Institutional International Equity Portfolio
- --------------------------------------------------------------------------------
Mid-Year Report
June 30, 1996
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<PAGE>
<TABLE>
<CAPTION>
Board of Directors
<S> <C>
DAVID S. LEE(1) Chairman of the Board; Managing Director, Scudder, Stevens
& Clark, Inc.
EDGAR R. FIEDLER(1) (2) (3) Vice President and Economic Counsellor, The Conference Board;
formerly Assistant Secretary of the Treasury for Economic Policy
PETER B. FREEMAN(2) (3) Corporate Director and Trustee
ROBERT W. LEAR(2) (3) Executive-in-Residence and Visiting Professor, Columbia
University Graduate School of Business; Director or Trustee,
Various Organizations
DANIEL PIERCE(1) President; Chairman of the Board, Scudder, Stevens & Clark, Inc.
(1)Member of Executive Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee
- ---------------------------------------------------------------------------------------------------------
Officers
DAVID S. LEE Chairman of the Board
DANIEL PIERCE President
K. SUE COTE Vice President
JERARD K. HARTMAN Vice President
KATHRYN L. QUIRK Vice President
THOMAS W. JOSEPH Vice President and Assistant Secretary
THOMAS F. McDONOUGH Vice President and Assistant Secretary
PAMELA A. McGRATH Vice President and Treasurer
IRENE McC. PELLICONI Secretary
</TABLE>
2
<PAGE>
Dear Shareholder:
We are pleased to provide you with the first mid-year report for the
Institutional International Equity Portfolio. The report covers the abbreviated
period from when the Portfolio commenced operations on April 3, 1996 through
June 30, 1996. Going forward, you can expect to receive an annual report each
year as of the Portfolio's December 31 fiscal year end, as well as a mid-year
report.
Over the period of less than three months since the Portfolio has been in
operation, the Portfolio has provided a positive total return of 1.83%,
reflecting in part a generally positive if unspectacular market environment for
international equities. Going forward, the Portfolio will continue to seek to
provide long-term growth of capital by investing principally in the equity
securities of companies which do business primarily outside of the United
States. The management discussion which follows outlines key elements of the
current market environment and Portfolio strategy.
Thank you for your investment in the Institutional International Equity
Portfolio. If you have any questions about the Portfolio, please call us at
(800) 854-8525.
/s/David S. Lee
David S. Lee
Chairman
3
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO SUMMARY (Unaudited) as of June 30, 1996
- -------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COUNTRY (Excludes Cash Equivalents of 12%)
- ---------------------------------------------------------------------------
Japan 31%
Emerging Markets 20%
Germany 11%
United Kingdom 8%
France 7%
Switzerland 7%
Sweden 4%
Netherlands 4%
Italy 3%
Other 5%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
CURRENCY (Excludes Cash Equivalents of 12%)
- --------------------------------------------------------------------------
Japanese Yen 31%
Deutsche Marks 11%
British Pounds 8%
French Francs 7%
Swiss Francs 7%
Philippine Pesos 4%
U.S. Dollars 4%
Hong Kong Dollars 4%
Dutch Guilders 4%
Other 20%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS (Excludes Cash Equivalents of 12%)
- --------------------------------------------------------------------------
Manufacturing 25%
Service Industries 11%
Financial 9%
Metals & Minerals 9%
Consumer Discretionary 7%
Technology 6%
Communications 5%
Energy 5%
Utilities 5%
Other 18%
-----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS (12% of Portfolio)
- -----------------------------------------------------------------------
1. JAPAN ASSOCIATED FINANCE CO.
Venture capital company in Japan
2. SANDOZ LTD. AG.
Swiss pharmaceutical company
3. SCHNEIDER SA
Manufacturer of electronic components and automated
manufacturing systems in France
4. MANNESMANN AG
Diversified construction and technology company in Germany
5. CARLTON COMMUNICATIONS PLC
Television post production products and services in the United Kingdom
6. HOESCHT AG
Chemical producer in Germany
7. BAYER AG
Leading chemical producer in Germany
8. BRIDGESTONE CORP.
Leading automobile tire manufacturer in Japan
9. HENNES & MAURITZ AB
Clothing and cosmetics retailer throughout Europe
10. COMPAGNIE FINANCIERE DE PARIBAS
Finance and investment company in France
For more complete details about the Fund's Investment Portfolio,
see page 7.
4
<PAGE>
Dear Shareholder:
The Institutional International Equity Portfolio provided a total return of
1.83% for the period between the Portfolio's beginning of operations on April 3,
1996 and June 30, 1996. For the full three months between April 1 through June
30, the unmanaged MSCI EAFE plus Canada Index returned 1.63%.
In Europe, sluggish growth and high unemployment have provided the backdrop
for the region's stock markets. Economic activity has been dampened as
governments struggle to restrain spending in preparation for European Monetary
Union. In Japan, the overriding factor has been a reversal of the yen, which had
reached a historic high of 79.75 yen to the dollar in April of 1995. Such
currency strength put major Japanese corporations at a disadvantage in export
markets and placed a severe strain on the economy. The government has since
implemented a concerted policy of monetary and fiscal easing, resulting in a
weaker yen and the first signs of recovery.
Looking ahead, while stocks in the U.K. are receiving a boost from
continued bid activity in the corporate sector, the economic cycle is at a more
advanced stage and there is less impetus from interest rate declines than on the
Continent. Across the Channel, corporations are beginning to restructure on a
scale similar to their U.K. counterparts. Managements, particularly in Germany,
are focusing more on shareholder value and are also improving disclosure to the
investment community. Europe will continue to feature privatizations,
consolidations, and restructurings, providing the underpinnings for favorable
long-term equity performance.
In Japan, exports should be sustained not only by a depreciating currency
but also by improved competitiveness as Japanese corporations restructure and
shift production overseas.
5
<PAGE>
Encouraged by the turn in the yen and signs of economic recovery, we have
assumed a 31% position in Japan. Finally, the emerging markets appear to have
put 1995's doldrums behind them, and holdings in the small but expanding venues
of Latin America, Asia, and Eastern Europe constitute 20% of the Portfolio's
assets.
/s/Carol L. Franklin /s/Nicholas Bratt
Lead Portfolio Manager Portfolio Manager
Carol L. Franklin Nicholas Bratt
/s/Irene T. Cheng /s/Francisco S. Rodrigo III
Portfolio Manager Portfolio Manager
Irene T. Cheng Francisco S. Rodrigo III
/s/Joan R. Gregory
Portfolio Manager
Joan R. Gregory
6
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
INVESTMENT PORTFOLIO (UNAUDITED)
JUNE 30, 1996
<CAPTION>
PRINCIPAL MARKET
AMOUNT($)(b) VALUE($)
------------ -------
<S> <C> <C>
REPURCHASE AGREEMENTS - 4.5%
Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 6/28/96 at 5.45% to be
repurchased at $758,344 on 7/1/96,
collateralized by a $708,000 U.S. Treasury
Note, 9.25%, 8/15/98, (Cost $758,000) ............. 758,000 758,000
-----------
COMMERCIAL PAPER - 7.2%
CIT Group Holdings Inc., 5.38%, 7/17/96 ............. 610,000 608,454
General Electric Capital Corp., 5.29%, 8/20/96 ...... 600,000 600,000
-----------
TOTAL COMMERCIAL PAPER (Cost $1,208,454) .............. 1,208,454
-----------
CONVERTIBLE BONDS - 0.4%
JAPAN
Softbank Corp., 0.5%, 3/29/02 (Cost $63,199)......... JPY 5,000,000 58,977
-----------
Shares
------
PREFERRED STOCKS - 1.9%
GERMANY
RWE AG (Producer and marketer of petroleum
and chemical products) ........................... 5,000 153,856
SAP AG (Computer software manufacturer) ............. 1,100 163,239
-----------
TOTAL PREFERRED STOCKS (Cost $299,949) ............ 317,095
-----------
COMMON STOCKS - 86.0%
ARGENTINA 0.9%
YPF S.A. "D" (ADR) (Petroleum company) .............. 6,500 146,250
-----------
BRAZIL 2.9%
Companhia Energetica de Minas Gerais (pfd.)
(Electric power utility) .......................... 6,000,000 159,538
Petroleo Brasileiro S/A (pfd.)*
(Petroleum company) ............................... 1,300,000 159,886
</TABLE>
See notes to financial statements.
7
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
INVESTMENT PORTFOLIO (CONTINUED)
JUNE 30, 1996
<CAPTION>
MARKET
SHARES VALUE($)
------ --------
<S> <C> <C>
Usinas Siderurgicas de Minas Gerais S/A (pfd.)
(Non-coated flat products and electrolytic
galvanized products) ............................. 150,000,000 158,343
-----------
477,767
-----------
CANADA 1.0%
Canadian Pacific Ltd. (Ord.) (Transportation and
natural resource conglomerate) ................... 7,500 164,256
-----------
FRANCE 6.1%
Carrefour (Hypermarket operator and food retailer) .. 300 168,188
Christian Dior (Leading fashion house) .............. 1,000 130,242
Compagnie Financiere de Paribas (Finance and
investment company) .............................. 3,060 180,831
Pinault-Printemps, SA (Distributor of consumer goods) 500 175,050
Schneider SA* (Manufacturer of electronic
components and automated manufacturing systems) .. 4,100 215,192
Total SA "B" (International oil and gas exploration,
development and production) ...................... 2,000 148,438
-----------
1,017,941
-----------
GERMANY 7.9%
BASF AG (Manufacturer of diversified chemicals
for industrial use) .............................. 500 143,007
Bayer AG (Leading chemical producer) ................ 5,700 201,443
Daimler-Benz AG* (Automobile and truck manufacturer) 250 133,919
Hoechst AG (Chemical producer) ...................... 6,000 203,564
Mannesmann AG (Bearer) (Diversified construction
and technology company) .......................... 600 207,509
Schering AG (Pharmaceutical and chemical producer) .. 2,000 145,572
Siemens AG (Leading electrical engineering and
electronics company) ............................. 2,500 133,638
VEBA AG (Electric utility, distributor of oil
and chemicals) ................................... 2,800 148,883
-----------
1,317,535
-----------
GHANA 0.8%
Ashanti Goldfields Co., Ltd. (ADS)
(Leading gold producer) .......................... 7,000 138,250
-----------
HONG KONG 3.5%
First Pacific Co., Ltd. (International management
and investment company) .......................... 100,000 154,378
</TABLE>
See notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------ --------
<S> <C> <C>
HSBC Holdings Ltd. (Bank) ............................ 10,000 151,148
Hutchinson Whampoa, Ltd. (Container terminal
and real estate company) .......................... 22,000 138,410
Television Broadcasts, Ltd.
(Television broadcasting) ......................... 38,000 142,609
-----------
586,545
-----------
INDONESIA 1.7%
Darya Varia Laboratoria (Producer of
medicines and pharmaceuticals) .................... 68,960 141,475
HM Sampoerna (Foreign registered) (Tobacco company) .. 13,000 148,013
-----------
289,488
-----------
ITALY 2.8%
Ente Nazionale Idrocarburi SpA (Exploration and
production of oil, natural gas and chemicals) ..... 32,000 159,684
Luxottica Group SpA (ADR) (Manufacturer and
marketer of eyeglasses) ........................... 2,000 146,750
Telecom Italia Mobile SpA (Ord.) (Cellular
telecommunication services) ....................... 70,000 156,492
-----------
462,926
-----------
JAPAN 27.0%
Bridgestone Corp. (Leading automobile
tire manufacturer) ................................ 10,000 191,103
Canon Inc. (Leading producer of visual image
and information equipment) ........................ 8,000 166,781
DDI Corp. (Long distance telephone and
cellular operator) ................................ 18 157,345
East Japan Railway Co. (Railroad operator) ........... 15 78,864
Fujitsu Ltd. (Leading manufacturer of computers) ..... 15,000 137,155
Hitachi Ltd. (General electronics manufacturer) ...... 12,000 111,919
Hitachi Metals, Ltd. (Major producer of high-
quality specialty steels) ......................... 11,000 126,732
Ishikawajima-Harima Heavy Industries Co.,
Ltd. (Comprehensive heavy machinery manufacturer
in aerospace and defense fields) .................. 21,000 102,729
Itochu Corp. (Leading general trading company) ....... 19,000 133,077
Japan Associated Finance Co. (Venture capital company) 2,000 234,079
Jusco Co., Ltd. (Major supermarket operator) ......... 5,000 164,129
Kajima Corp. (Leading contractor engaged in
large-scale civil engineering projects) ........... 13,000 134,321
</TABLE>
See notes to financial statements.
9
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
INVESTMENT PORTFOLIO (CONTINUED)
JUNE 30, 1996
<CAPTION>
MARKET
SHARES VALUE($)
------ --------
<S> <C> <C>
Kawasaki Steel Corp. (Major integrated steel maker) .. 40,000 144,470
Keyence Corp. (Specialized manufacturer of sensors) .. 1,000 136,241
Kokuyo (Leading manufacturer of paper stationery) .... 5,000 138,527
Komori Corp. (Leading manufacturer of offset
printing machines) ................................ 6,000 153,614
Kyocera Corp. (Leading ceramic package manufacturer) . 2,000 141,727
Mabuchi Motor Co., Ltd. (Manufacturer of DC motors) .. 1,000 63,823
Matsushita Electric Industrial Co., Ltd. (Leading
manufacturer of consumer electronic products) ..... 9,000 167,878
Matsushita Electric Works, Inc.. (Leading maker of
building materials and lighting equipment) ........ 5,000 54,405
Mitsubishi Heavy Industries, Ltd. (Diversified heavy
machinery manufacturer and leading shipbuilder) .. 16,000 139,423
NSK Ltd. (Leading manufacturer of bearings and other
machinery parts) .................................. 19,000 144,022
Nisshin Steel Co., Ltd. (Blast furnace steel maker) .. 32,000 124,354
Pioneer Electronics Corp. (Leading manufacturer
of audio equipment) ............................... 7,000 167,055
Ricoh Co., Ltd. (Leading maker of copiers and
information equipment) ............................ 13,000 137,887
SMC Corp. (Leading maker of pneumatic equipment) ..... 2,000 155,077
Secom Co., Ltd. (Electronic security system operator) 2,000 132,401
Sekisui Chemical Co., Ltd. (Leading chemical producer,
PVC resin processor) .............................. 11,000 134,778
Sumitomo Corp. (Leading general trading company) ..... 7,000 62,342
Sumitomo Electric Industries, Ltd. (Leading
manufacturer of electric wires and cables ......... 11,000 157,912
Sumitomo Metal Industries, Ltd. (Leading integrated
crude steel producer) ............................. 45,000 138,253
Sumitomo Metal Mining Co., Ltd. (Leading gold,
nickel and copper mining company) ................. 14,000 121,483
THK Co., Ltd. (Manufacturer of linear motion
systems for industrial machinery) ................. 6,000 145,385
-----------
4,499,291
-----------
KOREA 0.8%
Pohang Iron & Steel Co., Ltd. (ADR)
(Leading steel producer) .......................... 5,800 141,375
-----------
</TABLE>
See notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------ -------
<S> <C> <C>
MALAYSIA 1.4%
Malayan Banking Bhd. (Leading banking and
financial services group) ............................. 12,000 115,454
Renong Bhd (Holding company involved in
engineering, construction, financial services,
telecommunication and information technology) ......... 72,000 114,877
-----------
230,331
-----------
NETHERLANDS 3.3%
AEGON Insurance Group NV (Insurance company) ............. 3,000 138,258
Elsevier NV (International publisher of scientific,
professional, business, and consumer information books) 9,000 136,675
Heineken Holdings N.V. "A" (Brewery) ..................... 700 141,519
Wolters Kluwer CVA (Publisher) ........................... 1,200 136,429
-----------
552,881
-----------
NEW ZEALAND 0.8%
Telecom Corp. of New Zealand
(Telecommunication services) .......................... 33,000 138,949
-----------
PHILIPPINES 3.9%
C & P Homes, Inc. (Home construction company) ............ 165,000 143,273
Manila Electric Co. "B" (Electric utility) ............... 15,000 157,443
Metropolitan Bank and Trust Company
(Commercial bank and trust company) ................... 3,700 103,798
Philippine National Bank* (Bank) ......................... 6,400 106,870
SM Prime Holdings Corp.* (Leader in commercial
center operations) .................................... 552,000 143,267
-----------
654,651
-----------
PORTUGAL 1.0%
Portugal Telecom SA (Telecommunication services) ......... 6,500 169,997
-----------
SPAIN 2.7%
Acerinox, S.A. (Stainless steel producer) ................ 1,200 125,151
Compania Telefonica Nacional de Espana SA (ADR)
(Telecommunication services) .......................... 3,000 165,375
Iberdrola SA (Electric utility) .......................... 15,000 154,096
-----------
444,622
-----------
</TABLE>
See notes to financial statements.
11
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
INVESTMENT PORTFOLIO (CONTINUED)
JUNE 30, 1996
<CAPTION>
MARKET
SHARES VALUE($)
------ -------
<S> <C> <C>
SWEDEN 3.8%
AGA AB Free"B" (Producer and distributor of
industrial and medical gases) .................... 8,600 148,097
Astra AB "A" (Free) (Pharmaceutical company) ........ 1,600 70,816
Hennes & Mauritz AB "B" (Free) (Clothing and
cosmetics retailer throughout Europe) ............ 2,000 185,801
L.M. Ericsson Telephone Co. "B" (ADR) (Leading
manufacturer of cellular telephone equipment) .... 7,000 150,500
S.K.F. AB "B" (Free)(Manufacturer of roller bearings) 3,000 71,375
-----------
626,589
-----------
SWITZERLAND 5.9%
Adia SA (Personnel and temporary employment company) 600 150,702
Brown, Boveri & Cie. AG (Bearer)
(Manufacturer of electrical equipment) ........... 120 148,590
Elektrowatt AG (Bearer) (Holding company: owner
of electric plants and interests in hydro and
nuclear power plants) ............................ 375 138,883
Holderbank Financiere Glaris AG (Bearer)
(Cement producer) ................................ 200 159,981
SGS Holdings SA (Bearer) (Trade inspection company) . 70 167,700
Sandoz Ltd. AG (Registered) (Pharmaceutical company) 190 217,486
-----------
983,342
-----------
THAILAND 0.8%
Bangkok Bank Ltd. (Foreign registered)
(Leading commercial bank) ........................ 5,000 67,756
Thai Farmers Bank (Foreign registered)
(Commercial bank) ................................ 6,000 65,708
-----------
133,464
-----------
UNITED KINGDOM 7.0%
BOC Group PLC (Producer of industrial gases) ........ 7,300 104,696
British Petroleum PLC (Major integrated
world oil company) ............................... 16,000 140,391
Carlton Communications PLC (Television post
production products and services) ................ 25,500 205,136
PowerGen PLC (Electric utility) ..................... 16,000 116,537
RTZ Corp., PLC (Mining and finance company) ......... 10,000 148,001
Reuters Holdings PLC (International news agency) .... 12,000 145,174
Thorn EMI PLC (Amusement and recreational services) . 5,200 144,876
</TABLE>
See notes to financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------ -------
<S> <C> <C>
Zeneca Group PLC (Holding company: manufacturing and
marketing of pharmaceutical and agrochemical
products and specialty chemicals)................. 7,000 154,803
-----------
1,159,614
-----------
TOTAL COMMON STOCKS (Cost $14,136,225).................. 14,336,064
-----------
===============================================================================
TOTAL INVESTMENTS - 100.0% (cost $16,465,827) (a)....... $16,678,590
===========
- ----------
<FN>
* Non-income producing security.
(a) Cost for federal income tax purposes was $16,465,827. At June 30, 1996, net
unrealized appreciation for all securities based on tax cost was $212,763.
This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$538,508 and unrealized depreciation for all securities in which there was
an excess of tax cost over market value of $325,745.
(b) Principal amount stated in U.S. dollars unless otherwise noted.
Currency Abbreviations
----------------------
JPY Japanese Yen
</FN>
</TABLE>
Sector breakdown of the Portfolio's equity securities is noted on page 4.
13
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $16,465,827) (note 2) ...... $16,678,590
Cash ............................................................... 793
Foreign currency holdings, at market (identified cost $461) (note 2) 463
Receivable for investments sold .................................... 3,816
Dividend and interest receivable ................................... 33,693
Foreign tax recoverable ............................................ 8,111
Deferred organizational expenses (note 2) .......................... 26,295
Due from adviser (note 5) .......................................... 79,477
-----------
Total assets ................................................... 16,831,238
LIABILITIES
Payable for investments purchased .................................. $677,240
Management fee payable (note 5) .................................... 28,621
Accrued expenses (note 5) .......................................... 44,456
--------
Total liabilities .............................................. 750,317
-----------
Net assets, at market value ........................................ $16,080,921
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income ............................. $ 96,930
Net unrealized appreciation on:
Investments ................................................. 212,763
Foreign currency related transactions ....................... (963)
Accumulated net realized loss ................................... (19,819)
Capital Stock ($.001 par value) ................................. 1,316
Additional paid-in capital ...................................... 15,790,694
-----------
Net assets, at market value ........................................ $16,080,921
===========
NET ASSET VALUE, offering and redemption price per share
($16,080,921[divided by]1,315,555 outstanding shares of Capital
Stock, $.001 par value, 100,000,000 shares authorized)........... $ 12.22
===========
</TABLE>
See notes to financial statements.
14
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD APRIL 3, 1996* TO JUNE 30, 1996
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividend (net of foreign taxes withheld of $7,672) ... $ 69,663
Interest ............................................. 57,478
--------
127,141
EXPENSES:
Management fee (note 5) .............................. $ 28,621
Shareholder services (note 5) ........................ 5,917
Custodian and accounting fees (note 5) ............... 32,181
Directors' fees and expenses (note 5) ................ 4,025
Reports to shareholders .............................. 4,617
Auditing ............................................. 25,000
Legal ................................................ 4,325
Amortization of organization expense (note 2) ........ 1,205
Registration fees .................................... 19,389
Miscellaneous fees ................................... 2,323
-------
Total expenses before reductions ..................... 127,603
Expense reductions (note 5) .......................... (97,392)
-------
Expenses, net ........................................ 30,211
--------
NET INVESTMENT INCOME ................................ 96,930
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from:
Investments ...................................... (13,058)
Foreign currency related transactions ............ (6,761) (19,819)
-------
Net unrealized gain (loss) from:
Investments ...................................... 212,763
Foreign currency related transactions ............ (963) 211,800
------- --------
Net gain on investments .............................. 191,981
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . $288,911
========
<FN>
* Commencement of operations
</FN>
</TABLE>
See notes to financial statements.
15
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<CAPTION>
FOR THE PERIOD
APRIL 3, 1996
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1996
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ...................................... $ 96,930
Net realized loss on investments ........................... (19,819)
Net unrealized appreciation on investments during the period 211,800
------------
Net increase in net assets resulting from operations ....... 288,911
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares ............................... 15,790,810
------------
Total increase in net assets ............................... 16,079,721
------------
NET ASSETS:
Beginning of period ........................................ 1,200
------------
End of period .............................................. $ 16,080,921
============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .................. 100
Shares sold ................................................ 1,315,455
------------
Shares outstanding at end of period ........................ 1,315,555
============
</TABLE>
See notes to financial statements.
16
<PAGE>
INTERNATIONAL INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<CAPTION>
FOR THE PERIOD
APRIL 3, 1996
(COMMENCEMENT
OF OPERATIONS)
TO JUNE 30,
1996
--------------
<S> <C>
Net asset value, beginning of period ........................... $12.00
------
Income from Investment Operations:
Net investment income (a) ...................................... .07
Net realized and unrealized gain (loss) on investments ......... .15
------
Total from investment operations ............................... .22
------
Net asset value, end of period ................................. $12.22
======
TOTAL RETURN (%) (d) ........................................... 1.83(b)
RATIOS AND SUPPLEMENTARY DATA
Net assets, end of period ($ millions) ......................... 16
Ratio of operating expenses, to average daily net assets (%) (a) .95(c)
Ratio of net investment income, to average daily net assets (%) 3.05(c)
Portfolio turnover rate (%) .................................... 1.90(c)
Average commission rate paid ................................... $.0004
<FN>
(a) Reflects a per share amount of expense reductions ......... $ .07
Operating expense ratio before expense reductions (%) ..... 4.01(c)
(b) Not annualized
(c) Annualized
(d) Total returns are higher due to maintenance of the Fund's expenses.
</FN>
</TABLE>
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INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
Institutional International Equity Portfolio (the "Portfolio") is a
portfolio of Scudder Institutional Fund, Inc. (the "Company") which is an
open-end, diversified management investment company. Currently the Portfolio is
comprised of a single class of shares ("Barrett International Shares").
2. SIGNIFICANT ACCOUNTING POLICIES
The Portfolio's financial statements are prepared in accordance with
generally accepted accounting principles which require the use of management
estimates. Significant accounting policies followed by the Portfolio are:
(a) Security Valuation--Portfolio securities which are traded on U.S. or
foreign stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Portfolio, which
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
(b) Foreign Currency Transactions--The books and records of the
Portfolio are maintained in U.S. dollars. Foreign currency transactions are
translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and other liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest income
and certain expenses at the rates of exchange prevailing on the respective
dates of such transactions.
The Portfolio does not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
(c) Federal Income Taxes--The Fund intends to qualify as a regulated
investment company under subchapter M of the Internal Revenue Code and to
distribute all taxable income, including any realized net capital gains, to
shareholders. Therefore, no Federal income tax provision is required.
(d) Distribution of Income and Gains--Distributions of net investment
income are made annually. During any particular year net realized gains from
investment transactions, in excess of available capital loss carryforwards,
would be taxable to the Portfolio if not distributed and, therefore, will be
distributed to shareholders annually. An additional
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distribution may be made to the extent necessary to avoid the payment of a four
percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. 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 Portfolio may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Portfolio.
(e) Organization Costs--Costs incurred by the Portfolio in connection
with its organization have been deferred and are being amortized on a
straight-line basis over a five-year period.
(f) Other--Investment transactions are recorded on a trade date basis.
Interest income is recorded on the accrual basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates.
3. REPURCHASE AGREEMENTS
It is the Portfolio's policy to obtain possession, through its
custodian, of the securities underlying each repurchase agreement to which it is
a party, either through physical delivery or book entry transfer in the Federal
Reserve System or Participants Trust Company. Payment by the Company in respect
of a repurchase agreement is authorized only when proper delivery of the
underlying securities is made to the Company's custodian. The Company's
investment manager values such underlying securities each business day using
quotations obtained from a reputable, independent source. If the Company's
investment manager determines that the value of such underlying securities
(including accrued interest thereon) does not at least equal the value of each
repurchase agreement (including accrued interest thereon) to which such
securities are subject, it will ask for additional securities to be delivered to
the Company's custodian. In connection with each repurchase agreement
transaction, if the seller defaults and the value of the collateral declines or
if the seller enters an insolvency proceeding, realization of the collateral by
the Company may be delayed or limited.
4 PURCHASES AND SALES OF SECURITIES
For the period April 3, 1996 (commencement of operations) to June 30,
1996, purchases and sales of securities (excluding short-term investments)
aggregated $14,571,508 and $59,192, respectively.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Company retains Scudder, Stevens & Clark, Inc. ("Scudder") as
investment manager for the Portfolio, pursuant to an investment advisory
agreement between Scudder and the Company on behalf of the Portfolio, for a
management fee payable each month, based upon the average daily value of the
Portfolio's net assets, at an annual rate of 0.90%. Scudder has agreed not to
impose all or a portion of its management fee until April 30, 1997, and during
such period to maintain the annualized expenses of the Portfolio at not more
than 0.95% of average daily net assets. For the period April 3, 1996
(commencement of operations) to June 30, 1996, Scudder did not impose any of its
fee amounting to $28,621. In addition, Scudder reimbursed expenses amounting to
$50,856.
Under certain state regulations, if the total expenses of the Portfolio,
exclusive of taxes, interest, and extraordinary expenses exceed certain
limitations, the Company's investment adviser is required to reimburse the
Portfolio for such excess up to the amount of the management fee. For the period
April 3, 1996 (commencement of operations) to June 30, 1996, no such
reimbursement was required.
Scudder Service Corporation ("SSC"), a subsidiary of Scudder, is the
Portfolio's shareholder service, transfer and dividend disbursing agent. For the
period April 3, 1996 (commencement of operations) to June 30, 1996, SSC did not
impose any of its fee amounting to $5,500.
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INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
is responsible for determining the daily net asset value per share and
maintaining the portfolio and general accounting records for the Portfolio. For
the period April 3, 1996 (commencement of operations) to June 30, 1996, SFAC did
not impose any of its fees amounting to $12,415.
The Company has a compensation arrangement under which payment of
Directors' fees may be deferred. Interest is accrued (based on the rate of
return earned on the 90 day Treasury Bill as determined at the beginning of each
calendar quarter) on the deferred balances and is included in "Directors' fees
and expenses." For the period April 3, 1996 (commencement of operations) to June
30, 1996, directors' fees and expenses amounted to $4,025. The accumulated
balance of deferred directors' fees and interest thereon relating to the
Portfolio aggregated $729, which is included in accrued expenses of the
Portfolio.
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Institutional International Equity Portfolio
345 Park Avenue, New York, New York 10154
(800) 854-8525
Investment Manager
Scudder, Stevens & Clark, Inc.
345 Park Avenue New York,
New York 10154
Distributor
Scudder Investor Services, Inc.
Two International Place
Boston, Massachusetts 02110
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Fund Accounting Agent
Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
P.O. Box 9242
Boston, Massachusetts 02205
Legal Counsel
Sullivan & Cromwell
New York, New York
---------------------------------------------
This report is for the information of the shareholders. Its use in connection
with any offering of the Company's shares is authorized only in case of a
concurrent or prior delivery of the Company's current prospectus.
Institutional International
Equity Portfolio
BARRETT INTERNATIONAL SHARES
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Mid-Year Report
June 30, 1996
