of savings in a
debtor nation means that investment from foreign sources will be required.
Fundamental Research
Analysis of companies based on the projected impact of management, products,
sales, and earnings on their balance sheets and income statements. Distinct from
technical analysis, which evaluates the attractiveness of a stock based on
historical price and trading volume movements, rather than the financial results
of the underlying company.
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.
Restructuring
The general term for major corporate changes aimed at greater efficiency and
adaptation to changing markets. Cost-cutting initiatives, debt retirement,
management realignments, and the sale of non-core businesses are all
developments frequently associated with corporate restructuring.
SCUDDER EMERGING MARKETS GROWTH FUND 15
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Trade Deficit
The difference between the value of goods and services a country imports and the
value of goods and services it exports. A deficit exists when the value of
imports is greater than the value of exports. Such a condition is often
considered to be a negative factor for the strength of the currency, since a
deficit implies weaker demand for the currency of the country in question
relative to its trading partners.
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.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
16 SCUDDER EMERGING MARKETS GROWTH FUND
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Investment Portfolio as of October 31, 1999
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<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
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Repurchase Agreements 4.1%
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<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 10/29/1999 at 5.2%, to be repurchased at
$4,149,797 on 11/1/1999, collateralized by a
$4,152,000 U.S. Treasury Inflationary Index Note, 3.625%, -----------
1/15/2008 (Cost $4,148,000) ..................................................... 4,148,000 4,148,000
-----------
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Short Term Notes 2.0%
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Federal Home Loan Mortgage Corp., 5.234%**, 11/1/1999 -----------
(Cost $2,000,000) ............................................................... 2,000,000 2,000,000
-----------
<CAPTION>
Shares
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<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible Preferred Stock 0.4%
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Thailand
Siam Commercial Bank Public Company Ltd., 5.250% -----------
(Provider of financial services) (Cost $236,077) ................................ 336,000 380,583
-----------
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Common Stocks 93.6%
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Bahrain 0.1%
Arab Insurance Group* (Insurance company) .......................................... 81,690 62,084
-----------
Botswana 0.3%
Sechaba Investment Trust Co. (Brewery) ............................................. 340,000 346,766
-----------
Brazil 4.3%
Aracruz Celulose S.A. "B" (ADR) (Producer of eucalyptus
kraft pulp) ..................................................................... 71,300 1,461,650
Companhia Paranaense de Energia -- Copel (pfd.) "B" (ADR) (Electric power utility. 100,000 662,500
Companhia Vale do Rio Doce (pfd.) "A" (Diverse mining
and industrial complex) ......................................................... 25,525 501,852
Companhia Vale do Rio Doce (pfd.) (ADR) ............................................ 4,500 89,578
Petroleo Brasileiro S.A. (pfd.) (Petroleum company) ................................ 5,115,300 815,349
Tele Centro Sul Participacoes S.A. (pfd.) (Provider of
cellular telecommunication services) ............................................ 15,000,000 179,492
Tele Centro Sul Participacoes S.A. (pfd.) (ADR) .................................... 6,060 362,085
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER EMERGING MARKETS GROWTH FUND 17
<PAGE>
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<TABLE>
<CAPTION>
Market
Shares Value ($)
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<S> <C> <C>
Telecomunicacoes de Minas Gerais S.A. (voting)*
(Telecommunication services) .................................................... 15,530 131
Telecomunicacoes de Minas Gerais S.A. "B" (pfd.) ................................... 395 8
Telecomunicacoes de Minas Gerais S.A. "C"* (pfd.) .................................. 395 4
Votorantim Celulose e Papel S.A. (pfd.) (Producer and
exporter of printing, writing and other special papers) ......................... 9,500,000 277,977
-----------
4,350,626
-----------
Bulgaria 0.1%
Bulgartabak Holdings* (Tobacco products) ........................................... 6,500 87,693
-----------
Canada 0.2%
Corriente Resources, Inc.* (Mining and processing of gold,
bismuth, tin and tungsten in South America) ..................................... 325,900 143,978
-----------
Chile 2.0%
Empresa Nacional De Telecom* (Telecommunication services) .......................... 28,300 104,681
Laboratorio Chile S.A. (ADR) (Manufacturer and distributor
of off-patent pharmaceutical products) .......................................... 20,750 360,531
Vina Concha y Toro S.A. (ADR) (Wine producer) ...................................... 43,700 1,507,650
-----------
1,972,862
-----------
China 0.4%
Shanghai Petrochemical Co., Ltd. "H" (Manufacturer of
petrochemical and petroleum products) ........................................... 1,884,000 388,054
-----------
Croatia 2.1%
Pliva D.D. (GDR) (Pharmaceutical company) .......................................... 183,720 2,002,548
-----------
Czech Republic 0.8%
Ceske Radiokomunikace (GDR)* (TV and radio signal
transmission services) .......................................................... 24,000 768,000
-----------
Egypt 10.9%
Al Ahram Beverages Co. "S.A.E" (GDR)* (Beverage
Producer) ....................................................................... 67,000 1,976,500
Commercial International Bank (Commercial bank) .................................... 29,450 352,885
Commercial International Bank (GDR) ................................................ 10,950 135,233
EFG Hermes Holdings, S.A.E. (GDR) (Brokerage firm) ................................. 40,000 494,000
Eastern Tobacco Co. (Maker of tobacco products) .................................... 45,000 1,063,732
Egyptian Mobile Phone Network, Ltd.* (Cellular
telecommunication services) ..................................................... 80,766 2,083,433
International Foods Co.* (Food producer) (b) ....................................... 34,000 380,939
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
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<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Madinet Nasser City Housing Co. (Real estate
development company) ............................................................ 27,340 293,566
Misr International Bank (Commercial bank) .......................................... 31,810 681,736
Olympic Group Financial Investments (Through
subsidiaries, manufactures and markets household
appliances) ..................................................................... 125,000 400,875
Orascom Construction Industries* (Construction
company) ........................................................................ 16,080 225,026
Orascom Hotel Holdings* (Operator of hotels) ....................................... 154,500 363,503
Oriental Weavers Corp. (Carpet manufacturer) ....................................... 18,600 325,364
Suez Cement Co. (Cement producer) .................................................. 51,577 842,224
Suez Cement Co. (GDR) .............................................................. 24,600 412,050
Torrah Portland Cement Co. (Cement producer) ....................................... 47,005 945,582
-----------
10,976,648
-----------
Estonia 0.4%
AS Eesti Telekom (GDR) (Provider of telecommunication
services) ....................................................................... 27,500 435,875
-----------
Finland 0.8%
Nokia AB Oy (ADR) (Leading cellular telephone
manufacturer) ................................................................. 7,300 843,606
-----------
Ghana 0.5%
Social Security Bank Ltd. PLC (Full service commercial
bank) ......................................................................... 804,000 529,757
-----------
Greece 4.3%
Alpha Credit Bank A.E. (Commercial bank) ......................................... 26,833 2,058,443
Ethniki General Insurance Co. (Insurance and reinsurance
company) ...................................................................... 8,800 389,580
Ethniki General Insurance Co. (Rights) ........................................... 8,800 52,403
Hellenic Telecommunication Organization S.A. (OTE)
(Telecommunication services) .................................................. 30,700 652,565
National Bank of Greece S.A. (Full service bank) ................................. 16,000 1,150,711
-----------
4,303,702
-----------
Hong Kong 0.7%
China Telecom Ltd., (ADR)* (Provider of cellular
telecommunication services) ................................................... 11,000 742,500
Moulin International Holdings Ltd., Warrants*
(Manufacturer of optical products) ............................................ 249,208 321
-----------
742,821
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER EMERGING MARKETS GROWTH FUND 19
<PAGE>
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<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hungary 4.6%
Demasz RT (Distributor of electricity) ........................................... 5,500 394,160
Graboplast Rt* (Producer of home improvement materials,
artificial leather and book bindings) ......................................... 2 15
Magyar Olaj-es Gazipari Rt (Integrated domestic oil
and gas company) .............................................................. 27,200 548,940
Matav Rt "B" (ADR) (Telecommunications company) .................................. 6,700 193,044
Matav Rt "A" (Telecommunication services) ........................................ 340,800 1,986,169
OTP Bank Rt (Savings and commercial bank) ........................................ 29,100 1,323,790
Pick Szeged Rt (Processor, marketer and distributor of
meat products) ................................................................ 6,265 215,719
-----------
4,661,837
-----------
India 2.3%
Bharat Heavy Electricals Ltd. (Manufacturer of heavy
electrical equipment) ......................................................... 27,700 170,972
Bharat Petroleum Corp. Ltd (Oil exploration and refining,
manufacturer of petroleum products) ........................................... 28,700 191,686
Dr. Reddy's Laboratories Ltd. (Pharmaceutical
company) ...................................................................... 11,500 282,070
HDFC Bank Ltd. (Corporate banking and financial
services) ..................................................................... 21,900 45,949
Hindustan Petroleum Corp. Ltd (Oil refining, manufacturer
of petroleum products) ........................................................ 87,600 322,700
Housing Development Finance Corp. Ltd. (Housing
finance provider to individuals, corporations and
developers) ................................................................... 14,000 85,122
Satyam Computer Services Ltd. (Provider of software
services) ..................................................................... 16,700 489,231
Videsh Sanchar Nigam Ltd. (Telecommunication
services) ..................................................................... 17,400 527,971
Videsh Sanchar Nigam Ltd. (GDR) .................................................. 9,900 158,153
-----------
2,273,854
-----------
Indonesia 1.1%
Indonesia Satellite Corp. (ADR) (International
telecommunication services) ................................................... 5,400 86,063
PT Bank Pan Indonesia, Warrants (expire 7/8/2002)*
(Commerical bank) ............................................................. 22,294 882
PT Indofood Sukses Makmur Tbk* (Manufacturer of food
products) ..................................................................... 124,000 147,165
PT Lippo Bank Tbk* (Commercial and foreign exchange
bank) ......................................................................... 11,500,000 379,121
PT Ramayana Lestari Sentosa Tbk (Operator of department
stores) ....................................................................... 700,000 492,308
-----------
1,105,539
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Israel 0.7%
Check Point Software Technologies Ltd.* (Developer,
marketer and supporter of management solutions for
active networks) .............................................................. 3,500 404,906
Matav-Cable Systems Media Ltd. (Operator and provider
of broadband cable television services) ....................................... 13,000 300,316
-----------
705,222
-----------
Jordan 0.8%
Arab Bank PLC (Commercial bank) .................................................. 630 167,935
Aramex International Ltd.* (Express delivery and freight
forwarding in the Middle East and India) ...................................... 17,700 152,663
Hikma (Pharmaceutical company) (b) ............................................... 68,000 492,615
-----------
813,213
-----------
Kenya 1.7%
James Finlay PLC (Tea producer) .................................................. 632,000 769,238
Sasini Tea & Coffee Ltd. (Tea and coffee grower and
processor) .................................................................... 970,000 671,191
Uchumi Supermarket Ltd. (Supermarket operator) ................................... 470,000 245,476
-----------
1,685,905
-----------
Korea 15.1%
Hankook Tire Manufacturing Co., Ltd. (Manufacturer of
tires, tire tubes, batteries, and aluminum alloy wheels) ........................ 2 7
Hite Brewery Co., Ltd.* (Brewery) .................................................. 16,384 573,679
Housing & Commercial Bank* (Bank) .................................................. 32,210 851,236
Korea Telecom Corp. (Telecommunication services) ................................... 21,100 1,419,566
Korea Telecom Corp. (ADR) .......................................................... 31,100 1,096,275
Korea Tobacco and Ginseng Corp. (Tobacco company) .................................. 17,000 463,443
Pohang Iron & Steel Co., Ltd. (Steel producer) (c) ................................. 7,180 879,198
SK Telecom Co., Ltd. (Mobile telecommunication
services) ....................................................................... 450 519,592
Samchully (Producer and distributor of anthracite
and gas) ........................................................................ 10,000 383,493
Samsung Corp., Ltd.* (Trading company) ............................................. 72,800 1,153,147
Samsung Electro-Mechanics Co. (Electronics parts
company) ........................................................................ 16,712 808,083
Samsung Electronics Co., Ltd. (Electronics manufacturer) ........................... 19,500 3,251,355
Samsung Securities Co., Ltd. (Securities company) .................................. 70,518 2,469,159
Samsung Securities Co., Ltd. (Rights) (b) .......................................... 16,924 179,187
Shinhan Bank (GDR)* (Bank) ......................................................... 19,100 408,263
Shinsegae Department Store Co. (Major department
store chain) .................................................................... 14,000 769,154
Shinsegae Department Store Co. (Rights) ............................................ 2,447 43,248
-----------
15,268,085
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER EMERGING MARKETS GROWTH FUND 21
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mauritius 0.1%
New Mauritius Hotels Ltd. (Operator of hotels) ..................................... 55,300 98,457
-----------
Mexico 10.2%
Consorcio ARA, S.A. de C.V.* (Low-income housing
developer) ...................................................................... 770,000 867,402
Controladora Comercial Mexicana S.A. de C.V. "BC" (GDR)
(Operator of supermarkets and warehouses) ....................................... 14,800 244,200
Fomento Economico Mexicano S.A. de C.V. "B" (Producer
of beer and soft drinks) ........................................................ 957,500 3,110,255
Gruma S.A. de C.V. "B" (Producer and distributor of
corn flour) ..................................................................... 556,552 727,776
Grupo Financiero Banorte S.A. de C.V. "O"* (Provider of
financial services) ............................................................. 820,700 1,025,341
Grupo Industrial Bimbo S.A. de C.V. "A" (Producer of
bread and other baked goods) .................................................... 523,900 962,165
Grupo Modelo S.A. "C" (Brewery) .................................................... 178,000 435,502
Organizacion Soriana S.A. de C.V. "A" (Retailer) ................................... 179,600 665,670
StarMedia Network, Inc.* (Online network across
Latin America) .................................................................. 1,800 51,750
Telefonos de Mexico S.A. de C.V. "L" (ADR)
(Telecommunication services) .................................................... 20,400 1,744,200
Tubos de Acero de Mexico S.A. (ADR) (Manufacturer of
various types of pipes, casings and tubing) ..................................... 41,700 456,094
-----------
10,290,355
-----------
Morocco 0.9%
Omnium Nord Africaine (Diversified holding company) ................................ 1,050 127,088
Societe des Brasseries du Nord Marocain (Distributor of
beer and carbonated beverages) .................................................. 1,600 358,626
WAFABANK (Commercial bank) ......................................................... 4,107 456,089
-----------
941,803
-----------
Nigeria 0.2%
First Bank of Nigeria plc* (Commerical bank) ....................................... 2,500,000 246,719
-----------
Oman 2.2%
Bank Muscat Al Ahli Al Omani* (Commercial bank) .................................... 5,250 60,683
Commercial Bank of Oman* (Commercial bank) ......................................... 17,000 82,131
National Bank of Oman Ltd.* (Commercial bank) ...................................... 119,553 1,226,599
Oman Cable Industry SAOG* (Manufacturer of electrical
and power cables) (b) ........................................................... 18,685 184,426
Oryx Fund, Ltd.* (Mutual fund domiciled in Guernsey,
investing in the Middle East) ................................................... 52,275 627,300
-----------
2,181,139
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peru 2.1%
Cementos Lima S.A. "T" (Cement producer) ........................................... 47,999 764,184
Enrique Ferreyros y Cia. (Machinery manufacturer) .................................. 1,072,090 584,329
Gitennes Exploration Inc.* (Exploration and development
of gold mining properties in Peru) .............................................. 54,000 6,973
Minas Buenaventura S.A. "B" (Mining company) ....................................... 99,000 812,220
-----------
2,167,706
-----------
Philippines 0.8%
Bank of the Philippine Islands (Commercial bank) ................................... 110,000 290,773
International Container Terminal Services, Inc.*
(Containerized cargo handling firm) ............................................. 5,555,375 533,371
-----------
824,144
-----------
Poland 7.3%
Central European Distribution Corp.* (Distributor of
alcoholic beverages) .......................................................... 36,200 212,675
Cersanit-Krasnystaw S.A. "B" (Producer of ceramic
sanitation and porcelain products) ............................................ 105,000 374,511
Elektrim Spolka Akcyjna S.A.* (Manufacturer of power
equipment, electrical machinery and apparatus) ................................ 113,300 966,655
ITI Group S.A.* (Telecommunication services) (b) ................................. 4,100 943,000
KGHM Polska Miedz S.A. (Producer of copper and silver) ........................... 150 853
Netia Holdings BV* (Telecommunication services) (b) .............................. 96,742 1,511,594
Netia Holdings BV "O"* (b) ....................................................... 8,729 136,391
Netia Holdings BV "P"* (b) ....................................................... 7,330 114,531
Netia Holdings BV "R"* (b) ....................................................... 3,980 62,187
Orbis S.A.* (Hotel owner and operator) ........................................... 68,800 495,680
Telekomunikacja Polska S.A. (Owner and operator of
telecommunication networks) ................................................... 212,500 1,082,770
Wielkopolski Bank Kredytowy S.A. (Commercial bank) ............................... 236,000 1,381,491
Zaklady Lentex S.A.* (Producer of PVC products used in
cars, footwear, housing and public construction) .............................. 25,800 101,500
-----------
7,383,838
-----------
Portugal 0.5%
Jeronimo Martins SGPS, S.A. (Food producer and retailer) ......................... 11,500 321,783
SIVA-SGPS S.A. (Importer of automobiles) ......................................... 15,600 210,358
-----------
532,141
-----------
Russia 1.5%
LUKoil Holdings (ADR) (Extracter, transporter, refiner, and
provider of oil and gas) ...................................................... 11,000 352,000
Surgutneftegaz (ADR) (Extracter of oil and natural gas) .......................... 126,900 1,062,788
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER EMERGING MARKETS GROWTH FUND 23
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vimpel-Communications SP (ADR)* (Cellular
telecommunication services) ................................................... 5,600 94,500
-----------
1,509,288
-----------
Singapore 0.0%
Asia Pulp & Paper Co., Ltd. Warrants (expire 7/27/2000)*
(Producer of paper and pulp) .................................................. 15,280 13,370
-----------
South Africa 1.1%
AngloGold Ltd. (Holding company for group of companies
which mine gold) .............................................................. 4,050 228,828
Gencor Ltd. (Holding company with interests in precious
metals mining) ................................................................ 38,900 144,414
Gold Fields Ltd. (Gold mining company) ........................................... 61,500 294,407
Harmony Gold Mining Co., Ltd. (Gold mining company) .............................. 70,313 460,815
-----------
1,128,464
-----------
Sri Lanka 0.1%
Tea Plantations Investment Trust PLC (Trust investing in
regional plantations) ......................................................... 100,700 95,238
-----------
Taiwan 6.9%
Bank Sinopac (Commerical bank) ................................................... 732,652 413,445
Chinatrust Commercial Bank (Commerical bank) ..................................... 364,240 334,155
Far East Textile Ltd. (Manufacturer of natural and synthetic
textile products) ............................................................. 694,430 950,134
Hon Hai Precision Industry Co., Ltd. (Manufacturer of
electronic connectors, cable assemblies and memory
chips) ........................................................................ 372,400 2,547,629
President Chain Store Corp. (Operator of Seven-Eleven
convenience stores) ........................................................... 43,660 123,189
Siliconware Precision Industries Co. (Manufacturer of
packaging for integrated circuits) ............................................ 151,290 271,864
Taiwan Semiconductor Manufacturing Co. (Manufacturer
of integrated circuits) ....................................................... 486,760 2,163,719
Yang Ming Marine Transport (Marine transportation) ............................... 317,000 176,888
-----------
6,981,023
-----------
Thailand 0.9%
Bangkok Bank Ltd.* (Foreign registered) (Commercial
bank) ......................................................................... 75,100 174,990
Siam Cement Co., Ltd.* (Foreign registered) (Construction
materials and industrial conglomerate) ........................................ 14,600 377,994
Siam Commercial Bank, Warrants (expire 5/10/2002)* ............................... 451,500 157,806
Thai Farmers Bank Public Co., Ltd.* (Foreign registered)
(Commercial bank) ............................................................. 143,300 202,197
-----------
912,987
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Turkey 3.5%
Akbank A.S. (Banking and investment organization) ................................ 55,921,000 872,366
Koc Holding A.S. (Holding company with interests in the
automotive and durable goods industries) ...................................... 4,642,000 468,284
Migros Turkey (Retailer) ......................................................... 2,840,400 1,225,915
Tupras-Turkiye Petrol Rafinerileri A.S. (Petroleum refinery) ..................... 13,749,000 915,132
-----------
3,481,697
-----------
Zimbabwe 1.1%
Delta Corp., Ltd. (Brewery) ...................................................... 902,031 249,323
Meikles Africa Ltd. (GDR)* (Hotel operator) ...................................... 200,400 200,400
Tanganda Tea Company Ltd. (Tea producer and
distributor) .................................................................. 1,476,212 673,630
-----------
1,123,353
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $89,365,220) 94,380,397
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $95,749,297) (a) 100,908,980
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase, not a coupon rate.
(a) The cost for federal income tax purposes was $95,837,776. At October 31,
1999, net unrealized appreciation for all securities based on tax cost was
$5,071,204. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $16,306,562 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$11,235,358.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $4,004,871 (3.9% 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 October 31, 1999 aggregated $4,259,374. These
securities may also have certain restrictions as to resale.
(c) Security that has met the foreign-ownership limitation valued at a premium
in good faith by the Valuation Committee of the Board of Directors. The
cost of the security at October 31, 1999 was $674,263. The aggregate
premium ($16,760) over the local share price ($862,438) for the security
valued by the Valuation Committee was approximately 0.02% of the Fund's
net assets at October 31, 1999.
The accompanying notes are an integral part of the financial statements.
SCUDDER EMERGING MARKETS GROWTH FUND 25
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 1999
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at market (identified cost $95,749,297) ............ $ 100,908,980
Cash ............................................................ 100,754
Foreign currency holdings, at market (identified
cost $1,319,202) ............................................. 1,324,545
Receivable for investments sold ................................. 1,933,236
Dividends and interest receivable ............................... 274,197
Receivable for Fund shares sold ................................. 15,744
Foreign taxes recoverable ....................................... 3,525
Deferred organization expense ................................... 3,546
Other assets .................................................... 683
-------------
Total assets .................................................... 104,565,210
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased ............................... 953,993
Payable for Fund shares redeemed ................................ 343,528
Accrued management fee .......................................... 197,262
Other payables and accrued expenses ............................. 430,431
-------------
Total liabilities ............................................... 1,925,214
- --------------------------------------------------------------------------------
Net assets, at market value $ 102,639,996
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income .... (64,694)
Unrealized appreciation (depreciation) on:
Investments ................................................... 5,159,683
Foreign currency related transactions ......................... (19,562)
Accumulated net realized loss ................................... (44,940,124)
Paid-in capital ................................................. 142,504,693
- --------------------------------------------------------------------------------
Net assets, at market value $ 102,639,996
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($102,639,996 / 8,731,960 shares of capital stock -------------
outstanding, $.01 par value, 100,000,000 shares authorized) .. $ 11.75
-------------
The accompanying notes are an integral part of the financial statements.
26 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
- -----------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes witheld of $131,249) .......................... $ 1,993,274
Interest ...................................................................... 178,857
------------
2,172,131
------------
Expenses:
Management fee ................................................................ 1,433,301
Services to shareholders ...................................................... 733,096
Custodian and accounting fees ................................................. 695,127
Directors' fees and expenses .................................................. 46,293
Registration fees ............................................................. 30,124
Auditing ...................................................................... 68,574
Reports to shareholders ....................................................... 108,879
Legal ......................................................................... 22,800
Amortization of organization expense .......................................... 5,159
Other ......................................................................... 17,501
------------
Total expenses before reductions .............................................. 3,160,854
Expense reductions ............................................................ (580,913)
------------
Expenses, net ................................................................. 2,579,941
- -----------------------------------------------------------------------------------------------
Net investment income (loss) (407,810)
- -----------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ................................................................... (11,270,440)
Foreign currency related transactions (including CPMF tax of $12,675) ......... (422,406)
------------
(11,692,846)
------------
Net unrealized appreciation (depreciation) during the period on:
Investments ................................................................... 26,772,206
Foreign currency related transactions ......................................... (17,972)
------------
26,754,234
- -----------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 15,061,388
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 14,653,578
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER EMERGING MARKETS GROWTH FUND 27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ..................................................... $ (407,810) $ 872,361
Net realized gain (loss) from investment transactions ............................ (11,692,846) (33,020,863)
Net unrealized appreciation (depreciation) on investment
transactions during the period ................................................ 26,754,234 (26,379,850)
------------- -------------
Net increase (decrease) in net assets resulting from operations .................. 14,653,578 (58,528,352)
------------- -------------
Distributions to shareholders from net investment
income ........................................................................ (211,905) (862,031)
------------- -------------
Distributions in excess of net investment income ................................. (175,892) --
------------- -------------
Fund share transactions:
Proceeds from shares sold ........................................................ 22,608,308 57,798,973
Net asset value of shares issued to shareholders in reinvestment of
distributions ................................................................. 324,120 731,288
Cost of shares redeemed .......................................................... (59,509,301) (94,348,182)
Redemption fees .................................................................. 149,185 385,726
------------- -------------
Net increase (decrease) in net assets from Fund share transactions ............... (36,427,688) (35,432,195)
------------- -------------
Increase (decrease) in net assets ................................................ (22,161,907) (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 $64,694 and $609,346, ------------- -------------
respectively) ................................................................. $ 102,639,996 $ 124,801,903
------------- -------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................................ 12,048,140 15,080,532
------------- -------------
Shares sold ...................................................................... 2,001,721 4,313,252
Shares issued to shareholders in reinvestment of distributions ................... 30,551 52,272
Shares redeemed .................................................................. (5,348,452) (7,397,916)
------------- -------------
Net increase (decrease) in Fund shares ........................................... (3,316,180) (3,032,392)
------------- -------------
Shares outstanding at end of period .............................................. 8,731,960 12,048,140
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 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>
- ---------------------------------------------------------------------------------------------------------------
Years Ended October 31, 1999 1998 1997 1996(b)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.36 $ 14.56 $ 12.85 $ 12.00
----------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.04) .06 .02 (.02)
Net realized and unrealized gain (loss) on investment
transactions 1.46 (4.23) 1.67 .86
----------------------------------------------
Total from investment operations 1.42 (4.17) 1.69 .84
Distributions to shareholders from net investment income (.04) (.06) (.03) --
Redemptions fees .01 .03 .05 .01
Net asset value, end of period $ 11.75 $ 10.36 $ 14.56 $ 12.85
==============================================
Total Return (%) (c) 13.89 (28.54) 13.51 7.08(d)**
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 103 125 220 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 daily net assets (%) 2.77 2.31 2.33 3.79*
Ratio of net investment income (loss) to average daily net
assets (%) (.36) .48 .11 (.32)*
Portfolio turnover rate (%) 63.6 44.8 61.5 19.5*
</TABLE>
* Annualized
** Not annualized
(a) Based on monthly average shares outstanding during the period.
(b) For the Period May 8, 1996 (commencement of operations) to October 31,
1996.
(c) Total returns would have been lower had certain expenses not been reduced.
(d) Shareholders redeeming shares held less than one year will have a lower
total return due to the effect of the 2% redemption fee.
SCUDDER EMERGING MARKETS GROWTH FUND 29
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1999
A. Significant Accounting Policies
Scudder Emerging Markets Growth Fund (the "Fund") is a non-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.
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.
Money market instruments purchase 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.
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.
30 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
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.
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 against changes in the exchange rates
relating to foreign currency denominated assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Sales and
purchases of 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 a forward contract to buy
and a 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.
SCUDDER EMERGING MARKETS GROWTH FUND 31
<PAGE>
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Taxes. The Fund's policy is to comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required.
At October 31, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $44,916,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2004 ($370,000), October 31, 2006 ($32,800,000), and October 31, 2007
($11,746,000), the respective expiration dates, whichever occurs first.
Net realized and unrealized gains of the Fund derived in India are subject to
certain non-U.S. taxes.
The Fund is subject to a 0.38% Contribuicao Provisoria sobre Movimentacoes
Financieras (CPMF) tax which is applied to foreign exchange transactions
representing capital inflows or outflows to the Brazilian market.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. 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. These
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.
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.
32 SCUDDER EMERGING MARKETS GROWTH FUND
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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.
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 accounted for as an addition to paid-in
capital.
B. Purchases and Sales of Securities
For the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $69,186,330 and
$101,252,064, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Management Agreement") with
Scudder Kemper Investments, Inc. (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 year ended
October 31, 1999, the Adviser did not impose a portion of its management fee
amounting to $580,913, and the amount imposed amounted to $852,388. In addition,
during the year ended October 31, 1999, the Adviser reimbursed the Fund $111,078
for losses incurred in connection with equity securities trading.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1999, the amount charged to the Fund by STC aggregated $123,109, of which
$30,858 is unpaid at October 31, 1999.
SCUDDER EMERGING MARKETS GROWTH FUND 33
<PAGE>
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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 year ended
October 31, 1999, the amount charged to the Fund by SFAC aggregated $125,323, of
which $19,079 is unpaid at October 31, 1999.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1999 the amount charged by SSC aggregated $345,907, of
which $53,392 is unpaid at October 31, 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 year ended October 31,
1999, the Special Servicing Agreement expense charged to the Fund amounted to
$170,134, of which $52,333 was unpaid at October 31, 1999.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1999, Directors' fees and expenses aggregated $46,293.
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.
34 SCUDDER EMERGING MARKETS GROWTH FUND
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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.
SCUDDER EMERGING MARKETS GROWTH FUND 35
<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 October 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 October 31, 1999
by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 10, 1999
36 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
October 31, 1999
The Fund paid foreign taxes of $131,249 and earned $131,249 of foreign
source income during the year ended October 31, 1999. Pursuant to section
853 of the Internal Revenue Code, the Fund designates $0.02 per share as
foreign taxes paid and $0.02 per share as income earned from foreign
sources for the year ended October 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.
SCUDDER EMERGING MARKETS GROWTH FUND 37
<PAGE>
Officers and Directors
- --------------------------------------------------------------------------------
Nicholas Bratt*
o President
Sheryle J. Bolton
o Director; Chief Executive Officer,
Scientific Learning Corporation
William T. Burgin
o Director; General Partner,
Bessemer Venture Partners
Keith R. Fox
o Director; Private Equity
Investor
William H. Luers
o Director; Chairman and President,
U.N. Association of America
Kathryn L. Quirk*
o Director, Vice President and
Assistant Secretary
Joan E. Spero
o Director; President, Doris Duke
Charitable Foundation
Thomas J. Devine
o Honorary Director; Consultant
William H. Gleysteen, Jr.
o Honorary Director; Consultant;
Guest Scholar, Brookings
Institution
William Nolen
o Honorary Director; Consultant
Robert G. Stone, Jr.
o Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Elizabeth J. Allan*
o Vice President
Irene T. Cheng*
o Vice President
Joyce E. Cornell*
o Vice President
Susan E. Dahl*
o Vice President
Philip S. Fortuna*
o Vice President
Carol L. Franklin*
o Vice President
Edmund B. Games, Jr.*
o Vice President
Theresa Gusman*
o Vice President
Ann M. McCreary*
o Vice President
Sheridan P. Reilly*
o Vice President
Shahram Tajbakhsh*
o Vice President
John Millette*
o Vice President and Secretary
John R. Hebble*
o Treasurer
Richard W. Desmond*
o Assistant Secretary
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
38 SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
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**
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
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 Heath Care Fund
Scudder Technology Fund
Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
SCUDDER GLOBAL DISCOVERY FUND 39
<PAGE>
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1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
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.
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.
40 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient ways to invest, quickly and reliably
Automatic Investment Plan
A convenient investment program in which money is 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 account.
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-clock electronic account service and information, including some
transactions
Scudder Automated Information Line: SAIL(TM) -- 1-800-343-2890
Personalized account information, the ability to exchange or redeem
shares, and information on other Scudder funds and services via touchtone
telephone.
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.
SCUDDER GLOBAL DISCOVERY FUND 41
<PAGE>
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1-800-SCUDDER www.scudder.com
Retirees and those who depend on investment proceeds can enjoy these convenient,
timely, and reliable automated withdrawal programs
Automatic Withdrawal Plan
You designate the bank account, determine the schedule (as frequently as
once a month) and amount of the redemptions, and Scudder does the rest.
Distributions Direct
Automatically deposits your fund distributions into the bank for living
expenses account you designate within three business days after each
distribution is paid.
QuickSell
Provides speedy access to your money by electronically crediting your
redemption proceeds to the bank account you previously designated.
For more information about these services
Call a Scudder representative at 1-800-SCUDDER
Or visit our Web site at www.scudder.com
Please address all written correspondence to
The Scudder Funds
PO Box 2291
Boston, Massachusetts
02107-2291
42 SCUDDER GLOBAL DISCOVERY FUND
<PAGE>
Notes
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<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, Massachusetts 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 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 over 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.
