SCUDDER
INVESTMENTS(SM)
[LOGO]
--------------------------
EQUITY/GLOBAL
--------------------------
Scudder Emerging
Markets Growth Fund
Fund #079
Semiannual Report
April 30, 2000
The fund seeks long-term growth of capital.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
--------------------------------------------------------------------------------
4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
14 Glossary of Investment Terms
15 Investment Portfolio
23 Financial Statements
26 Financial Highlights
27 Notes to Financial Statements
33 Report of Independent Accountants
34 Officers and Directors
35 Investment Products and Services
37 Scudder Solutions
2
<PAGE>
Scudder Emerging Markets Growth Fund
--------------------------------------------------------------------------------
ticker symbol SEMGX fund number 079
--------------------------------------------------------------------------------
Date of o While strengthening global growth was a positive for
Inception: emerging markets equities during the last six months,
5/8/96 concerns about higher interest rates in the developed
countries took a toll on the asset class during
April.
Total Net o The fund benefited from its holdings in the technology
Assets as of and telecommunications sectors during the first half of
4/30/00: the period, but management began to trim its weighting
$105 million in these areas in February on valuation concerns.
o Recent additions to the portfolio include "Old Economy"
stocks and companies listed on stock markets that have
a lower correlation with movements of established
markets.
3
<PAGE>
Letter from the Fund's President
Dear Shareholders,
Over the past decade, a number of important trends have helped fuel the bull
market in equities in the United States. Restructuring has enabled corporations
to improve profitability by cutting waste and becoming more efficient, while
consolidation has boosted stock price performance in a variety of sectors, such
as financial services and health care. Even more important, companies have
adopted new technologies to increase productivity and make their operations more
efficient. Since these themes are no longer new stories in the United States, it
is harder to find domestic companies that are poised to boost their earnings by
these means. In the emerging markets, however, investors have the opportunity to
choose among hundreds of undiscovered companies that are making significant
changes to the way they do business. It is possible to find these sorts of
companies in the more established emerging markets such as Brazil and Taiwan, or
in nascent market economies such as Poland and Hungary. While the stock prices
in countries such as these will frequently be impacted by volatility in the
established markets -- as has been the case in the last two months -- companies
that are boosting their earnings through innovation and successful adaptation to
the new, wired world will be the ones that succeed over the long term.
In managing the portfolio of Scudder Emerging Markets Growth Fund, lead
portfolio manager Joyce Cornell strives to invest in such companies. Leading an
experienced team of analysts that
4
<PAGE>
each year spends thousands of hours overseas gathering details on individual
companies, Ms. Cornell searches for market leaders that she believes are poised
for outstanding growth over time. Although investing in the developing countries
has not come without risk in recent months, we remain extremely optimistic on
the long-term potential for well-managed companies in emerging markets. For more
information on how the fund's management team seeks to take advantage of the
changes unfolding in the emerging markets, please turn to the Portfolio
Management Discussion that begins on page 10.
Thank you for your continued investment in Scudder Emerging Markets Growth Fund.
For current information on the fund or your account, visit our Web site at
www.scudder.com. There you'll find a wealth of information, including fund
performance, the most recent news on Scudder products and services, and the
opportunity to perform account transactions. You can also speak with one of our
representatives by calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Nicholas Bratt
Nicholas Bratt
President,
Scudder Emerging Markets Growth Fund
5
<PAGE>
Performance Update
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
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
4/00 11189 10057
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder Emerging Markets Growth Fund
--------------------------------------------------------------------------------
1 year $ 11,924 19.24% 19.24%
--------------------------------------------------------------------------------
Life of Fund** $ 11,365 13.65% 3.27%
--------------------------------------------------------------------------------
IFC Emerging Markets Investable Index
--------------------------------------------------------------------------------
1 year $ 12,211 22.11% 22.11%
--------------------------------------------------------------------------------
Life of Fund** $ 10,057 .57% .14%
--------------------------------------------------------------------------------
* 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
<PAGE>
--------------------------------------------------------------------------------
Returns and Per Share Information
--------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE SCUDDER EMERGING MARKETS GROWTH FUND TOTAL RETURN (%) AND
IFC EMERGING MARKETS INVESTABLE INDEX* TOTAL RETURN (%)
Yearly periods ended April 30
1997** 1998 1999 2000
--------------------------------------------------------------------------------
Fund Total
Return (%) 29.07 -3.73 -23.30 19.24
--------------------------------------------------------------------------------
Index Total
Return (%) 5.72 -15.13 -8.63 22.11
--------------------------------------------------------------------------------
Net Asset
Value ($) 15.46 14.82 11.33 13.51
--------------------------------------------------------------------------------
Income
Dividends
($) .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.
7
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Geographical
--------------------------------------------------------------------------------
(Excludes 6% Cash Equivalents) Management has increased
the fund's position in
Pacific Basin 35% Asia, while reducing its
Latin America 20% holdings in Europe and
Europe 19% Africa.
Africa 14%
Other 12%
------------------------------------
100%
------------------------------------
--------------------------------------------------------------------------------
Sectors
--------------------------------------------------------------------------------
(Excludes 6% Cash Equivalents) The fund's weighting in
technology and
Communication 27% communications sectors
Technology 19% increased significantly
Financial 15% due to the strong
Consumer Staples 15% performance of these
Metals & Minerals 5% sectors.
Consumer Discretionary 4%
Energy 4%
Manufacturing 4%
Health 3%
Other 4%
------------------------------------
100%
------------------------------------
8
<PAGE>
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------------
(31% of Portfolio) The fund's top holdings
reflect management's
1. Samsung Electronics Co., Ltd. focus on well-managed
Electronic manufacturer in Korea companies in countries
with favorable growth
2. Fomento Economico Mexicano S.A. de C.V. characteristics.
Producer of beer and soft drinks in Mexico
3. Neita Holdings S.A.
Provider of telecommunication services in Poland
4. Egyptian Mobile Phone Network, Ltd.
Cellular telecommunication services in Egypt
5. Taiwan Semiconductor Manufacturing Co.
Manufacturer of integrated circuits in Taiwan
6. SK Telecom Co., Ltd.
Provider of mobile telecommunication and paging
services in Korea
7. United Microelectronics Corp., Ltd.
Manufacturer of integrated circuits in Taiwan
8. Hon Hai Precision Industry Co., Ltd.
Manufacturer of electronic connectors, cable
assemblies and memory chips in Taiwan
9. Matav Rt.
Telecommunication services in Hungary
10. Al Ahram Beverage Co.
Beverage producer in Eygpt
For more complete details about the Fund's investment portfolio, see page 15. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
April 30, 2000
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 over the six-month period ended April 30, 2000.
Q: How did emerging markets stocks perform during the last six months?
A: From November through February, stocks in the developing countries staged an
impressive rally on the strength of improved global growth and massive gains in
the Nasdaq average. The emerging markets generally held up well when the Nasdaq
began to falter in March, but by April concerns over higher interest rates in
the United States -- and the possible slowdown in global growth that could
result from a decline in U.S. consumption -- led to a broad sell-off. In April
alone, the IFC Emerging Markets Index slid 10.5%. While the fund also declined
over the final weeks of the period, its returns have not been closely correlated
with the Nasdaq since it tends to hold large positions in areas where
performance is determined more by local fundamentals than external factors. For
example, the fund holds 18% of its assets in Africa and the Middle East, and
another 19% in emerging Europe.
Q: How did the fund perform in this period?
A: For the six months ended April 30, 2000, the fund produced a total return of
14.88%, compared to a return of 13.85% for its unmanaged benchmark, the IFC
Emerging Markets Index. Positive drivers of performance included our
underweighted position in Greece, where we thought the country's good
fundamentals were fully reflected in stock prices, and South Africa, where we
were not impressed with the macroeconomic picture. Over the full period, we were
also helped by our holdings in the tech and telecom sectors, such as Egyptian
Mobile Phone Network (Egypt), Check Point Software Technologies, Ltd. (Israel),
Samsung Electronics (Korea), and China Telecom (Hong Kong). On the down side,
performance was hurt by our underweight position in Brazil -- which performed
10
<PAGE>
very well -- and our overweight position in Korea, which was hit hard by a
crisis in its financial sector.
Q: What are some of the broad, global factors that have been influencing the
performance of the emerging markets?
A: We believe that the near term is likely to be characterized by continued
volatility in the technology sector, particularly among stocks related to the
Internet. In some cases, this may mean the complete collapse of some of the more
speculative companies launched with little in the way of viable business plans.
It is clear that the "Internet universe" is a globalized sector. The correlation
in tech sector performance across developed and emerging economies approaches
unity. We do not expect the inevitable washout of the froth in this sector to
impair the overall growth of the better emerging markets, nor to compromise
their appreciation over anything but the short term.
On the plus side, the continued strength in the global economy is a distinct
plus for emerging markets equities. Synchronized global growth should be a
significant positive for the emerging markets. The U.S. has been carrying the
world's growth burden for a number of years. Europe has begun to pick up
finally, and Japan seems poised to grow slightly or at least not detract from
world economic activity by shrinking. This wider-spread growth should not be
underestimated as a driver for the emerging markets, which are a leveraged play
on global growth.
Q: How have these trends affected your management style?
A: As always, we strive to pick out what we believe are the most attractive
countries, and invest in the best companies within them. Recently, we have found
attractive opportunities in so-called "Old Economy" stocks. In our view, these
companies presently have two attractions over "Internet universe" stocks. They
sport more attractive valuations and are more sensitive to economic growth. The
latter virtue is unlike most Old Economy stocks in the
11
<PAGE>
mature markets, which tend to have slow or even negative growth. Conversely,
many Old Economy companies in the emerging markets are high-growth, defensive
plays, and we have found attractive opportunities in the tourism, construction
materials, beverage, and banking stocks. In these sectors there are few of the
risks associated with technology and telecom stocks, such as the continuous
supply of new stock or extreme disappointment risk when revenue or earnings fail
to meet expectations. Many companies have long histories of revenue and earnings
growth, proven strategies, and capable management teams. For example, Al Ahram
-- an Egyptian beer company we hold in the fund -- does not respond to broad
global themes or the performance of the Nasdaq, but rather to the growth of the
Egyptian economy and population.
Q: What other changes have you been making in the portfolio?
A: As techs and telecoms rose, they grew to represent almost half of the
portfolio by mid-February. Believing that this weighting was too risky given the
group's increasingly stretched valuations, we began to trim the position during
the final months of the reporting period. Although we remained optimistic on the
prospects for many individual companies in the sector, we believed that it was
impossible to justify many of the valuations in an environment of rising
interest rates worldwide.
Other portfolio changes have involved our gradually taking profits in Poland,
Egypt, and Mexico as those markets rose. These proceeds, along with some of the
cash we raised by trimming our positions in techs and telecoms, are being
redeployed in Taiwan and Turkey. We believe these two countries offer
particularly attractive values, high growth prospects, and relatively low
correlation with the U.S. and other large markets.
In South Asia, we have added to our position in India. India may at last have
enough political stability to move forward with long-stalled reforms. The
technology sector is likely to remain vibrant even though many companies
12
<PAGE>
have been negatively impacted by the global correction in tech. Outside of the
tech and telecom area, we hold oil refiners and financial services stocks, which
we believe will benefit from further deregulation and a stronger economy.
Q: What is your outlook for emerging markets' stocks from here?
A: Going forward, we remain optimistic on the outlook for emerging markets
equities. Looking through the present volatility that has been induced by the
collapse of the Internet sector, we anticipate strong performance from
technology and telecommunications stocks later in the year. However, we will be
closely monitoring global liquidity conditions, since they are a key variable in
the performance of stocks in developing countries. The surge of liquidity that
was created by the U.S. Federal Reserve's aggressive rate cuts in the wake of
the 1998 crisis helped spark strong market performance in the developing
countries during 1999. However, the Fed has raised short-term interest rates
1.75 percentage points in the past year. Should Japan join the Fed in adopting a
more aggressive stance with respect to its monetary policy, the resulting
headwinds could have a negative impact on emerging markets' equities. However,
it is our belief that the reduction in liquidity will continue to be managed
carefully and reasonably.
13
<PAGE>
Glossary of Investment Terms
--------------------------------------------------------------------------------
Defensive Stocks and bonds that are more conservative than average,
Securities and tend to perform better than the overall market when that
market is weak. Often, non-cyclical stocks are used to
establish a defensive position, since they tend not to be as
severely affected during economic slowdowns.
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.
Monetary Policy The decision of a central bank to control the level of
economic activity by either supplying credit through lower
interest rates or open market purchases, or by restricting
credit through higher rates or open market sales. Looser
credit tends to stimulate the economy, while tighter credit
tends to calm inflationary forces.
Weighting Refers to the allocation of assets -- usually in terms of
(over/under) sectors, industries, or countries -- within a portfolio
relative to the portfolio's benchmark index or investment
universe.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
14
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio as of April 30, 2000
------------------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
U.S. Government Agency Obligations 6.0%
------------------------------------------------------------------------------------------
<S> <C> <C>
United States
Federal Home Loan Bank, 5.88%**, 5/1/2000
(Cost $6,227,000) ........................................... 6,227,000 6,227,000
Shares
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Common Stocks 94.0%
------------------------------------------------------------------------------------------
Botswana 0.2%
Sechaba Breweries Ltd. (Brewery) ............................... 260,000 220,303
-----------
Brazil 6.3%
Aracruz Celulose S.A. "B" (ADR) (Producer of eucalyptus
kraft pulp) ................................................. 56,000 1,046,500
Banco Itau S.A. (pfd.) (Commercial bank) ....................... 9,353,900 698,825
Companhia Paranaense de Energia-- Copel (pfd.) "B"
(ADR) (Electric utility) .................................... 133,300 983,088
Companhia Vale do Rio Doce (pfd.) "A" (Diverse mining
and industrial complex) ..................................... 25,525 631,415
Companhia Vale do Rio Doce (pfd.) (ADR) ........................ 8,400 209,475
Embratel Participacoes S.A. (pfd.) (ADR) (Provider of
telecommunication services) ................................. 36,300 816,750
Petroleo Brasileiro S.A. (pfd.) (Petroleum company) ............ 2,732,000 650,267
Souza Cruz S.A. (voting) (Holding company for
cigarettes, tobacco, and fiber cellulose) ................... 56,200 342,114
Tele Centro Sul Participacoes S.A. (pfd.) (Provider of
cellular telecommunication services) ........................ 18,821,700 245,817
Tele Centro Sul Participacoes S.A. (pfd.) (ADR) ................ 6,060 386,325
Tele Nordeste Celular Participacoes S.A. (pfd.) (ADR)
(Provider of cellular telecommunications services) .......... 9,000 468,000
Telecomunicacoes de Minas Gerais S.A. (pfd.) "B"
(Telecommunication services) ................................ 395 13
Telemig Celular S.A. (pfd.) "C"
(Telecommunication services) ................................ 395 10
Votorantim Celulose e Papel S.A. (pfd.) (Producer and
exporter of printing, writing and other special papers) ..... 3,500,000 104,206
-----------
6,582,805
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-----------------------------------------------------------------------------------
<S> <C> <C>
Canada 0.4%
Corriente Resources, Inc.* (Mining and processing of gold,
bismuth, tin and tungsten in South America) ........... 224,800 455,184
-----------
Chile 2.3%
ENTEL-Chile (Telecommunication services) ................. 150,000 1,237,263
Vina Concha y Toro S.A. (ADR) (Wine producer) ............ 30,000 1,160,625
-----------
2,397,888
-----------
Croatia 1.2%
Pliva D.D. (GDR) (Pharmaceutical company) ................ 96,650 1,208,125
-----------
Czech Republic 0.4%
Ceske Radiokomunikace (GDR)* (TV and radio signal
transmission services) ................................ 8,800 397,320
-----------
Egypt 8.1%
Al Ahram Beverages Co. "S.A.E." (GDR)*
(Beverage producer) ................................... 118,000 2,076,800
Commercial International Bank (Commercial bank) .......... 29,450 317,104
Eastern Tobacco Co. (Maker of tobacco products) .......... 45,000 1,085,631
Egyptian Mobile Phone Network* (Provider of cellular
telecommunication services) ........................... 80,766 3,079,038
International Foods Co.* (Food producer) (b) ............. 33,991 380,145
Orascom Construction Industries* (Construction company) .. 20,100 276,033
Orascom Hotel Holdings* (Operator of hotels) ............. 154,500 395,664
Oriental Weavers Corp. (Carpet manufacturer) ............. 13,000 223,095
Suez Cement Co. (Cement producer) ........................ 44,177 578,527
-----------
8,412,037
-----------
Estonia 0.7%
AS Eesti Telekom (GDR) (Provider of telecommunication
services) ............................................. 24,000 552,000
Hansabank Ltd. (Provider of commercial banking services) . 23,300 185,200
-----------
737,200
-----------
Finland 1.0%
Nokia AB Oyj (ADR) (Manufacturer of telecommunication
networks and equipment) ............................... 17,920 1,019,200
-----------
Greece 2.9%
Alpha Credit Bank A.E. (Commercial bank) ................. 21,512 1,186,443
Ethniki General Insurance Co. (Insurance and reinsurance
company) .............................................. 7,300 228,965
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-------------------------------------------------------------------------------------
<S> <C> <C>
Hellenic Telecommunication Organization S.A. (OTE)
(Provider of telecommunication services) ................ 34,900 786,742
National Bank of Greece S.A. (Bank) ........................ 18,200 777,706
-----------
2,979,856
-----------
Hong Kong 1.1%
China Telecom Ltd. (ADR)* (Provider of cellular
telecommunications services) ............................ 7,940 1,164,699
-----------
Hungary 4.6%
Demasz Rt (Distributor of electricity) ..................... 2,700 180,558
EGIS Rt (Pharmaceutical company) ........................... 10,700 469,999
Gedeon Richter Rt (Pharmaceutical company) ................. 3,500 193,959
MOL Magyar Olaj-es Gazipari Rt "B" (Integrated domestic
oil and gas company) .................................... 21,800 384,408
Magyar Tavkozlesi Rt (ADR) "B" (Telecommunications
company) ................................................ 6,700 233,244
Matav Rt "A" (Provider of telecommunication services) ...... 316,800 2,172,063
OTP Bank Rt (Savings and commercial bank) .................. 25,300 1,122,436
-----------
4,756,667
-----------
India 4.0%
Bharat Petroleum Corp., Ltd (Oil exploration and refining,
manufacturer of petroleum products) ..................... 39,600 158,445
Dr. Reddy's Laboratories Ltd. (Pharmaceutical company) ..... 11,500 339,863
HDFC Bank Ltd. (Corporate banking and financial services) .. 21,900 123,648
Hindalco Industries Ltd. (Miner/refiner of aluminum) ....... 24,000 387,629
Housing Development Finance Corp., Ltd. ....................
(Provider of housing finance to individuals, corporations
and developers) ......................................... 14,000 151,675
Infosys Technologies Ltd. (Developer of software) .......... 2,600 482,474
Pentamedia Graphics Ltd. (Developer of educational and
multimedia software) .................................... 3,700 53,868
Satyam Computer Services Ltd. (Provider of software
services) ............................................... 23,800 1,701,168
Sri Adhikari Brothers Television Network (Producer of
television programs in Indonesia) ....................... 7,800 85,496
Videsh Sanchar Nigam Ltd. (Provider of telecommunication
services) ............................................... 17,400 530,172
Videsh Sanchar Nigam Ltd., (GDR) ........................... 9,900 187,110
-----------
4,201,548
-----------
Indonesia 0.3%
PT Bank Indonesia Warrants* (expire 7/8/2002) (Bank) ....... 44,588 703
PT Lippo Bank Tbk* (Commercial bank) ....................... 8,000,000 151,420
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
PT Ramayana Lestari Sentosa Tbk (Operator of department
stores) ................................................. 210,000 106,656
-----------
258,779
-----------
Israel 1.0%
Bank Hapoalim Ltd. (Bank) .................................. 37,900 116,382
Check Point Software Technologies, Ltd.* (Developer,
marketer and supporter of management solutions for
active networks) ........................................ 4,680 809,640
Orbotech, Ltd.* (Designer of automated optical inspection
systems and imaging solutions) .......................... 700 59,675
Orckit Communications Ltd.* (Designer of high speed data
access systems .......................................... 1,100 48,675
-----------
1,034,372
-----------
Jordan 0.7%
Aramex International Ltd.* (Provider of express delivery and
freight forwarding in the Middle East and India) ........ 17,700 185,850
HIKMA (Pharmaceutical company) (b) ......................... 68,000 493,239
-----------
679,089
-----------
Kenya 0.6%
James Finlay PLC (Tea producer) ............................ 342,000 371,644
Sasini Tea & Coffee Ltd. (Tea and coffee grower and
processor) .............................................. 620,000 263,521
-----------
635,165
-----------
Korea 16.1%
Dacom Corp.* (Provider of domestic long-distance and
internet services) ...................................... 2,320 336,580
Hankook Tire Manufacturing Co., Ltd. (Manufacturer of
tires, tire tubes, batteries, and aluminum alloy wheels) 2 4
Hite Brewery Co., Ltd. (Brewery) ........................... 21,684 615,495
Housing & Commercial Bank (Provider of banking services) ... 42,941 735,192
Korea Telecom Corp. (Provider of telecommunication
services) ............................................... 18,000 1,229,466
Korea Telecom Corp. (ADR) .................................. 29,000 1,000,500
Korea Tobacco and Ginseng Corp. (Tobacco company) .......... 17,000 326,290
Pohang Iron & Steel Co., Ltd. (Steel producer) (c) ......... 7,180 572,821
SK Telecom Co., Ltd. (Provider of mobile
telecommunication and paging services) .................. 10,500 2,791,169
Samsung Corp., Ltd. (Trading company) ...................... 33,000 374,679
Samsung Electro-Mechanics Co. (Manufacturer of precision
and electronic parts) ................................... 16,712 1,136,973
Samsung Electronics Co. (Manufacturer of electronics) ...... 20,180 5,455,283
Samsung Securities Co., Ltd. (Provider of brokerage,
investment and underwriting services) ................... 83,494 1,406,928
Shinhan Bank (GDR) (Commercial bank) ....................... 15,600 295,620
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Shinsegae Department Store Co. (Department store chain) . 14,000 526,064
-----------
16,803,064
-----------
Malaysia 0.4%
Unisem (M) Berhad (Manufacturer of semiconductors) ...... 43,000 381,903
-----------
Mauritius 0.1%
New Mauritius Hotels Ltd. (Operator of hotels) .......... 55,300 90,854
-----------
Mexico 9.3%
Consorcio ARA, S.A. de C.V.* (Low-income housing
developer) ........................................... 770,000 955,636
Fomento Economico Mexicano S.A. de C.V. "B" (Producer
of beer and soft drinks) ............................. 857,000 3,397,898
Gruma S.A. de C.V. "B" (Producer and distributor of
corn flour) .......................................... 240,052 314,278
Grupo Financiero Banamex Accival, S.A. de C.V. (Provider
of individual, commercial and retail banking services) 211,000 763,598
Grupo Financiero Banorte S.A. de C.V. "O"*
(Provider of financial services) ..................... 410,000 558,595
Grupo Bimbo S.A. de C.V. "A" (Producer
of bread and other baked goods) ...................... 335,000 434,305
Grupo Modelo S.A. "C" (Brewery) ......................... 178,000 378,925
Grupo Televisa S.A. de C.V. (GDR)* (Media company) ...... 1,500 95,156
Organizacion Soriana S.A. de C.V. "A" (Retailer) ........ 155,000 618,680
Telefonos de Mexico S.A. de C.V. "L" (ADR)
(Provider of telecommunication services) ............. 27,130 1,595,583
Tubos de Acero de Mexico S.A. (ADR) (Manufacturer
of various types of pipes, casings and tubing) ....... 41,700 622,894
-----------
9,735,548
-----------
Morocco 0.6%
Omnium Nord Africaine (Diversified holding company) ..... 1,050 109,141
Societe des Brasseries du Marocain (Distributor of
beer and carbonated beverages) ....................... 1,600 244,091
WAFABANK (Commercial bank) .............................. 3,107 247,869
-----------
601,101
-----------
Nigeria 0.1%
First Bank of Nigeria plc (Commercial bank) ............. 900,000 143,750
-----------
Oman 1.6%
Bank Muscat Al Ahla Al Omani (Commercial bank) .......... 5,250 54,545
Commercial Bank of Oman* (Commercial bank) .............. 17,000 90,519
National Bank of Oman Ltd.* (Commercial bank) ........... 113,980 1,021,379
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Oman Cable Industry SAOG* (Manufacturer of electrical
and power cables) (b) ................................... 18,685 189,277
Oryx Fund, Ltd. (Mutual fund which invests in the securities
of developing markets) .................................. 30,575 336,325
-----------
1,692,045
-----------
Peru 1.2%
Cementos Lima S.A. "T" (Cement producer) ................... 15,199 211,632
Compania de Minas Buenaventura S.A. "B"
(Mining company) ........................................ 99,000 861,551
Ferreyros S.A. (Machinery manufacturer) .................... 455,090 161,036
Gitennes Exploration Inc.* (Exploration and development
of gold mining properties in Peru) ...................... 54,000 7,289
-----------
1,241,508
-----------
Poland 6.9%
Bank Polska Kasa Opieki Grupa Pekao S.A.*
(Commercial bank) ....................................... 12,900 152,953
Central European Distribution Corp.* (Distributor of
alcoholic beverages) .................................... 36,200 149,325
Elektrim Spolka Akcyjna S.A. (Manufacturer of power
equipment, electrical machinery and apparatus) .......... 46,800 596,779
ITI Group S.A.* (Provider of telecommunication
services) (b) ........................................... 3,700 1,291,744
KGHM Polska Miedz S.A. (Producer of copper and silver) ..... 150 1,007
Netia Holdings BV* (Telecommunication services) (b) ........ 96,742 2,666,451
Netia Holdings BV "O"* (b) ................................. 8,729 240,593
Netia Holdings BV "P"* (b) ................................. 7,330 202,033
Netia Holdings BV "R"* (b) ................................. 3,980 109,699
Orbis S.A.* (Hotel owner and operator) ..................... 57,400 493,101
Telekomunikacja Polska S.A. (Owner and operator of
telecommunication networks) ............................. 105,000 810,403
Wielkopolski Bank Kredytowy S.A. (Commercial bank) ......... 73,000 416,443
Zaklady Lentex S.A.* (Producer of PVC products used in
cars, footwear, housing and public construction) ........ 16,000 101,298
-----------
7,231,829
-----------
Russia 2.6%
Golden Telecom Inc.* (Provider of telecommunication
services) ............................................... 2,600 79,625
LUKoil Holdings (ADR) (Extracter, transporter, refiner,
and provider of oil and gas) ............................ 12,850 761,363
Surgutneftegaz (ADR) (Producer of oil and natural gas) ..... 120,000 1,830,000
-----------
2,670,988
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
----------------------------------------------------------------------------------------
<S> <C> <C>
Singapore 0.0%
Asia Pulp & Paper Co., Ltd., Warrants*
(expire 7/27/2000) (Producer of paper and pulp) ........ 15,280 2,626
-------------
South Africa 2.6%
Anglo American Platinum Corp. (Platinum mining
company) ............................................... 21,900 529,813
Capital Alliance Holdings Ltd.* (Provider of insurance
and pension services) .................................. 40,400 79,262
Dimension Data Holdings Ltd.* (Investment holding
company comprised of several technology groups
including communications, software, interactive) ....... 118,000 774,598
Driefontein Consolidated Ltd. (Gold mining company) ....... 61,500 199,587
Harmony Gold Mining Co., Ltd. (Gold mining company) ....... 98,813 485,392
Sappi Ltd. (Producer of pulp paper and timber) ............ 91,300 639,733
-------------
2,708,385
-------------
Taiwan 10.1%
Asustek Computer Inc. (Manufacturer of computer
motherboards) .......................................... 29,000 321,327
Bank Sinopac (Provider of commercial banking services) .... 732,652 407,095
Chinatrust Commercial Bank* (Commercial bank) ............. 702,240 580,705
Far Eastern Textile Ltd. (Manufacturer of natural and
synthetic textile products) ............................ 465,430 714,993
Formosa Plastics Corp. (Manufacturer of plastics materials) 332,000 689,067
Hon Hai Precision Industry Co., Ltd.* (Manufacturer of
electronic connectors and cable assemblies) ............ 227,000 2,188,756
Synnex Technology International Corp. (Distributor
of personal computers and peripherals) ................. 14,000 94,721
Taiwan Semiconductor Manufacturing Co., Ltd.*
(Manufacturer of integrated circuits) .................. 442,760 2,850,914
United Microelectronics Corp., Ltd.* (Manufacturer of
integrated circuits) ................................... 806,000 2,726,622
-------------
10,574,200
-------------
Thailand 0.4%
Siam Cement Co., Ltd.* (Foreign registered) (Construction
materials and industrial conglomerate) ................. 14,600 337,617
TelecomAsia, Ltd.* (Foreign registered) (Telecommunication
services) .............................................. 76,200 102,121
-------------
439,738
-------------
Tunisia 0.2%
Societe Frigorifique et Brasserie de Tunis SA
(Beverage producer) .................................... 1,800 188,780
-------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Shares Value ($)
------------------------------------------------------------------------------------
Turkey 5.0%
Akbank A.S. (Banking and investment organization) .... 30,500,000 686,094
Dogan Sirketler Grubu Holdings A.S. (Industrial
conglomerate) ..................................... 17,048,300 529,927
EGE Biracilik Ve Malt Sanayii A.S. (Brewery) ......... 6,896,600 620,553
Erciyas Biracilik (Brewery) .......................... 4,476,600 333,227
Koc Holding A.S. (Holding company with interests in
the automotive and durable goods industries) ...... 780,000 156,319
Migros Turkey (Retailer) ............................. 2,400,000 1,629,448
Turkiye Garanti Bankasi A.S. (Bank) .................. 34,914,734 588,338
Vestel Elektronik Sanayi ve Ticaret A.S. (Manufacturer
of televisions and monitors) ...................... 1,240,000 466,585
Yapi ve Kredi Bankasi A.S. (Commercial bank) ......... 8,000,000 255,215
--------------
5,265,706
--------------
Zimbabwe 1.0%
Delta Corp., Ltd. (Brewery) .......................... 902,031 176,638
Econet Wireless Holdings Ltd.* (Provider of
telecommunication services) ....................... 1,361,100 497,530
Tanganda Tea Company Ltd. (Producer and distributor of
tea products) ..................................... 1,056,212 420,554
--------------
1,094,722
--------------
------------------------------------------------------------------------------------
Total Common Stocks (Cost $80,331,263) 98,006,984
------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $86,558,263) (a) 104,233,984
------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase, not a coupon rate.
(a) The cost for federal income tax purposes was $86,646,742. At April 30,
2000, net unrealized appreciation for all securities based on tax cost was
$17,587,242. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$26,358,287 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value of $8,771,045.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $5,573,181 (5.30% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at April 30, 2000 aggregated $4,183,208. 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 April 30, 2000 was $674,263. The aggregate premium
($11,201) over the local share price ($561,620) for the security valued by
the Valuation Committee was approximately 0.02% of the Fund's net assets at
April 30, 2000.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
----------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of April 30, 2000
Assets
----------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $86,558,263) .............. $ 104,233,984
Foreign currency, at value (cost $1,440,906) ........................ 1,434,222
Receivable for investments sold ..................................... 325,971
Dividends receivable ................................................ 165,617
Receivable for Fund shares sold ..................................... 33,628
Foreign taxes recoverable ........................................... 3,012
Deferred organization expenses ...................................... 1,729
Other assets ........................................................ 33,652
-------------
Total assets ........................................................ 106,231,815
Liabilities
----------------------------------------------------------------------------------------
Due to custodian bank ............................................... 13,643
Payable for investments purchased ................................... 180,458
Payable for Fund shares redeemed .................................... 49,834
Deferred foreign taxes .............................................. 386,647
Accrued management fee .............................................. 179,571
Accrued reorganization costs ........................................ 54,175
Accrued Directors' fees and expenses ................................ 38,554
Other accrued expenses and payables ................................. 362,674
-------------
Total liabilities ................................................... 1,265,556
----------------------------------------------------------------------------------------
Net assets, at value $ 104,966,259
----------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss ..................................... (714,756)
Net unrealized appreciation (depreciation) on:
Investments (net of deferred foreign taxes of $386,647) ........... 17,289,074
Foreign currency related transactions ............................. (9,233)
Accumulated net realized gain (loss) ................................ (40,699,048)
Paid-in capital ..................................................... 129,100,222
----------------------------------------------------------------------------------------
Net assets, at value $ 104,966,259
----------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------
NetAsset Value, offering and redemption price per share ($104,966,259 /
7,768,807 shares of capital stock outstanding, $.01 par value,
100,000,000 shares authorized) ................................... $ 13.51
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended April 30, 2000
Investment Income
--------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $48,115) ........... $ 634,195
Interest (net of foreign taxes withheld of $42) ................ 119,129
------------
Total income ................................................... 753,324
------------
Expenses:
Management fee ................................................. 727,240
Services to shareholders ....................................... 398,551
Custodian and accounting fees .................................. 305,738
Auditing ....................................................... 38,993
Legal .......................................................... 9,254
Directors' fees and expenses ................................... 88,194
Reports to shareholders ........................................ 21,669
Registration fees .............................................. 11,234
Reorganization ................................................. 59,157
Other .......................................................... 10,153
------------
Total expenses, before expense reductions ...................... 1,670,183
Expense reductions ............................................. (266,796)
------------
Total expenses, after expense reductions ....................... 1,403,387
Net investment income (loss) ................................... (650,063)
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments (net of foreign taxes of $68,694) .................. 4,399,334
Foreign currency related transactions (including CPMF
tax of (158,258) ............................................. $ 10,182)
------------
4,241,076
------------
Net unrealized appreciation (depreciation) during the period on:
Investments (net of deferred foreign taxes of $386,647) ........ 12,129,391
Foreign currency related transactions .......................... 10,330
------------
12,139,721
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 16,380,797
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 15,730,734
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------
Six Months Year Ended
Ended October 31,
Increase (Decrease) in Net Assets April 30, 2000 1999
------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) ...................... $ (650,063) $ (407,810)
Net realized gain (loss) on investment transactions 4,241,076 (11,692,846)
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... 12,139,721 26,754,234
------------- -------------
Net increase (decrease) in net assets resulting
from operations ................................ 15,730,734 14,653,578
------------- -------------
Distributions to shareholders from:
Net investment income ............................. -- (211,905)
------------- -------------
In excess of net investment income ................ -- (175,892)
------------- -------------
Fund share transactions:
Proceeds from shares sold ......................... 15,647,387 22,608,308
Reinvestment of distributions ..................... -- 324,120
Cost of shares redeemed ........................... (29,106,461) (59,509,301)
Redemption fees ................................... 54,603 149,185
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (13,404,471) (36,427,688)
------------- -------------
Increase (decrease) in net assets ................. 2,326,263 (22,161,907)
Net assets at beginning of period ................. 102,639,996 124,801,903
Net assets at end of period (including accumulated
net investment loss of $714,756 and accumulated
distributions in excess of net investment
income of $64,694, respectively) ............... $ 104,966,259 $ 102,639,996
Other Information
------------------------------------------------------------------------------------
Shares outstanding at beginning of period ......... 8,731,960 12,048,140
------------- -------------
Shares sold ....................................... 1,063,874 2,001,721
Shares issued to shareholders in reinvestment of
distributions .................................. -- 30,551
Shares redeemed ................................... (2,027,027) (5,348,452)
------------- -------------
Net increase (decrease) in Fund shares ............ (963,153) (3,316,180)
Shares outstanding at end of period ............... 7,768,807 8,731,960
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
------------------------------------------------------------------------------------
Years Ended October 31, 2000(b) 1999 1998 1997 1996(c)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.75 $10.36 $14.56 $12.85 $12.00
----------------------------------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss)(a) (.08) (.04) .06 .02 (.02)
------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 1.83 1.46 (4.23) 1.67 .86
----------------------------------------------
------------------------------------------------------------------------------------
Total from investment operations 1.75 1.42 (4.17) 1.69 .84
------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- (.04) (.06) (.03) --
------------------------------------------------------------------------------------
Redemptions fees .01 .01 .03 .05 .01
------------------------------------------------------------------------------------
Net asset value, end of period $13.51 $11.75 $10.36 $14.56 $12.85
----------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) (d)(e) 14.88** 13.89 (28.54) 13.51 7.08**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 105 103 125 220 76
------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 2.77(f)* 2.77 2.31 2.33 3.79*
------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 2.34(f)* 2.25 2.16 2.00 2.00*
------------------------------------------------------------------------------------
Ratio of net investment
income (loss)(%) (1.04)* (.36) .48 .11 (.32)*
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 49* 64 45 62 20
------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended April 30, 2000.
(c) For the period May 8, 1996 (commencement of operations) to October 31,
1996.
(d) Total returns would have been lower had certain expenses not been reduced.
(e) Shareholders redeeming shares held less than one year will have a lower
total return due to the effect of the 2% redemption fee.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 2.66% and
2.25%, respectively.
* Annualized
** Not annualized
26
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Emerging Markets Growth Fund (the "Fund") is a non-diversified series of
Scudder International Fund, Inc. (the "Corporation") 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 purchased with an original maturity of sixty days or
less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
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.
27
<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.
28
<PAGE>
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.
29
<PAGE>
Organization Costs. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
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 six months ended April 30, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $26,036,635 and
$39,774,740, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Management Agreement") with
Scudder Kemper Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Fund
pays the Adviser a fee equal to an annual rate of 1.25% of the Fund's average
daily net assets, computed and accrued daily and payable monthly. As manager of
the assets of the Fund, the Adviser directs the investments of the Fund in
accordance with its investment objective, policies, and restrictions. The
Adviser determines the securities, instruments and other contracts relating to
investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Management Agreement. The Adviser has agreed to
maintain the annualized expenses of the Fund at 2.25% until December 31, 2000.
Certain expenses incurred in connection with the reorganization are excluded
from the expense limitation. For the six months ended April 30, 2000, the
Adviser did not impose a portion of its management fee amounting to $233,405,
and the amount imposed amounted to $493,835, which was equivalent to an
annualized effective rate of 0.85% of the Fund's average daily net assets.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended April 30,
2000, the amount charged to the Fund by STC aggregated $128,941, of which
$71,547 is unpaid at April 30, 2000.
30
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 2000, the amount charged to the Fund by SFAC aggregated $70,568,
of which $30,101 is unpaid at April 30, 2000.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 2000 the amount charged by SSC aggregated $292,445 of
which $170,186 is unpaid at April 30, 2000.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. For the six months ended April
30, 2000, the Special Servicing Agreement expense charged to the Fund amounted
to $125,363, of which $77,867 was unpaid at April 30, 2000.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 2000, Directors' fees and expenses aggregated $21,413. In
addition, a one-time fee of $66,781 was accrued for payment to those Directors
not affiliated with the Adviser who are not standing for re-election, under the
reorganization discussed in Note F. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $33,391 of such costs.
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
31
<PAGE>
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion 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 upon net assets, 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 33 percent of its net assets
under the agreement.
F. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund.
32
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder Emerging Markets Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Emerging Markets Growth
Fund (the "Fund") at April 30, 2000, the results of its operations, the changes
in its net assets, and the financial highlights for each of the periods
indicated therein, in conformity with accounting principles generally accepted
in the United States. 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 auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at April 30, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
June 16, 2000
33
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Nicholas Bratt* Irene T. Cheng*
o President o Vice President
Sheryle J. Bolton Joyce E. Cornell*
o Director; Chief Executive o Vice President
Officer, Scientific Learning
Corporation Carol L. Franklin*
o Vice President
William T. Burgin
o Director; General Partner, Edmund B. Games, Jr.*
Bessemer Venture Partners o Vice President
Keith R. Fox Joan R. Gregory*
o Director; General Partner, o Vice President
The Exeter Group of Funds
Ann M. McCreary*
William H. Luers o Vice President
o Director; Chairman and
President, U.N. Association of Sheridan P. Reilly*
America o Vice President
Kathryn L. Quirk* Tien-Yu Sieh*
o Director, Vice President and o Vice President
Assistant Secretary
Shahram Tajbakhsh*
Joan E. Spero o Vice President
o Director; President, Doris
Duke Charitable Foundation John Millette*
o Vice President and Secretary
Paul Bancroft III
o Honorary Director; Consultant John R. Hebble*
o Treasurer
Thomas J. Devine
o Honorary Director; Consultant Caroline Pearson*
o Assistant Secretary
William H. Gleysteen, Jr.
o Honorary Director; Consultant; *Scudder Kemper Investments, Inc.
Guest Scholar, Brookings
Institution
Wilson Nolen
o Honorary Director; Consultant
Robert G. Stone, Jr.
o Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
34
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
The Scudder Family of Funds+++
--------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares* Scudder Micro Cap Fund
Managed Shares*
Growth
Tax Free Money Market+ Scudder Classic Growth Fund***
Scudder Tax Free Money Fund Scudder Large Company Growth Fund***
Scudder California Tax Free Money Fund** Scudder Select 1000 Growth Fund
Scudder New York Tax Free Money Fund** Scudder Development Fund
Scudder 21st Century Growth Fund
Tax Free+
Scudder Limited Term Tax Free Fund Global Equity
Scudder Medium Term Tax Free Fund Worldwide
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder High Yield Tax Free Fund Scudder International Value Fund
Scudder California Tax Free Fund** Scudder International Growth and
Scudder Massachusetts Limited Term Income Fund
Tax Free Fund** Scudder International Fund++
Scudder Massachusetts Tax Free Fund** Scudder International Growth Fund
Scudder New York Tax Free Fund** Scudder Global Discovery Fund***
Scudder Ohio Tax Free Fund** Scudder Emerging Markets Growth Fund
Scudder Gold Fund
U.S. Income
Scudder Short Term Bond Fund Regional
Scudder GNMA Fund Scudder Greater Europe Growth Fund
Scudder Income Fund Scudder Pacific Opportunities Fund
Scudder Corporate Bond Fund Scudder Latin America Fund
Scudder High Yield Bond Fund The Japan Fund, Inc.
Global Income Industry Sector Funds
Scudder Global Bond Fund Choice Series
Scudder International Bond Fund Scudder Financial Services Fund
Scudder Emerging Markets Income Fund Scudder Health Care Fund
Scudder Technology Fund
Asset Allocation
Scudder Pathway Conservative Portfolio Preferred Series
Scudder Pathway Balanced Portfolio Scudder Tax Managed Growth Fund
Scudder Pathway Growth Portfolio Scudder Tax Managed Small Company Fund
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
</TABLE>
35
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Closed-End Funds#
-----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
+++ Funds within categories are listed in order from expected least
risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder
Kemper Investment'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 Kemper Investment'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.
36
<PAGE>
Scudder Solutions
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank 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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
37
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
38
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
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.
SCUDDER
IONVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Finanical Services Group
