SCUDDER
INVESTMENTS(SM)
[LOGO]
------------------------
EQUITY/GLOBAL
------------------------
Scudder Emerging
Markets Growth Fund
Annual Report
October 31, 2000
The fund seeks long-term growth of capital.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
16 Glossary of Investment Terms
17 Investment Portfolio
25 Financial Statements
28 Financial Highlights
30 Notes to Financial Statements
38 Report of Independent Accountants
39 Tax Information
40 Shareholder Meeting Results
41 Officers and Directors
42 Investment Products and Services
44 Account Management Resources
2
<PAGE>
Scudder Emerging Markets Growth Fund
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Class AARP ticker symbol SEMMX fund number 179
Class S ticker symbol SEMGX fund number 079
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Date of o As an asset class, emerging markets stocks declined
Inception: sharply during the twelve months ended October 31, with
5/8/96 the most significant losses occurring in the second
half of the period. Despite the downturn, management
believes that investors should not lose sight of the
fact that many emerging markets nations offer improving
Total Net fundamentals and a positive long-term outlook.
Assets as
of 10/31/00-- o Fund performance bettered the index and was helped by
its holdings in Korea, Greece, and Taiwan, while its
Class AARP: positions in Egypt and Brazil detracted from
$0.07 million performance.
Class S: o Management continues to find opportunities in Mexico,
$72 million Korea, and Brazil, as well as in countries that are
benefiting from higher oil prices.
3
<PAGE>
Letter from the Fund's President
--------------------------------------------------------------------------------
Dear Shareholders,
The past twelve months have been a time of extraordinary volatility for the
global stock markets, and for the developing countries in particular. As the
seemingly ideal investment environment of the first calendar quarter gave way to
rising interest rates, higher oil prices, and a falling euro, investments
perceived to have the highest degree of safety benefited from a "flight to
quality." On the other end of the spectrum, investments that contain a higher
degree of risk -- such as emerging markets equities -- declined sharply
regardless of their fundamental strengths.
At times like these, it is important to remember that stock prices are not a
perfect indicator of the fundamental trends that are unfolding within an
individual company or even an entire region. The market tends to overshoot on
the upside, valuing companies far above their actual worth (as was the case with
many technology stocks in the spring), as well as on the downside, as has been
the case with the many high-quality companies that have been swept away in the
emerging markets' downturn in 2000. Investors, keeping in mind that emerging
market investments are volatile by their nature, should nonetheless focus on the
potential opportunities offered by investments with improving fundamentals,
particularly when these positive trends are not being reflected in their market
prices.
4
<PAGE>
Emerging markets equities may offer just such an opportunity in the wake of
their recent declines. Although a litany of external factors and short-term
developments have unsettled investors in recent months, we believe many positive
trends -- such as strong growth, improving corporate earnings, and meaningful
reform in both the public and private sectors -- point to a favorable long-term
outlook. While we understand that you may find declines in the value of your
mutual fund holdings to be distressing, we nonetheless urge you to keep in mind
that the emerging markets continue to be an area of positive, dynamic change.
For more information on why the fund's management team holds a positive
long-term outlook for the developing countries, 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/Lin Coughlin
Linda C. Coughlin
President
Scudder Emerging Markets Growth Fund
5
<PAGE>
Performance Update
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October 31, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Emerging IFC Emerging
Markets Growth Markets Investable
Fund -- Class S Index*
10000 10000
10559 9676
12727 10621
11986 8711
12252 9013
8565 6182
9398 8236
9754 8833
11206 10057
9207 8049
Yearly periods ended October 31
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder Emerging Markets Growth Fund -- Class S
--------------------------------------------------------------------------------
1 year $ 9,455 -5.45% -5.45%
--------------------------------------------------------------------------------
Life of Fund** $ 9,337 -6.63% -1.52%
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IFC Emerging Markets Investable Index*
--------------------------------------------------------------------------------
1 year $ 9,112 -8.88% -8.88%
--------------------------------------------------------------------------------
Life of Fund** $ 8,049 -19.51% -4.79%
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6
<PAGE>
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE SCUDDER EMERGING
MARKETS GROWTH FUND -- CLASS S TOTAL RETURN (%) AND IFC EMERGING MARKETS
INVESTABLE INDEX* TOTAL RETURN (%)
Yearly periods ended October 31
1996** 1997 1998 1999 2000
--------------------------------------------------------------------------------
Fund Total
Return (%) 7.08*** 13.51 -28.54 13.89 -5.45
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Index Total
Return (%) -3.24 -9.97 -29.04 42.90 -8.88
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Net Asset
Value ($) 12.85 14.56 10.36 11.75 11.11
--------------------------------------------------------------------------------
Income
Dividends
($) -- .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.
*** Total return does not reflect the effect to the shareholder of the
applicable redemption fees.
On October 2, 2000, existing shares of the Fund were redesignated as
Class S shares. In addition, the Fund commenced offering Class AARP
shares. The total return information provided is for the Fund's Class S
shares.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
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 Fund would have been lower. Portfolio Summary
7
<PAGE>
Portfolio Summary
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October 31, 2000
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Geographical
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 5% Cash Equivalents) During the period, we
Latin America 31% focused on countries
Pacific Basin 25% making progress on
Europe 20% structural reform such
Africa 14% as Brazil, Turkey,
Other 10% Korea, and Mexico.
------------------------------------
100%
------------------------------------
--------------------------------------------------------------------------------
Sectors
--------------------------------------------------------------------------------
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 5% Cash Equivalents) The fund is maintaining
Communications 27% substantial weightings
Consumer Staples 18% in countries benefiting
Financial 16% from strong oil prices.
Technology 11%
Energy 10%
Metals & Minerals 6%
Consumer Discretionary 4%
Manufacturing 4%
Health 2%
Other 2%
------------------------------------
100%
------------------------------------
8
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Ten Largest Equity Holdings
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(25% of Portfolio) The fund's top holdings
reflect management's
1. Fomento Economico Mexicano S.A. de C.V. focus on well-managed
Producer of beer and soft drinks in Mexico companies in countries
with favorable growth
2. Korea Telecom Corp. characteristics.
Provider of telecommunications services in Korea
3. Petroleo Brasileiro S.A.
Producer of petroleum products in Brazil
4. ITI Holdings S.A.
Provider of telecommunication services in Poland
5. Surgutneftegaz
Producer of oil and natural gas in Russia
6. Taiwan Semiconductor Manufacturing Co.
Manufacturer of integrated circuits in Taiwan
7. Netia Holdings S.A.
Provider of fixed-line telecommunications services in
Poland
8. Samsung Electronics Co.
Electronics manufacturer in Korea
9. Hon Hai Precision Industry Co., Ltd.
Manufacturer of electronic products in Taiwan
10. Al Ahram Beverages Co.
Beverage producer in Egypt
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
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October 31, 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 twelve-month period ended October 31, 2000.
Q: Emerging markets equities have performed poorly during the past year. Why?
A: The emerging markets have been afflicted by a combination of rising oil
prices, conflict in the Middle East, a sell-off in global technology stocks over
the second half of the reporting period, and the steady weakening of the euro.
Another key problem at the moment is liquidity, or -- in other words -- the flow
of money in the world economy. Both the U.S. Federal Reserve and the European
Central Bank have been raising interest rates over the course of the past year,
and ongoing bad loan problems in Japan have led to a reduction in bank lending.
This has led to a lower availability of credit, which has dampened the economies
of the emerging markets. To make matters worse, the U.S. economy has been
absorbing much of the world's excess savings, leaving little for other markets
to tap.
In Asia, where the fund holds 24% of net assets, stocks plunged during the final
six months of the reporting period. The decline in the Nasdaq was a key factor
behind the downturn, but the region's markets were further impacted by
region-specific difficulties, such as political issues in Taiwan and concerns
over the slowing pace of restructuring in Korea. Additionally, Asian currencies
were weak across the board in the face of a strong dollar. The investment
picture in Latin America was brighter, but stocks fell nonetheless. In that
region, we are encouraged by the strong performance from the economies of Mexico
and Brazil, as well as the positive developments on the political front in both
countries.
10
<PAGE>
Q: Why did the fund outperform in relation to its benchmark?
A: For the twelve-month period ended October 31, 2000, the Class S shares of the
fund's total return was -5.45%, versus a return of -8.88% for its unmanaged
benchmark, the IFC Emerging Markets Investable Index. The single largest
contributor to the fund's outperformance was good stock picking in Korea. While
the Korean index fell 37%, our picks lost only 15.5%. Solid stock picking in
Taiwan and Poland also helped. Being overweight in Polish stocks was another
cause for our performance -- our holdings rose 12% in a down market. An
underweight in Greece, which fell more than average, was another factor.
Q: How is the portfolio positioned at present?
A: We continue to focus on countries that are making progress on structural
reform; Brazil, Turkey, Korea, and Mexico are the strongest in this category. We
are maintaining substantial weightings in countries benefiting from strong oil
prices, such as Egypt, Russia, and Oman. Mexico and Brazil also fall in this
category. We also continue to overweight countries with a relatively low level
of correlation with the established markets, such as Egypt, Poland, Hungary,
Turkey, and Morocco, although we have generally scaled back our exposure to some
of these markets to make room for countries that have been undertaking
structural reforms, such as Brazil and Korea. Recent additions in Brazil, where
we are encouraged by improving economic conditions and government efforts to
finally enact meaningful tax and pension reform, and Turkey, where the
implementation of a stabilization package should result in lower inflation and
better economic conditions. We have also added to positions in Morocco, which
could benefit from the recent discovery of a major gas deposit, and Russia,
which has benefited from higher oil prices. We have been reducing the fund's
position in Taiwan due to its vulnerability to softening electronics demand. The
political turmoil that erupted during September jeopardizes necessary economic
reforms
11
<PAGE>
and heightens uncertainty in the relationship with mainland China.
Q: Mexico is now the fund's number one country holding. What factors have led
you to build up a large position there?
A: Mexico has been transforming itself steadily over the past six years.
Domestic and external deficits have been substantially reduced, and the currency
has been managed in an exemplary fashion. The rehabilitation of the banking
system is nearly complete. With several banks having been sold to larger global
companies, the system is increasingly being operated to global standards. In
addition, the trends in foreign direct investment, real wages, unemployment, and
inflation are all positive.
Politically, Mexico is becoming a functioning democracy. Vicente Fox's
convincing victory in the recent presidential election was a watershed event,
heralding a new era in the country's history. We believe that his victory will
be a major long-term positive for the equity markets. Over time, it is likely
that the declining risk level in Mexico will be appreciated by the global
investment community, leading to a positive rerating of the market and
encouraging even greater inflow of direct investment. In the portfolio, we are
emphasizing consumer companies over exporters, as a slowdown in the U.S. could
hurt the latter to a greater degree.
Q: The fund's number two country weighting is in Korea. What is your outlook for
that country?
A: Korea provides an example of both the positive trends and risks inherent in
the emerging markets. On one hand, the country has a lot going for it: political
leaders that are committed to reform, a flexible and educated work force, a
growing awareness of minority shareholder rights, and a newfound focus on
profitability and returns on capital. On the other hand, Korea has just about
borrowed to capacity to restructure its banking system, and time may be running
out. In addition, we continue to find evidence of mid-level
12
<PAGE>
bureaucrats tampering with market forces and meddling in companies' investment
decisions.
In this sense, Korea represents the crosscurrents in which many emerging markets
find themselves. Staggering potential and renewed momentum for change are set
against the ballast of vested interests and the old, nearly feudal economic
system. The juxtaposition of these elements yields a stop-and-go evolutionary
process that is buffeted by external factors such as oil prices and export
demand. As is the case with other countries, we will therefore stay positioned
to take advantage of the region's opportunities while still watching closely to
ensure that the potential rewards continue to outweigh the risks.
Q: After such a difficult year, investors may be asking themselves, "Why the
emerging markets, and why now?" What is your answer to this question?
A: The most important thing to keep in mind is that we have seen a dramatic
improvement in the fundamentals of many emerging markets. The crises these
countries have experienced in recent years have prompted many of them to reform.
We point to Mexico, Korea, Turkey, Brazil, and even Russia as prime examples.
Having experienced hardships, governments in these countries have spent the last
few years improving their fiscal positions, shoring up foreign exchange
reserves, restructuring and/or reducing their foreign debts, opening up their
economies to foreigners, and generally demonstrating a greater willingness to
let market forces decide which companies fail or succeed. What's more, companies
are placing greater emphasis on shareholder value and are focusing more on
profits rather than market share. The resulting improvement in returns on
equity, combined with the fact that many of the emerging markets economies are
emerging from recessions, should translate into dramatic improvements in
earnings. Finally, we are encouraged by the fact that many of these markets are
trading at or near their historic lows in terms of their valuations.
13
<PAGE>
It is our contention that the weakness in emerging markets equities will change
in the not-too-distant future. As the U.S. economy (along with U.S. corporate
profitability) slows and stock market performance tapers off to more normal
levels, the U.S. should become less of a magnet for the world's excess savings.
At the same time, economic growth and corporate profitability in the emerging
markets should pick up, improving their relative attractiveness. While there are
sure to be more bumps along the road as the process of reform takes hold in the
developing countries, we believe that the long-term picture is positive.
The opinions expressed are those of the portfolio management team as of October
31, 2000, and may not actually come to pass.
14
<PAGE>
Scudder Emerging Markets Growth Fund:
A Team Approach to Investing
Scudder Emerging Markets Growth Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an important
role in the fund's management process. Team members work together to develop
investment strategies and select securities for the fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in offices across the United
States and abroad. The Adviser believes that a team approach benefits fund
investors by bringing together many disciplines and leveraging the firm's
extensive resources.
Lead portfolio manager Joyce E. Cornell has overall responsibility for the
fund's day-to-day management and investment strategies. Ms. Cornell joined the
Adviser in 1991 and has been a portfolio manager with the Adviser since 1993.
Portfolio manager Tara C. Kenney joined the Adviser in 1995 and has over 12
years of financial industry experience.
Portfolio manager Andre J. DeSimone joined the Adviser in 1997 after three years
as Chief Executive Officer of a stock brokerage company in Kenya. Mr. DeSimone
also has seven years of experience in investment banking on Wall Street.
15
<PAGE>
Glossary of Investment Terms
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Currency Exchange The price at which one country's currency can be exchanged
Rate into another currency. When a country's currency rises
relative to other currencies, this decreases the buying
power of foreign purchasers of that country's goods and
services and tends to hurt the earnings of companies that
export; by contrast, a weak currency promotes exports. From
the perspective of a U.S. investor in overseas securities, a
weakening U.S. dollar adds to total returns, as assets
denominated in foreign currencies then translate into more
in dollar terms; a strengthening dollar relative to foreign
currencies reduces returns to U.S. investors.
Foreign Direct Investment in a country's businesses by foreign citizens,
Investment usually involving majority stock ownership of the
enterprise. For example, a U.S. corporation that wishes to
sell its cars in Europe forms a joint venture with a French
auto company to construct a production facility in France.
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)
16
<PAGE>
Investment Portfolio as of October 31, 2000
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Short-Term Investments 5.2%
------------------------------------------------------------------------------------
<S> <C> <C>
Student Loan Marketing Association, 6.45%**, -----------
11/1/2000 (Cost $3,705,000) ........................... 3,705,000 3,705,000
-----------
Shares
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Common Stocks 94.8%
------------------------------------------------------------------------------------
Bolivia 0.2%
Corriente Resources, Inc.* (Explorer and producer of gold,
bismuth, tin and tungsten in South America) ........... 224,800 177,066
-----------
Botswana 0.2%
Sechaba Breweries Ltd. (Holding company with interest in
brewery and beverage companies) ....................... 167,900 136,523
-----------
Brazil 11.9%
Aracruz Celulose S.A. "B" (ADR) (Producer of eucalyptus
kraft pulp) ........................................... 22,000 330,000
Banco Itau S.A. (pfd.) (Provider of commercial
banking services) ..................................... 12,355,200 965,656
Brasil Telecom Participacoes S.A. (pfd.) (ADR) (Provider
of telecommunication services) ........................ 9,560 518,043
Compahnia de Bebidas das Americas (pfd.) (ADR)
(Producer of beverages) ............................... 24,900 561,815
Companhia Brasileira de Distribuicao Grupo Pao
de Acucar (pfd.) (ADR) (Operator of hypermarkets,
supermarkets and appliance stores) .................... 7,500 267,198
Companhia Paranaense de Energia-- Copel (pfd.) "B"
(ADR) (Distributor of electric power) ................. 95,473 865,234
Companhia Vale do Rio Doce (pfd.) "A" (Operator of
diverse mining and industrial complex) ................ 21,525 498,474
Companhia Vale do Rio Doce (pfd.) (ADR) .................. 4,700 110,450
Electropaulo Metropolitana (Distributor of electric power
in Brazil) ............................................ 4,350,300 244,991
Embratel Participacoes S.A. (pfd.) (ADR) (Provider of
telecommunication services) ........................... 40,400 653,975
Petroleo Brasileiro S.A. (ADR)* (Producer and marketer of
petroleum and petroleum products) ..................... 32,400 941,625
Petroleo Brasileiro S.A. (pfd.) .......................... 36,087 961,244
Tele Centro Sul Participacoes S.A. (pfd.) (Provider of
cellular telecommunication services) .................. 4,000,700 43,523
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Tele Nordeste Celular Participacoes S.A. (pfd.) (ADR)
(Provider of cellular telecommunications services) .... 7,600 313,500
Tele Norte Leste Participacoes S.A. (pfd.) (ADR)
(Provider of telecommunication services) .............. 54,000 1,194,750
Telecomunicacoes de Minas Gerais S.A. "B" (pfd.)
(Provider of telecommunication services) .............. 395 16
Telecomunicaoes de Minas Gerais S.A. "C" (pfd.) .......... 395 8
Votorantim Celulose e Papel S.A. (pfd.) (Producer and
exporter of printing, writing and other special papers) 1,750,000 58,763
-----------
8,529,265
-----------
Chile 3.6%
Companhia Cervecerias Unidas S.A. (ADR) (Bottler and
distributor of beer, soft drinks and mineral water) ... 4,600 88,838
Empresa Nacional De Telecom (Provider of
telecommunication services) ........................... 150,000 1,288,682
Vina Concha y Toro S.A. (ADR) (Producer and
distributor of wine) .................................. 30,000 1,151,250
-----------
2,528,770
-----------
China 2.4%
China Mobil Ltd. (ADR)* (Provider of cellular
telecommunications services) .......................... 29,100 891,139
China Petroleum and Chemical Corp. "H"* (Explorer and
producer of oil and natural gas and petroleum
products in China) .................................... 3,840,000 753,366
-----------
1,644,505
-----------
Croatia 1.4%
Pliva D.D. (GDR) (Pharmaceutical company) ................ 93,400 985,370
-----------
Czech Republic 0.3%
Ceske Radiokomunikace (GDR)* (Provider of TV and radio
signal transmission services) ......................... 6,600 247,500
-----------
Egypt 6.2%
Al Ahram Beverages Co. "S.A.E." (GDR)* (Producer of
beverages) ............................................ 102,000 1,295,400
Commercial International Bank (Provider of commercial
bank services) ........................................ 41,250 361,486
Eastern Tobacco Co. (Producer of tobacco products) ....... 35,500 524,003
Egyptian Mobile Phone Network* (Provider of
cellular telecommunication services) .................. 65,506 1,288,169
International Foods Co.* (Producer and distributor of
food products) (b) .................................... 33,991 207,110
Orascom Construction Industries* (Provider of
construction services) ................................ 20,100 192,180
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Orascom Hotel Holdings* (Operator of hotels) .............. 154,500 205,863
Orascom Telecommunications (GDR)* (Operator and
participant in joint ventures that provide
telecommunication services) ............................ 10,600 64,660
Oriental Weavers Corp. (Carpet manufacturer) .............. 13,000 115,150
Suez Cement Co. (Manufacturer of cement and
building materials) .................................... 18,594 170,610
-----------
4,424,631
-----------
Estonia 0.8%
AS Eesti Telekom (GDR) (Provider of
telecommunication services) ............................ 24,000 372,000
Hansabank Ltd. (Provider of commercial banking services) .. 23,300 169,285
-----------
541,285
-----------
Greece 3.1%
Alpha Credit Bank A.E. (Provider of commercial banking) ... 20,003 739,482
Ethniki General Insurance Co. (Provider of insurance and
reinsurance services) .................................. 7,300 126,450
Hellenic Telecommunications Organization S.A. (OTE)
(Provider of telecommunication services) ............... 31,900 557,355
National Bank of Greece S.A. (Provider of banking services) 20,200 767,971
-----------
2,191,258
-----------
Hungary 3.5%
EGIS Rt. (Producer of pharmaceutical products) ............ 10,700 451,841
Gedeon Richter Rt. (Producer and manufacturer of
pharmaceutical products) ............................... 5,000 243,214
MOL Magyar Olaj-es Gazipari Rt. "B" (Producer of crude
oil, petroleum products and natural gas) ............... 55,100 851,668
Magyar Tavkozlesi Rt. (ADR) "B" (Provider of
telecommunication services) ............................ 6,700 157,450
Matav Rt. "A" (Provider of telecommunication services) .... 77,000 342,531
OTP Bank Rt. (Provider commercial banking services) ....... 10,000 463,864
-----------
2,510,568
-----------
India 3.4%
Dr. Reddy's Laboratories Ltd. (Manufacturer and exporter
of pharmaceuticals) .................................... 11,500 344,153
HCL Technologies Ltd. (Provider of IT services
and consulting) ........................................ 4,300 109,191
HDFC Bank Ltd. (Provider of corporate banking and
custodial services) .................................... 21,900 116,851
Hindalco Industries Ltd. (Miner/refiner of aluminum) ...... 24,000 366,212
Housing Development Finance Corp., Ltd. (Provider of
housing finance to individuals, corporations and
developers) ............................................ 14,000 140,717
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Infosys Technologies Ltd. (ADR) (Provider of IT services
and consulting) ....................................... 800 110,000
Infosys Technologies Ltd. ................................ 2,600 397,917
Satyam Computer Services Ltd. (Provider of IT services) .. 86,000 564,062
Videsh Sanchar Nigam Ltd. (Provider of international
telecommunication services) ........................... 52,200 235,120
Videsh Sanchar Nigam Ltd. (ADR) .......................... 9,900 73,013
-----------
2,457,236
-----------
Indonesia 0.2%
PT Bank Indonesia Warrants* (Bank) ....................... 44,588 181
PT Lippo Bank Tbk* (Provider of commercial and foreign
exchange banking services) ............................ 8,000,000 55,585
PT Lippo Bank Tbk, Certificates* (b) ..................... 5,155,000 --
PT Lippo Bank Tbk, Class C Warrants* ..................... 5,155,000 --
PT Ramayana Lestari Sentosa Tbk (Operator of
department stores) .................................... 210,000 101,016
-----------
156,782
-----------
Israel 1.7%
Check Point Software Technologies, Ltd.* (Developer,
marketer and supporter of management solutions for
active networks) ...................................... 7,520 1,190,980
Orckit Communications Ltd. (Designer of high speed
data access systems) .................................. 1,100 5,431
-----------
1,196,411
-----------
Jordan 0.9%
Aramex International Ltd.* (Provider of express delivery
and freight forwarding in the Middle East and India) .. 17,700 159,577
HIKMA (Manufacturer of pharmaceuticals) (b) .............. 68,000 487,549
-----------
647,126
-----------
Kenya 0.4%
Sasini Tea & Coffee Ltd. (Producer of coffee and tea) .... 620,000 265,658
-----------
Korea 12.3%
Hankook Tire Co., Ltd. (Manufacturer of
tires, tire tubes, batteries and aluminum alloy wheels) 2 4
Hite Brewery Co., Ltd. (Producer of beer, liquor and
natural mineral drinking water) ....................... 22,774 1,019,074
Housing & Commercial Bank (Provider of commercial
banking and financial services) ....................... 38,641 929,083
Korea Telecom Corp. (Provider of telecommunication
services) ............................................. 16,700 983,648
Korea Telecom Corp. (ADR) ................................ 31,370 1,156,769
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Korea Telecom Freetel (Provider of personal mobile
communication services) .............................. 14,200 500,589
Korea Tobacco and Ginseng Corp. (Manufacturer of
tobacco products) .................................... 19,670 312,126
SK Telecom Co., Ltd. (Provider of mobile
telecommunications services) ......................... 5,600 1,193,846
Samsung Electro-Mechanics Co., Ltd. (Manufacturer of
precision and electronic parts) ...................... 11,022 352,704
Samsung Electronics Co. (Manufacturer of industrial
electronic parts and consumer products) .............. 11,470 1,436,901
Samsung Securities Co., Ltd. (Provider of brokerage,
investment and underwriting services) ................ 12,004 217,391
Shinsegae Department Store Co. (Operator of
department stores) ................................... 14,000 644,923
-----------
8,747,058
-----------
Mauritius 0.2%
New Mauritius Hotels Ltd. (Operator of hotels) .......... 80,700 114,858
-----------
Mexico 12.6%
Consorcio ARA, S.A. de C.V.* (Developer of low-income
housing) ............................................. 588,000 829,148
Fomento Economico Mexicano S.A. de C.V. "B" (Producer
of beer and soft drinks) ............................. 834,000 3,175,647
Gruma S.A. de C.V. "B"* (Producer and distributor of
corn flour) .......................................... 60,053 50,256
Grupo Bimbo S.A. de C.V. "A" (Producer of
bread and other baked goods) ......................... 222,000 308,401
Grupo Financiero Banamex Accival, S.A. de CV* (Provider
of individual, commercial and retail banking services) 505,500 785,787
Grupo Financiero Banorte S.A. de C.V. "O"* (Provider of
financial services) .................................. 410,000 612,459
Grupo Modelo S.A. de C.V "C" (Producer and distributor
of beverages) ........................................ 134,000 357,445
Grupo Televisa S.A. de C.V. (GDR)* (Operator of
entertainment businesses) ............................ 9,500 514,188
Nueva Grupo Mexico S.A. "B"* (Processor and marketer of
copper, silver, gold, molybdenum, lead and zinc) ..... 73,100 243,170
Organizacion Soriana S.A. de C.V. "B" (Owner and
operator of the Soriana chain of hypermarkets) ....... 128,000 401,695
Telefonos de Mexico S.A. de C.V. "L" (ADR) (Provider of
telecommunication services) .......................... 12,130 654,262
Tubos de Acero de Mexico S.A. (ADR) (Manufacturer of
various types of pipes, casings and tubing) .......... 49,200 748,332
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Wal-Mart de Mexico S.A. de C.V. "V"* (Operator of
department stores, supermarkets, wholesale outlets
and restaurants) ...................................... 123,000 295,936
-----------
8,976,726
-----------
Morocco 1.4%
Omnium Nord Africaine (Diversified holding company) ...... 4,750 496,113
Societe des Brasseries du Marocain (Distributor of beer
and carbonated beverages) ............................. 1,600 233,697
Wafabank (Provider of commercial bank services) .......... 3,107 238,774
-----------
968,584
-----------
Nigeria 0.5%
First Bank of Nigeria PLC (Provider of commercial
banking services) ..................................... 1,125,000 161,359
Guiness Nigeria PLC* (Producer of beer) .................. 750,000 218,978
-----------
380,337
-----------
Oman 1.8%
Bank Muscat Al-Ahla Al-Oman (Provider of commercial
banking services) (b) ................................. 5,250 40,229
National Bank of Oman Ltd.* (Provider of commercial
banking services) ..................................... 113,981 814,192
Oman Cable Industry SAOG* (Manufacturer of
electrical wires and cables) (b) ...................... 18,685 170,358
Oryx Fund, Ltd.* (Mutual fund which invests in the
securities of developing markets) ..................... 30,575 259,898
-----------
1,284,677
-----------
Peru 1.0%
Compania de Minas Buenaventura S.A. "B" (Explorer and
producer of gold and silver) .......................... 104,000 675,941
Gitennes Exploration Inc.* (Explorer and developer of gold
mining properties in Peru) ............................ 54,000 8,861
-----------
684,802
-----------
Poland 5.7%
Bank Polska Kasa Opieki S.A.* (Provider of commercial
banking services) ..................................... 30,200 302,227
Central European Distribution Corp.* (Distributor of
alcoholic beverages) .................................. 36,200 131,225
ITI Holdings S.A.* (Provider of telecommunications
services) (b) ......................................... 3,700 1,672,400
KGHM Polska Miedz S.A.* (Producer of copper and silver) .. 150 814
Netia Holdings S.A.* (Provider of telecommunications
services) ............................................. 84,300 1,480,443
Telekomunikacja Polska S.A. (Owner and operator of
telecommunication networks) ........................... 67,000 343,183
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Wielkopolski Bank Kredytowy S.A. (Provider of commercial
banking services) ..................................... 9,600 44,007
Zaklady Lentex S.A. (Producer of PVC products used in
cars, footwear, housing and public construction) ...... 12,000 65,856
-----------
4,040,155
-----------
Russia 3.9%
LUKoil Holdings (ADR) (Extracter, transporter, refiner and
provider of oil and gas) .............................. 14,150 762,331
Mobile Telesystem (ADR)* (Provider of cellular phone
service) .............................................. 13,600 375,700
Surgutneftegaz (ADR) (Producer of oil and natural gas) ... 125,700 1,649,813
-----------
2,787,844
-----------
South Africa 2.7%
Anglo American Platinum Corp. (Producer of platinum) ..... 21,900 853,999
Gold Fields Ltd. (Operator of gold mining, development
and exploration) ...................................... 61,500 182,915
Harmony Gold Mining Co., Ltd. (Operator of gold
mining) ............................................... 98,813 376,835
Sappi Ltd. (Producer of pulp paper and timber) ........... 69,000 472,465
-----------
1,886,214
-----------
Taiwan 5.8%
Bank Sinopac (Provider of commercial banking services) ... 1,224,557 509,916
Chinatrust Commercial Bank (Provider of commercial
banking services) ..................................... 680,598 431,958
Compal Electronics Inc. (Manufacturer and marketer of
notebook computers and color monitors) ................ 45,000 68,684
Hon Hai Precision Industry Co., Ltd. (Manufacturer of
electronic products) .................................. 270,000 1,412,694
Realtek Semiconductor Corp. (Manufacturer of
integrated circuits) .................................. 24,400 91,028
Taiwan Semiconductor Manufacturing Co., Ltd.
(Manufacturer of integrated circuits) ................. 526,732 1,598,134
United Microelectronics Corp., Ltd. (Manufacturer of
integrated circuits) .................................. 200 353
-----------
4,112,767
-----------
Tunisia 0.5%
Societe Frigorifique et Brasserie de Tunis S.A. (Producer
of beverages) ......................................... 3,200 348,619
-----------
Turkey 5.3%
Anadolu Efes Biracilik ve Malt Sanayii A.S.*
(Operator of breweries) ............................... 18,603,333 1,090,657
Dogan Sirketler Grubu Holdings A.S. (Industrial
conglomerate) ......................................... 33,109,300 570,197
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Hurriyet Gazetecilik ve Matbaacilik A.S. (Publisher of
weekly newspapers) .................................... 14,098,000 169,437
Koc Holding A.S. (Holding company with interests in the
automotive and durable goods industries) .............. 6,112,200 389,694
Migros Turkey (Operator of retail stores) ................ 7,200,000 991,968
Turkcell Iletisim Hizmet (ADR)* (Provider of cellular
telephone voice and data transmission services) ....... 14,900 162,969
Turkiye Garanti Bankasi AS* (Provider of banking services) 20,011,434 205,312
Yapi ve Kredi Bankasi A.S. (Provider of commercial banking
services) ............................................. 18,720,000 161,881
-----------
3,742,115
-----------
Zimbabwe 0.9%
Delta Corp., Ltd. (Operator of breweries) (b) ............ 902,031 149,096
Econet Wireless Holdings Ltd.* (Provider of
telecommunication services) (b) ....................... 1,361,100 267,158
Tanganda Tea Company Ltd. (Producer and distributor
of tea products) (b) .................................. 856,212 241,768
-----------
658,022
-----------
------------------------------------------------------------------------------------
Total Common Stocks (Cost $67,432,016) 67,372,732
------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $71,137,016) (a) 71,077,732
------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $71,238,196. At October
31, 2000, net unrealized depreciation for all securities based on tax
cost was $160,464. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $10,992,177 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $11,152,641.
(b) Securities valued in good faith by the Valuation Committee of the Board
of Directors at fair value amounted to $3,235,668 (4.52% of net
assets). Their values have been estimated by the Valuation Committee in
the absence of readily ascertainable market values. However, because of
the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a
ready market for the securities existed, and the difference could be
material. The cost of these securities at October 31, 2000 aggregated
$3,627,985. These securities may also have certain restrictions as to
resale.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Assets
------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $71,137,016) ......................... $ 71,077,732
Foreign currency, at value (cost $1,180,041) ................................... 1,162,889
Receivable for investments sold ................................................ 517,140
Dividends receivable ........................................................... 84,199
Receivable for Fund shares sold ................................................ 10,952
Foreign taxes recoverable ...................................................... 4,080
Due from Adviser ............................................................... 34,447
---------------
Total assets ................................................................... 72,891,439
Liabilities
------------------------------------------------------------------------------------------------
Due to custodian bank .......................................................... 88,451
Payable for investments purchased .............................................. 502,859
Payable for Fund shares redeemed ............................................... 143,203
Accrued management fee ......................................................... 150,778
Accrued reorganization costs ................................................... 1,747
Accrued Directors' fees and expenses ........................................... 81,500
Other accrued expenses and payables ............................................ 326,192
---------------
Total liabilities .............................................................. 1,294,730
------------------------------------------------------------------------------------------------
Net assets, at value $ 71,596,709
------------------------------------------------------------------------------------------------
Net Assets
------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ................... (29,239)
Unrealized depreciation on:
Investments .................................................................. (59,284)
Foreign currency related transactions ........................................ (18,550)
Accumulated net realized gain (loss) ........................................... (39,263,711)
Paid-in capital ................................................................ 110,967,493
------------------------------------------------------------------------------------------------
Net assets, at value $ 71,596,709
------------------------------------------------------------------------------------------------
Net Asset Value
Class AARP
Net Asset Value, offering and redemption price per share ($70,729 / 6,366 shares
of capital stock outstanding, $.01 par value, 100,000,000 shares authorized) $ 11.11
Class S
Net Asset Value, offering and redemption price per share ($71,525,980/ 6,436,214
shares of capital stock outstanding, $.01 par value, 100,000,000 shares
authorized) ................................................................. $ 11.11
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 2000
--------------------------------------------------------------------------------
Investment Income
------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $124,688) .......... $ 1,172,151
Interest ....................................................... 327,188
---------------
Total Income ................................................... 1,499,339
---------------
Expenses:
Management fee ................................................. 1,317,881
Services to shareholders ....................................... 523,997
Custodian and accounting fees .................................. 607,432
Administrative fee ............................................. 39,285
Auditing ....................................................... 77,646
Legal .......................................................... 27,338
Directors' fees and expenses ................................... 113,718
Reports to shareholders ........................................ 18,356
Registration fees .............................................. 24,537
Reorganization fees ............................................ 30,005
Other .......................................................... 16,057
---------------
Total expenses, before expense reductions ...................... 2,796,252
Expense reductions ............................................. (379,513)
---------------
Total expenses, after expense reductions ....................... 2,416,739
------------------------------------------------------------------------------
Net investment income (loss) (917,400)
------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments (net of foreign taxes of $22,781) .................. 5,666,874
Foreign currency related transactions (including CPMF
tax of $14,657) .............................................. (299,973)
---------------
5,366,901
---------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (5,218,967)
Foreign currency related transactions .......................... 1,012
---------------
(5,217,955)
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 148,946
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (768,454)
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------
Years Ended October 31,
Increase (Decrease) in Net Assets 2000 1999
------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) ...................... $ (917,400) $ (407,810)
Net realized gain (loss) on investment transactions 5,366,901 (11,692,846)
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (5,217,955) 26,754,234
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations ................................ (768,454) 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 ......................... 23,095,788 22,608,308
Reinvestment of distributions ..................... -- 324,120
Cost of shares redeemed ........................... (53,458,775) (59,509,301)
Redemption fees ................................... 88,154 149,185
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (30,274,833) (36,427,688)
--------------- ---------------
Increase (decrease) in net assets ................. (31,043,287) (22,161,907)
Net assets at beginning of period ................. 102,639,996 124,801,903
Net assets at end of period (including accumulated
distributions in excess of net investment income
of $29,239 and $64,694, respectively) .......... $ 71,596,709 $ 102,639,996
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Class AARP
--------------------------------------------------------------------------------
2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $11.69
---------
--------------------------------------------------------------------------------
Income (loss) from investment operations:
--------------------------------------------------------------------------------
Net investment income (loss) (b) (.02)
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (.56)
---------
--------------------------------------------------------------------------------
Total from investment operations (.58)
--------------------------------------------------------------------------------
Redemption fees --
--------------------------------------------------------------------------------
Net asset value, end of period $11.11
---------
--------------------------------------------------------------------------------
Total Return (%) (c) (4.96)**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ millions) .07
--------------------------------------------------------------------------------
Ratio of expenses (%) 1.90*
--------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.13)**
--------------------------------------------------------------------------------
Portfolio turnover rate (%) 42
--------------------------------------------------------------------------------
(a) For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
(b) Based on monthly average shares outstanding during the period.
(c) Shareholders redeeming shares held less than one year will have a lower
total return due to the effect of the 2% redemption fee.
* Annualized
** Not annualized
28
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class S (a)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Years Ended October 31, 2000 1999 1998 1997 1996(b)
------------------------------------------------------------------------------------
<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) (c) (.11) (.04) .06 .02 (.02)
------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions (.54)(g) 1.46 (4.23) 1.67 .86
----------------------------------------------
------------------------------------------------------------------------------------
Total from investment operations (.65) 1.42 (4.17) 1.69 .84
------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- (.04) (.06) (.03) --
----------------------------------------------
------------------------------------------------------------------------------------
Total distributions -- (.04) (.06) (.03) --
------------------------------------------------------------------------------------
Redemption fees .01 .01 .03 .05 .01
------------------------------------------------------------------------------------
Net asset value, end of period $11.11 $11.75 $10.36 $14.56 $12.85
----------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) (d) (5.45) 13.89 (28.54) 13.51 7.08(e)**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 71 103 125 220 76
------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 2.66(f) 2.77 2.31 2.33 3.79*
------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 2.30(f) 2.25 2.16 2.00 2.00*
------------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) (.87) (.36) .48 .11 (.32)*
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 42 64 45 62 20
------------------------------------------------------------------------------------
</TABLE>
(a) On October 2, 2000 existing shares of the Fund were redesignated as
Class S.
(b) For the period May 8, 1996 (commencement of operations) to October 31,
1996.
(c) Based on monthly average shares outstanding during the period.
(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 2.56%
and 2.23%, respectively (see Notes to Financial Statements).
(g) Because of the timing of subscriptions and redemptions in relation to
fluctuating markets at value, the amount shown may not agree with the
change in aggregate gains and losses.
* Annualized
** Not annualized
29
<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 and is organized as a Maryland Corporation.
On October 2, 2000, the Fund commenced offering multiple classes of shares.
Existing shares of the Fund were redesignated as Class S and the Fund commenced
offering Class AARP shares. The two classes of shares provide investors with
different purchase options. Shares of Class AARP are especially designed for
members of AARP. Investment income, realized and unrealized gains and losses and
certain fund-level expenses and expense reductions, if any, are borne pro rata
on the basis of relative net assets by the holders of both classes except that
each class bears certain expenses unique to that class such as reorganization
expenses (see Note F). Differences in class-level expenses may result in payment
of different per share dividends by class. All shares of the Fund have equal
rights with respect to voting subject to class-specific arrangements. Effective
October 2, 2000, there are no class-specific expenses.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America 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.
30
<PAGE>
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.
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
31
<PAGE>
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.
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, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $39,192,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2006 ($27,365,000) and October 31, 2007 ($11,827,000), 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 was 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 until June 17,
2000. Effective June 18, 2000 the CPMF tax is 0.30%.
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 accounting principles generally accepted in the United
States of America. 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
32
<PAGE>
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.
Redemption Fees. In general, shares of each class 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
During the year ended October 31, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $40,869,065 and
$68,728,541, respectively.
C. Related Parties
As described in Note F, Scudder Kemper Investments, Inc. has initiated a
restructuring program for most of its Scudder no-load open-end funds. As part of
this reorganization, the Fund entered into an Administrative Agreement. This
agreement was effective October 2, 2000. The terms of the newly adopted and the
pre-existing agreements are set out below.
Management Agreement. Under the Investment 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 objectives, 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 1.25% of the Fund's average daily net assets, computed and
accrued daily and payable monthly.
33
<PAGE>
The Adviser agreed to maintain the annualized expenses of the Fund at not more
than 2.25% of average daily net assets until October 2, 2000. Certain expenses,
such as reorganization, taxes, brokerage and interest expense are excluded from
the expense limitation. Accordingly, the Adviser did not impose a portion of its
management fee pursuant to the Agreement aggregating $345,066 for the period
prior to October 2, 2000, and the amount imposed aggregated $972,815 for the
year ended October 31, 2000. The management fee imposed is equivalent to an
annual effective rate of 0.92% of the Fund's average daily net assets.
Administrative Fee. Effective October 2, 2000, the Fund, as approved by the
Fund's Board of Directors, adopted an Administrative Agreement (the
"Administrative Agreement") with Scudder Kemper. Under the Administrative
Agreement, the Adviser provides or pays others to provide substantially all of
the administrative services required by the Fund (other than those provided by
Scudder Kemper under its Agreement with the Fund, as described above) in
exchange for the payment by the Fund of an administrative services fee (the
"Administrative Fee") of 0.65% of average daily net assets. As of the effective
date of the Administrative Agreement, each service provider will continue to
provide the services that it currently provides to the Fund (i.e., fund
accounting, shareholder services, custody, audit and legal), under the current
arrangements, except that Scudder Kemper will pay these entities for the
provision of their services to the Fund and will pay most other Fund expenses,
including insurance, registration, printing and postage fees. Certain expenses
of the Fund will not be borne by Scudder Kemper under the Administrative
Agreement, such as taxes, brokerage, interest and extraordinary expenses, and
the fees and expenses of the Independent Directors (including the fees and
expenses of their independent counsel). For the period October 2, 2000 through
October 31, 2000, the Administrative Agreement expense charged to the Fund
amounted to $39,285, all of which is unpaid at October 31, 2000.
Service Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser,
is the transfer, dividend-paying and shareholder service agent for the Fund.
Prior to October 2, 2000, the amount charged to the Fund by SSC aggregated
$262,382, of which $69,243 is unpaid at October 31, 2000.
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. Prior to October 2, 2000, the
amount charged to the Fund by STC aggregated $118,108, of which $30,230 is
unpaid at October 31, 2000.
34
<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. Prior to October 2,
2000, the amount charged to the Fund by SFAC aggregated $101,747, of which
$7,683 is unpaid at October 31, 2000.
The Class S shares of the Fund are 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 such 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. Prior to
October 2, 2000, the Special Servicing Agreement expense charged to the Fund
amounted to $110,789.
Effective October 2, 2000, the above fees will be paid by the Adviser in
accordance with the Administrative Agreement.
Directors' Fees and Expenses. The Fund pays each Director not affiliated with
the Adviser an annual retainer plus specified amounts for attended board and
committee meetings. For the year ended October 31, 2000, Directors' fees and
expenses aggregated $44,825. In addition, a one-time fee of $68,893 was accrued
by Class S prior to October 2, 2000 for payment to those Directors not
affiliated with the Adviser who did not stand 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 $34,447 of such costs.
Other Related Parties. Effective October 2, 2000, Scudder Kemper has agreed to
pay a fee to AARP and/or its affiliates in return for advice relating to
investments by AARP members in Class AARP shares of the Fund. This fee is
calculated on a daily basis as a percentage of the combined net assets of the
AARP classes of all funds managed by Scudder Kemper. The fee rates, which
decrease as the aggregate net assets of the AARP classes become larger, are as
follows: 0.07% for the first $6,000,000,000 of net assets, 0.06% for the next
$10,000,000,000 of such net assets and 0.05% of such net assets thereafter.
35
<PAGE>
D. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States of America. These risks
include revaluation of currencies, high rates of inflation, repatriation
restrictions on income and capital, and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid,
subject to government ownership controls, delayed settlements and their prices
more volatile than those of comparable securities in the United States of
America.
E. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $1 billion
revolving credit facility with Chase Manhattan Bank 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. In addition, after December 29, 2000, Class
S shares of the Fund will generally not be available to new investors.
36
<PAGE>
G. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
---------------------------------------------------------------------
Shares Dollars Shares Dollars
Shares sold
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class AARP* ... 6,366 $ 71,848 -- $ --
Class S** ..... 1,652,866 23,023,940 2,001,721 22,608,308
$ 23,095,788 $ 22,608,308
Shares issued to shareholders in reinvestment of distributions
-----------------------------------------------------------------------------------------------
Class AARP* ... -- $ -- -- $ --
Class S** ..... -- -- 30,551 324,120
$ -- $ 324,120
Shares redeemed
-----------------------------------------------------------------------------------------------
Class AARP* ... -- $ -- -- $ --
Class S** ..... (3,948,612) (53,458,775) (5,348,452) (59,360,116)
$ (53,458,775) $ (59,360,116)
Redemption fees
-----------------------------------------------------------------------------------------------
Class AARP* ... $ -- $ --
Class S** ..... 88,154 149,185
$ 88,154 $ 149,185
Net increase (decrease)
-----------------------------------------------------------------------------------------------
Class AARP* ... 6,366 $ 71,848 -- $ --
Class S** ..... (2,295,746) (30,346,681) (3,316,180) (36,427,688)
$ (30,274,833) $ (36,427,688)
</TABLE>
* For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
** On October 2, 2000, existing shares of the Fund were redesignated as
Class S shares.
37
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder Emerging Markets Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Emerging Markets Growth
Fund (the "Fund") at October 31, 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 of America. 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 of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 20, 2000
38
<PAGE>
Tax Information (Unaudited)
--------------------------------------------------------------------------------
The Fund paid foreign taxes of $147,469 and earned $147,469 of foreign source
income during the year ended October 31, 2000. Pursuant to section 853 of the
Internal Revenue Code, the Fund designates $0.02 per share as foreign taxes paid
and $0.02 per share as income earned from foreign sources for the year ended
October 31, 2000.
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.
39
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Emerging Markets
Growth Fund (the "fund"), a series of Scudder International Fund, Inc., was held
on July 13, 2000, 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 elect Directors of Scudder International Fund, Inc.
Number of Votes:
Director For Withheld
-----------------------------------------------------------------------------
Henry P. Becton, Jr. 4,143,265 78,881
Linda C. Coughlin 4,138,667 83,479
Dawn-Marie Driscoll 4,143,462 78,684
Edgar R. Fiedler 4,140,773 81,373
Keith R. Fox 4,142,626 79,520
Joan E. Spero 4,142,222 79,924
Jean Gleason Stromberg 4,141,818 80,328
Jean C. Tempel 4,142,320 79,826
Steven Zaleznick 4,136,679 85,467
------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending October 31, 2000.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
4,156,837 25,453 39,856 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* 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.
40
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Linda C. Coughlin* Joyce E. Cornell*
o President and Director o Vice President
Henry P. Becton, Jr. Carol L. Franklin*
o Director; President, WGBH o Vice President
Educational Foundation
Edmund B. Games, Jr.*
Dawn-Marie Driscoll o Vice President
o Director; President, Driscoll
Associates; Executive Fellow, William F. Glavin*
Center for Business Ethics, o Vice President
Bentley College
Joan Gregory*
Edgar R. Fiedler o Vice President
o Director; Senior Fellow and
Economic Counsellor, The James E. Masur*
Conference Board, Inc. o Vice President
Keith R. Fox Howard S. Schneider*
o Director; General Partner, o Vice President
The Exeter Group of Funds
Tien-Yu Sieh*
Joan E. Spero o Vice President
o Director; President, The Doris
Duke Charitable Foundation John Millette*
o Vice President and Secretary
Jean Gleason Stromberg
o Director; Consultant Kathryn L. Quirk*
o Vice President and
Jean C. Tempel Assistant Secretary
o Director; Managing Director,
First Light Capital, LLC John R. Hebble*
o Treasurer
Steven Zaleznick
o Director; President and Brenda Lyons*
Chief Executive Officer, o Assistant Treasurer
AARP Services, Inc.
Caroline Pearson*
Thomas V. Bruns* o Assistant Secretary
o Vice President
*Scudder Kemper Investments, Inc.
Irene T. Cheng*
o Vice President
41
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Scudder Funds
--------------------------------------------------------------------------------
<TABLE>
<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
Managed Shares Growth
Scudder Tax Free Money Fund Scudder Classic Growth Fund
Scudder Capital Growth Fund
Tax Free Scudder Large Company Growth Fund
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund
Scudder California Tax Free Fund Scudder 21st Century Growth Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund
Scudder GNMA Fund Scudder Global Discovery Fund
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio Scudder Health Care Fund
Scudder Pathway Growth Portfolio Scudder Technology 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
42
<PAGE>
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Closed-End Funds
--------------------------------------------------------------------------------
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>
Scudder funds are offered by prospectus only. For more complete information on
any fund or variable annuity registered in your state, including information
about a fund's objectives, strategies, risks, advisory fees, distribution
charges, and other expenses, please order a free prospectus. Read the prospectus
before investing in any fund to ensure the fund is appropriate for your goals
and risk tolerance. There is no assurance that the objective of any fund will be
achieved, and fund returns and net asset values fluctuate. Shares are redeemable
at current net asset value, which may be more or less than their original cost.
A money market mutual fund investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although a
money market mutual fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in such a fund.
The services and products described should not be considered a solicitation to
buy or an offer to sell a security to any person in any jurisdiction where such
offer, solicitation, purchase, or sale would be unlawful under the securities
laws of such jurisdiction.
Scudder Investor Services, Inc.
43
<PAGE>
Account Management Resources
--------------------------------------------------------------------------------
For shareholders of Scudder funds including those in the AARP Investment Program
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- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to
exchange or redeem shares, and information on other
Scudder funds and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.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 you need
them. Scudder's site also provides news about Scudder
funds, retirement planning information, and more.
44
<PAGE>
--------------------------------------------------------------------------------
Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the
proceeds for schedule (as frequently as once a month) and amount
living expenses of the redemptions, and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into
automated the bank account you designate within three business
withdrawal days after 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 Scudder Class S Shareholders:
information
about these Call a Scudder representative at
services 1-800-SCUDDER
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 219669
Kansas City, MO
64121-9669
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 219735
Kansas City, MO
64121-9735
45
<PAGE>
Notes
--------------------------------------------------------------------------------
<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
INVESTMENTS(SM)
[LOGO]
AARP Investment
Program from Scudder
PO Box 219735
Kansas City, MO 64121-9735
1-800-253-2277
aarp.scudder.com
Scudder Funds
PO Box 219669
Kansas City, MO 64121-9669
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group