Scudder
International Growth and Income Fund
Annual Report
February 28, 1999
No-Load Funds
A fund seeking long-term growth of capital and current income primarily from
foreign equity securities.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder International Growth and Income Fund
- --------------------------------------------------------------------------------
Date of Inception: 6/30/97 Total Net Assets as Ticker Symbol: SIGIX
of 2/28/99: $45.88 million
- --------------------------------------------------------------------------------
o Weakness in commodity prices and the overseas economies contributed to the
underperformance of value stocks during the reporting period.
o Using an investment discipline that emphasizes relative yields, Fund
management uncovered opportunities in the telecommunications, consumer goods,
and capital equipment sectors.
o Additions to the portfolio included out-of-favor growth stocks with strong
earnings prospects and reasonable valuations.
o Fund management maintained an overweight position in Europe, and began to add
to its holdings in Japan.
Table of Contents
3 Letter from the Fund's Chairman 17 Notes to Financial Statements
4 Performance Update 21 Report of Independent Accountants
5 Portfolio Summary 22 Tax Information
6 Portfolio Management Discussion 23 Shareholder Meeting Results
9 Glossary of Investment Terms 24 Officers and Directors
10 Investment Portfolio 25 Investment Products and Services
13 Financial Statements 26 Scudder Solutions
16 Financial Highlights
2 - Scudder International Growth and Income Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
International investors have experienced a diverse array of market
conditions in the past twelve months. On one hand, financial assets in Europe
have been supported by low inflation, declining interest rates, and a surplus of
liquidity. On the other hand, however, the disinflationary environment has taken
a toll on Japan and the emerging markets, as well as commodity producers in all
parts of the world. In an environment of slowing global growth, investors have
placed a premium on companies that have demonstrated the ability to produce
sustainable earnings. Those whose outlooks appear less certain, including most
value stocks, performed poorly as a result.
For people who are invested in a sector that has underperformed for an
extended period of time, it is natural to consider reallocating assets into the
areas that have been posting the strongest returns. However tempting such a
course of action may be, we feel that value stocks, such as those held by
Scudder International Growth and Income Fund, continue to be a necessary element
of a diversified portfolio. Historically, a strategy that emphasizes reasonable
valuations and high relative yields has been an effective way to achieve strong
risk-adjusted returns. Believing that money will ultimately flow back into value
stocks, we urge investors to remain focused on their long-term objectives.
For those of you who are interested in new Scudder products, we are pleased
to introduce Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both
funds are managed with the goal of providing long term outperformance compared
to their benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Thank you for your continued investment in Scudder International Growth and
Income Fund. If you have any questions about your investment, please call
Scudder Investor Information at 1-800-225-2470, or visit our Web site at
www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Growth and Income Fund
3 - Scudder International Growth and Income Fund
<PAGE>
Performance Update as of February 28, 1999
- -----------------------------------------------
Fund Index Comparison
- -----------------------------------------------
Total Return
- -----------------------------------------------
Period Ended Growth of Average
2/28/99 $10,000 Cumulative Annual
- -----------------------------------------------
Scudder International Growth and Income Fund
- -----------------------------------------------
1 Year $ 9,480 -5.20% -5.20%
Life of Fund* $ 10,030 .30% .18%
- -----------------------------------------------
MSCI EAFE plus Canada Index
- -----------------------------------------------
1 Year $ 10,427 4.27% 4.27%
Life of Fund* $ 10,646 6.46% 3.83%
- -----------------------------------------------
* The Fund commenced operations on June 30, 1997.
Index comparisons begin June 30, 1997.
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
A chart in the form of a line graph appears here, illustrating the
Growth of a $10,000 Investment. The data points from the graph are
as follows:
Scudder International Growth and Income Fund
Year Amount
- ----------------------
6/97* $10000
8/97 $ 9708
11/97 $ 9608
2/98 $10580
5/98 $11682
8/98 $ 9874
11/98 $10384
2/99 $10030
MSCI EAFE plus Canada Index
Year Amount
- ----------------------
6/97* $10000
8/97 $ 9433
11/97 $ 9108
2/98 $10211
5/98 $10573
8/98 $ 9332
11/98 $10516
2/99 $10646
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.
- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here, illustrating the Fund
Total Return (%) and Index Total Return (%) with the exact data points
listed in the table below.
Yearly periods ended February 28
1998* 1999
- --------------------------------------------------------------
Net Asset Value $12.68 $11.93
- --------------------------------------------------------------
Income Dividends $ .02 $ .10
- --------------------------------------------------------------
Fund Total Return (%) 5.80 -5.20
- --------------------------------------------------------------
Index Total Return (%) 2.11 4.27
- --------------------------------------------------------------
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.
4 - Scudder International Growth and Income Fund
<PAGE>
Portfolio Summary as of February 28, 1999
Geographical
(Excludes 2% Cash Equivalents)
========================================
Europe 76%
Japan 16%
Pacific Basin 5%
U.S. & Canada 3%
--------------------------------------
100%
======================================
Believing that Japan's economy is poised for a turnaround, we have begun to add
companies that are likely to benefit from monetary stimulus and corporate
restructuring.
Sectors
(Excludes 2% Cash Equivalents)
========================================
Financial 28%
Consumer Discretionary 18%
Communications 16%
Manufacturing 15%
Service Industries 7%
Energy 6%
Durables 4%
Utilities 3%
Construction 2%
Consumer Staples 1%
--------------------------------------
100%
======================================
Telecommunications stocks provided an attractive combination of growth and
value.
Ten Largest Equity Holdings
(33% of Portfolio)
========================================
1. Koninklijke KPN NV
Provider of telecommunications
services
2. Telecom Italia SpA
Telecommunications, electronics,
network construction
3. HSBC Holdings PLC
Bank
4. UBS AG
Provider of banking and
management services
5. Metro AG
Operator of a range of retail
stores
6. BCE, Inc.
Telecommunication services
7. Accor S.A.
Catering, hotels, travel services
8. RWE AG
Producer and marketer of
petroleum and chemical products
9. EMI Group PLC
Music recording and retailing
company
10. Dexia France
Municipal and local development
financing
We have taken advantage of the recent underperformance of value stocks to buy
shares of quality companies at bargain prices.
For more complete details about the Fund's investment portfolio, see page 10. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder International Growth and Income Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Lead Portfolio Manager Sheridan Reilly discusses
Scudder International Growth and Income Fund's strategy and the market
environment in the twelve-month period ending February 28, 1999.
Q: The market environment of the past year has not been favorable for
value-oriented funds such as Scudder International Growth and Income Fund. What
are some factors that have led to the underperformance of value stocks?
A: To fully understand the slump in value stocks, it is necessary to consider
the bigger picture of what is happening in the global economy. Although growth
remains strong here in the United States, the investment backdrop in the rest of
the world is much less favorable. Some "Asian Tiger" countries are showing signs
of improvement, but most developing economies are still experiencing negative
growth. Japan, which we believe is poised to turn around, continues to suffer
from a deep recession. Even Europe, which has been viewed as a "safe haven" by
many, is beset by slow growth and high unemployment.
In a disinflationary environment where commodity prices have been weak and the
economies of so many nations have struggled, it is only natural that pricing
power has declined and corporate profits have suffered. As a result, investors
have become increasingly willing to pay high price-to-earnings multiples for
companies whose earnings are perceived to be the most reliable, especially those
in the technology and health care sectors. Conversely, they have been avoiding
companies that are losing pricing power, such as chemicals producers, energy
companies, and manufacturing firms, all of which tend to be included in the
value category. In other words, the universe of stocks from which we make our
selections has been hurt the most by recent economic developments, while the
stocks that have benefited are often too richly valued to fit within our
investment discipline.
Q: How did the Fund perform in these conditions?
A: In the twelve months ended February 28, the Fund posted a total return of
- -5.20%, versus a total return of 4.27% for its unmanaged benchmark, the MSCI
EAFE plus Canada Index. In a period where growth stocks outperformed, the Fund's
investment discipline left it poorly positioned for the market environment. Our
emphasis on value exposed the portfolio to the accelerated decline in oil and
basic materials at the end of 1998. In addition, we sought to reduce downside
risk in August and September by selling global financials and reducing positions
in companies with emerging markets exposure. When higher-risk stocks drove the
markets' recovery in the October-December period, the Fund's upside potential
was limited as a result.
Q: Please explain the process used to pick stocks for the Fund.
A: Using a strict investment discipline that is based on relative dividend
yields, we only 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),
6 - Scudder International Growth and Income Fund
<PAGE>
this strategy compels us to buy companies that are reasonably valued, and to
sell those whose valuations are becoming inflated.
After narrowing down the investment universe in this manner, we use rigorous
fundamental analysis to select what we see as 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 in an attempt to uncover the stocks with the strongest appreciation
potential. In addition, we pursue sector diversification in order to reduce the
risks associated with economic conditions and interest rate fluctuations in the
countries where we invest. Similarly, we seek to minimize currency risk and
political risk by diversifying among a large number of countries. The ultimate
goal of this intensive process is to provide superior risk-adjusted returns over
the long term.
Q: It sounds like this strategy can also be used to uncover out-of-favor growth
stocks.
A: Yes, it can. In fact, we found many opportunities in the area we refer to as
"bruised growth." Occasionally, a company will experience a glitch that hurts
its stock price in the near term, but has less effect on its long-term earnings
potential. Using our strong fundamental research capabilities, we dig beneath
the surface to determine when such a glitch indicates a short-term setback
taking place within the company, rather than a fundamental change for the worse.
One stock that falls in this category is Sony, the Japanese electronics
manufacturer whose stock price has been hurt by weakness in the broader market.
Sony has demonstrated the ability to remain competitive and build its global
brand franchise even as the domestic economy in Japan has weakened. Believing
that the company is well positioned to benefit from an eventual upturn in the
region, as well as from its dominance in branded consumer electronics, we
initiated a position late in the period.
Q: What sectors did you find to be particularly attractive in the last twelve
months?
A: Telecommunications stocks have been significant contributors to Fund
performance in the past twelve months. At the beginning of the period the sector
was weighed down by fears that deregulation would have a negative effect on
earnings, but our fundamental research revealed that many individual companies
still had favorable growth characteristics. As the year progressed, investors
recognized the value of the defensive characteristics and domestic orientation
of these companies. Even after their substantial gains, many telecoms still fit
within our value parameters.
In the latter part of the period, we reduced exposure to commodity cyclicals
such as oils, chemicals, and basic materials. In their place, we added to the
Fund's weighting in the consumer goods and capital equipment sectors, thereby
achieving a higher level of diversification. Examples of stocks we added were
Adidas-Salomon, which has been building market share and brand awareness on a
global level, and Michelin, whose restructuring initiatives should lead to
significant improvement in profit margins.
Q: What is your view on Japan?
A: Since the inception of the Fund, we have maintained an underweight position
in Japan. Although we had only 16% of the Portfolio in Japan as of February 28
7 - Scudder International Growth and Income Fund
<PAGE>
(compared to 21% for the benchmark), this marks an increase from the range of
8%-12% we held there during the 1998 calendar year. Believing that the country's
recession is nearing a bottom, we have begun to add companies that are likely to
benefit from at least one of three trends that we feel will help spark a
turnaround: monetary stimulus, restructuring, and the possibility of a weaker
yen. This focus has led us to invest in homebuilders that stand to benefit from
an increase in the money supply, such as Sekisui House, as well as highly
competitive exporters, such as Sony. While we intend to maintain an underweight
position in Japan in the immediate future, we feel that the valuations there are
becoming increasingly compelling.
Q: What would you tell investors at this point?
A: Above all, to be patient. We recognize that it can be frustrating when the
major indices are rising and your fund isn't. Despite the recent
underperformance, we are confident that a strategy emphasizing value and
relative yields, which has performed well on a historical basis, will again do
so in the future. Investment styles tend to move in and out of favor in extended
cycles, so investors who attempt to chase hot sectors will invariably find
themselves buying high and selling low. We believe that since such an approach
is often detrimental to the achievement of long-term investment goals, it makes
sense to view the slump in value stocks as an opportunity to purchase quality
companies at bargain prices. Going forward, we will continue to seek strong
risk-adjusted returns by employing this historically proven investment strategy.
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. Lauren C. Lambert, Portfolio Manager,
joined the Adviser in 1994 and has over 5 years experience as an Equity
Analyst.
8 - Scudder International Growth and Income Fund
<PAGE>
Glossary of Investment Terms
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 $20, the yield would fall to
5%.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected
impact of management, products, sales, and earnings
on their balance sheets and income statements.
Distinct from technical analysis, which evaluates the
attractiveness of a stock based on historical price
and trading volume movements, rather than the
financial results of the underlying company.
GROWTH STOCK Stock of a company that has displayed above-average
earnings growth and is expected to continue to
increase profits rapidly going forward. Stocks of
such companies usually trade at higher multiples to
earnings (see price/earnings ratio) and experience
more price volatility than the market as a whole.
Distinct from value stock.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation that
(P/E) (also "earnings indicates what investors are paying for a company's
multiple") earning power at the current stock price. A P/E
ratio may be based on a company's projected earnings
for the coming 12 months. A higher "earnings
multiple" indicates higher expected earnings growth,
along with greater risk of earnings disappointment.
VALUE STOCK A company whose stock price does not fully reflect
its intrinsic value, as indicated by price/earnings
ratio, price/book value ratio, dividend yield, or
some other valuation measure, relative to its
industry or the market overall. Value stocks tend to
display less price volatility and may carry higher
dividend yields. Distinct from growth stock.
WEIGHTING (OVER/UNDER) Refers to the allocation of assets --
usually in terms of sectors, industries, or countries
-- within a portfolio relative to the portfolio's
benchmark index or investment universe.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
9 - Scudder International Growth and Income Fund
<PAGE>
Investment Portfolio as of February 28, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
==============================================================================================================================
<S> <C> <C>
Repurchase Agreements 1.5%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 2/26/1999 at 4.75%, to be
repurchased at $634,251 on 3/1/1999, collateralized by a $630,000 U.S. Treasury Bond, --------------
3.625%, 1/15/2008 (Cost $634,000) ........................................................ 634,000 634,000
--------------
Shares
==============================================================================================================================
Common Stocks 98.5%
- ------------------------------------------------------------------------------------------------------------------------------
Australia 1.9%
Commonwealth Bank of Australia (Bank) ...................................................... 53,829 808,953
--------------
Austria 2.1%
Bank Austria AG (Provider of commercial and corporate banking services) .................... 16,100 866,646
--------------
Canada 3.2%
BCE, Inc. (Telecommunication services) ..................................................... 32,639 1,322,179
--------------
France 11.9%
Accor S.A. (Catering, hotels, travel services) ............................................. 5,659 1,317,939
Compagnie Generale des Etablissements Michelin "B" (Leading tire manufacturer) ............. 15,365 685,296
Dexia France (Municipal and local development financing) ................................... 9,330 1,255,560
Elf Aquitaine SA (Petroleum company) ....................................................... 4,458 465,247
Scor S.A. (Property, casualty and life reinsurance company) ................................ 24,167 1,243,804
--------------
4,967,846
--------------
Germany 16.4%
Adidas-Salomon AG (Manufacturer of sport shoes, clothing and equipment) .................... 12,096 1,158,719
Bayer AG (Leading chemical producer) ....................................................... 32,254 1,142,702
Deutsche Telekom AG (Telecommunication services) ........................................... 23,919 1,098,346
Dyckerhoff AG (pfd.) (Producer of cement, ready-mixed concrete and finishing products) ..... 67 17,297
Hochtief AG (Construction and civil engineering services) .................................. 24,778 819,318
Metro AG (pfd.) "I" (Operator of a range of retail stores) ................................. 35,600 1,353,150
RWE AG (Producer and marketer of petroleum and chemical products) .......................... 29,269 1,276,492
--------------
6,866,024
--------------
Hong Kong 3.4%
HSBC Holdings PLC (Bank) ................................................................... 51,200 1,440,671
--------------
Ireland 1.7%
Allied Irish Bank PLC (Bank) ............................................................... 41,040 712,335
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
==============================================================================================================================
<S> <C> <C>
Italy 8.5%
Ente Nazionale Idrocarburi SpA (Exploration and production of oil, natural gas and
chemicals) ............................................................................... 155,300 895,675
La Rinascente SpA (Department store chain) ................................................. 269,900 1,177,099
Telecom Italia SpA (Telecommunications, electronics, network construction) ................. 217,800 1,471,475
--------------
3,544,249
--------------
Japan 15.5%
Industrial Bank of Japan, Ltd. (Commercial bank and trust company) ......................... 141,000 704,851
Mitsubishi Heavy Industries, Ltd. (Diversified heavy machinery manufacturer and leading
shipbuilder) ............................................................................. 190,000 706,344
Nintendo Co., Ltd. (Game equipment manufacturer) ........................................... 14,800 1,247,629
Nomura Securities Co., Ltd. (Financial advisor, securities broker and underwriter) ......... 92,000 756,940
Sakura Bank Ltd. (Full service bank) ....................................................... 547,000 1,189,682
Sekisui House, Ltd. (Home builder) ......................................................... 68,000 696,481
Sony Corp. (Consumer electronic products manufacturer) ..................................... 15,800 1,196,072
--------------
6,497,999
--------------
Netherlands 4.9%
Koninklijke KPN NV (Provider of telecommunications services) ............................... 29,980 1,574,269
Royal Dutch Petroleum Co. (Owner of 60% of Royal Dutch/Shell Group) ........................ 10,660 468,422
--------------
2,042,691
--------------
Spain 2.8%
Iberdrola SA (Electric utility) ............................................................ 74,837 1,171,523
--------------
Sweden 2.1%
Investor AB "B" (Investment company with holdings in listed shares of industrial
companies) ............................................................................... 21,800 887,911
--------------
Switzerland 12.0%
ABB AG (Bearer) (Manufacturer of electrical equipment) ..................................... 570 696,033
Georg Fischer AG (Registered) (Manufacturer of automotive products and piping systems) ..... 3,296 1,080,097
Sika Finanz AG (Registered) (Manufacturer of water management products and systems) ........ 19,581 918,598
Swisscom AG (Registered)* (Operator of telecommunication networks and network application
services) ................................................................................ 2,298 908,419
UBS AG (Registered) (Provider of banking and management services) .......................... 4,563 1,419,740
--------------
5,022,887
--------------
United Kingdom 12.1%
EMI Group PLC (Music recording and retailing company) ...................................... 171,388 1,263,741
General Electric Co., PLC (Manufacturer of power, communications and defense equipment and
other various electrical components) ..................................................... 106,043 845,658
Lasmo PLC (Oil production and exploration) ................................................. 394,397 758,638
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
==============================================================================================================================
<S> <C> <C>
Marks & Spencer, PLC (Retailer of consumer goods and foods) ................................ 79,732 538,065
Royal & Sun Alliance Insurance Group PLC (Multi-line insurance holding company) ............ 121,348 1,026,551
Tomkins PLC (Manufacturer of fluid controls, industrial products, garden and leisure
products) ................................................................................ 170,870 624,483
--------------
5,057,136
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $40,964,353) 41,209,050
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $41,598,353) (a) 41,843,050
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $41,601,948. At
February 28, 1999, net unrealized depreciation for all securities
based on tax cost was $241,102. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $2,621,869 and aggregate
gross unrealized depreciation for all securities in which there was
an excess of tax cost over market value of $2,380,767.
At February 28, 1999, outstanding written options were as follows:
<TABLE>
<CAPTION>
Call Options Contracts Expiration Date Strike Price Market Value ($)
- ---------------------------------- --------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
Accor S.A. .................... 480 3/30/99 213.40 (EUR) 68,550
</TABLE>
Cash of approximately $307,000 is segregated as collateral for written options.
Transactions in written options for the year ended February 28, 1999 were:
Options on Securities
--------------------------------
Premiums
Contracts Received ($)
--------------- ---------------
Outstanding at February 28, 1998 ........... 126,989 26,006
Written .................................... 40,432 275,207
Exercised .................................. (126,989) (26,006)
Closed ..................................... (39,952) (165,240)
----------- -----------
Outstanding at February 28, 1999 ........... 480 109,967
=========== ===========
The accompanying notes are an integral part of the financial statements.
12 - Scudder International Growth and Income Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of February 28, 1999
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $41,598,353) .................... $ 41,843,050
Cash .................................................................... 307,635
Receivable for investments sold ......................................... 11,720,373
Dividends and interest receivable ....................................... 74,686
Receivable for Fund shares sold ......................................... 3,885
Foreign taxes recoverable ............................................... 51,509
Deferred organization expenses .......................................... 23,853
----------------
Total assets ............................................................ 54,024,991
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ....................................... 7,875,497
Payable for Fund shares redeemed ........................................ 84,318
Written options, at value (premiums received $109,967) .................. 68,550
Accrued management fee .................................................. 19,345
Other payables and accrued expenses ..................................... 93,539
----------------
Total liabilities ....................................................... 8,141,249
---------------------------------------------------------------------------------------------
Net assets, at market value $ 45,883,742
---------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ............ (66,834)
Unrealized appreciation (depreciation) on:
Investments .......................................................... 244,697
Written options ...................................................... 41,417
Foreign currency related transactions ................................ 8,809
Accumulated net realized gain (loss) .................................... (1,538,685)
Paid-in capital ......................................................... 47,194,338
---------------------------------------------------------------------------------------------
Net assets, at market value $ 45,883,742
---------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($45,883,742
/ 3,845,661 shares of capital stock outstanding, $.01 par value, ----------------
100,000,000 shares authorized) ....................................... $11.93
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder International Growth and Income Fund
<PAGE>
Statement of Operations
For the year ended February 28, 1999
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $157,532) ................... $ 1,322,125
Interest ................................................................ 216,020
----------------
1,538,145
----------------
Expenses:
Management fee .......................................................... 539,119
Services to shareholders ................................................ 302,200
Custodian and accounting fees ........................................... 174,281
Directors' fees and expenses ............................................ 46,974
Registration fees ....................................................... 23,967
Auditing ................................................................ 36,121
Reports to shareholders ................................................. 29,065
Legal ................................................................... 13,656
Amortization of organization expense .................................... 6,591
Other ................................................................... 6,542
----------------
Total expenses before reductions ........................................ 1,178,516
Expense reductions ...................................................... (234,812)
----------------
Expenses, net ........................................................... 943,704
---------------------------------------------------------------------------------------------
Net investment income 594,441
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................................. 633,316
Written options ......................................................... 148,425
Foreign currency related transactions ................................... (136,499)
----------------
645,242
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ............................................................. (4,792,082)
Written options ......................................................... 90,750
Foreign currency related transactions ................................... 9,368
----------------
(4,691,964)
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (4,046,722)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (3,452,281)
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder International Growth and Income Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
June 30, 1997
Year Ended (commencement of
February 28, operations) to
Increase (Decrease) in Net Assets 1999 February 28, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 594,441 $ 50,381
Net realized gain (loss) from investment transactions .. 645,242 (2,566,283)
Net unrealized appreciation (depreciation) on
investment transactions during the period ........... (4,691,964) 4,986,888
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations .......................................... (3,452,281) 2,470,986
---------------- ----------------
Distributions to shareholders from net investment
income .............................................. (427,107) (59,796)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .............................. 36,802,035 64,146,242
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 397,892 55,470
Cost of shares redeemed ................................ (36,316,961) (17,733,938)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 882,966 46,467,774
---------------- ----------------
Increase (decrease) in net assets ...................... (2,996,422) 48,878,964
Net assets at beginning of period ...................... 48,880,164 1,200
Net assets at end of period (including accumulated
distributions in excess of net investment income ---------------- ----------------
of $66,834 and $213,599, respectively) .............. $ 45,883,742 $ 48,880,164
---------------- ----------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .............. 3,854,083 100
---------------- ----------------
Shares sold ............................................ 2,826,965 5,333,375
Shares issued to shareholders in reinvestment of
distributions ....................................... 30,294 4,745
Shares redeemed ........................................ (2,865,681) (1,484,137)
---------------- ----------------
Net increase (decrease) in Fund shares ................. (8,422) 3,853,983
---------------- ----------------
Shares outstanding at end of period .................... 3,845,661 3,854,083
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder International Growth and Income Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
June 30, 1997
(commencement
Year Ended of operations) to
February 28, February 28,
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
----------------------------------
Net asset value, beginning of period .................................................... $12.68 $12.00
----------------------------------
Income from investment operations:
Net investment income ................................................................... .14 .01
Net realized and unrealized gain (loss) on investment transactions ...................... (.79) .69
----------------------------------
Total from investment operations ........................................................ (.65) .70
----------------------------------
Less distributions from:
Net investment income ................................................................... (.10) (.02)
----------------------------------
Total distributions ..................................................................... (.10) (.02)
----------------------------------
----------------------------------
Net asset value, end of period .......................................................... $11.93 $12.68
----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) .................................................................... -5.20 5.80**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .................................................. 46 49
Ratio of operating expenses, net to average daily net assets (%) ........................ 1.75 1.75*
Ratio of operating expenses before expense reductions, to average daily net assets (%) .. 2.19 2.65*
Ratio of net investment income to average daily net assets (%) .......................... 1.10 .17*
Portfolio turnover rate (%) ............................................................. 131.3 50.2*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
16 - Scudder International Growth and Income Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder International Growth and Income Fund ("the Fund") is a diversified
series of Scudder International Fund, Inc. (the "Corporation"). The corporation
is organized as a Maryland corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on Nasdaq. If there are no such sales, the value is the high or
"inside" bid quotation. Securities which are not quoted on Nasdaq but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such bid
and asked quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the 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. Short-term investments having a maturity of sixty days or less
are valued at amortized cost. All other securities are valued at their fair
value as determined in good faith by the Valuation Committee of the Board of
Directors.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund wrote call options on securities as a hedge against potential
adverse price movements in the value of portfolio assets. In addition, the Fund
purchased call options on currencies as a temporary substitute for purchasing
selected investments and to enhance gains.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent
17 - Scudder International Growth and Income Fund
<PAGE>
asked price (bid for purchased options) if no bid and asked price are available.
Over-the-counter written or purchased options are valued using dealer supplied
quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value is equal to at least the repurchase price.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and other
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex-dividend and payment dates on
dividends, interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
18 - Scudder International Growth and Income Fund
<PAGE>
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code of 1986, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. The Fund paid no federal income taxes and no federal income tax
provision was required.
At February 28, 1999 the Fund had a net tax basis capital loss carrforward of
approximately $1,700,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until February 28,
2006 ($215,000) and February 28, 2007 ($1,485,000), the expiration dates.
In addition, from November 1, 1998 through February 28, 1999, the Fund incurred
approximately $70,000 of net realized losses from foreign currency related
transactions. As permitted by tax regulations, the Fund intends to elect to
defer these losses and treat them as arising in the fiscal year ending February
28, 2000.
Distribution of Income and Gains. Distributions of net investment income are
made semiannually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
primarily relate to investments in forward contracts, passive foreign investment
companies, foreign denominated investments, and certain securities sold at a
loss. As a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
Other. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. Purchases and Sales of Securities
For the 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
19 - Scudder International Growth and Income Fund
<PAGE>
agreed to reimburse or not to impose, respectively, all or a portion of their
fees payable by the Fund until June 30, 1999 in order to maintain the annualized
expenses of the Fund at not more than 1.75% of average daily net assets. 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, of which $19,345 is unpaid at February 28, 1999.
Effective September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner
of the Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. In December 1998, the Board of
Directors and the shareholders of the Fund approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the former
Management Agreement, except for the dates of execution and termination.
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 February 28, 1999, the amount charged to the Fund by SSC aggregated
$216,638, of which $16,635 is unpaid at February 28, 1999.
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 February 28,
1999, the amount charged to the Fund by STC aggregated $5,789, of which $686 is
unpaid at February 28, 1999.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
February 28, 1999, the amount charged to the Fund by SFAC aggregated $55,490, of
which $8,780 is unpaid at February 28, 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 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 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 year
ended February 28, 1999, Directors' fees and expenses aggregated $46,974.
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.
20 - Scudder International Growth and Income Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder International Growth and Income Fund:
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 February 28, 1999, the results of its operations for
the year then ended, the changes in its net assets and the financial highlights
for the year then ended and for the period June 30, 1997 (commencement of
operations) to February 28, 1998, 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 February 28, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts PricewaterhouseCoopers LLP
April 8, 1999
21 - Scudder International Growth and Income Fund
<PAGE>
Tax Information
The Fund paid foreign taxes of $160,000 and earned $550,000 of foreign income
during the year ended February 28, 1999. Pursuant to Section 853 of the Internal
Revenue Code, the Fund designates $.04 per share as foreign taxes paid and $.14
per share as income earned from foreign sources for the year ended February 28,
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.
22 - Scudder International Growth and Income Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder International
Growth and Income Fund (the "Fund") was held on December 15, 1998, at the office
of Scudder Kemper Investments, Inc., Two International Place, Boston,
Massachusetts 02110. At the Meeting the following matters were voted upon by the
shareholders (the resulting votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
2,796,086 78,748 95,886 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
2,560,788 126,210 129,581 154,141
- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
23 - Scudder International Growth and Income Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board and
Director
Nicholas Bratt*
President
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Chief Executive
Officer, Scientific Learning
Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Keith R. Fox
Director; Private Equity Investor
William H. Luers
Director; Chairman and
President, U.N. Association of
the U.S.A.
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Joan Spero
Director; President, Doris Duke
Charitable Foundation
Thomas J. Devine
Honorary Director; Consultant
William H. Gleysteen, Jr.
Honorary Director; Managing
Director
Wilson Nolen
Honorary Director; Consultant
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus of the Board and
Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Irene T. Cheng*
Vice President
Joyce E. Cornell*
Vice President
Susan E. Dahl*
Vice President
Philip S. Fortuna*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Theresa Gusman*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Sheridan Reilly*
Vice President
Shahram Tajbakhsh*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - Scudder International Growth and Income Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series --
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds 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.
25 - Scudder International Growth and Income Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
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26 - Scudder International Growth and Income Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
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Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
800 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
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Additional Information on How to Contact Scudder:
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For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
27 - Scudder International Growth and Income Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $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 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
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