BARRETT INTERNATIONAL SHARES
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<PAGE>
Board of Directors
DR. ROSITA P. CHANG(2) (3) Professor of Finance, University of Rhode
Island
EDGAR R. FIEDLER(1) (2) (3) Senior Fellow and Economic Counsellor, The
Conference Board, Inc.
PETER B. FREEMAN(1) (2) (3) Corporate Director and Trustee
DR. J.D. HAMMOND(2) (3) Dean, Smeal College of Business
Administration, Pennsylvania State University
RICHARD M. HUNT(2) (3) University Marshal and Senior Lecturer,
Harvard University
(1)Member of Executive Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee
- --------------------------------------------------------------------------------
Officers
DANIEL PIERCE President
K. SUE COTE Vice President
JERARD K. HARTMAN Vice President
THOMAS W. JOSEPH Vice President and Assistant Secretary
THOMAS F. McDONOUGH Vice President and Secretary
KATHRYN L. QUIRK Vice President
DAVID B. WINES Vice President
2
<PAGE>
Dear Shareholder:
We are pleased to provide you with the December 31, 1997 annual report for
the Institutional Equity Portfolio (the "Portfolio"). The Portfolio is currently
comprised of a single class of shares ("Barrett International Shares"). The
report covers the period from December 31, 1996 through December 31, 1997.
Since the Portfolio has been in operation, the Portfolio has provided a
positive total return of 14.35%, reflecting in part a generally favorable 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 Portfolio. If you have any questions
about the Portfolio, please call us at 1-800-854-8525.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President
3
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO/BARRETT INTERNATIONAL SHARES
PERFORMANCE UPDATE
December 31, 1997
- ----------------------------------------------------------------
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/97 $ 10,000 Cumulative Annual
- --------------------------------------------
1 Year $ 10,898 8.98% 8.98%
Life of Fund* $ 11,435 14.35% 7.98%
- --------------------------------------------
MSCI EAFE & CANADA INDEX
- --------------------------------------------
1 Year $ 10,226 2.26% 2.26%
Life of Fund* $ 10,303 3.03% 1.80%
- --------------------------------------------
*The Portfolio commenced operations on April 3, 1996.
Index comparisons begin April 30, 1996.
- ----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- ----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
INSTITUTIONAL INTERNATIONAL
EQUITY PORTFOLIO
Year Amount
- ----------------------
4/96* $ 10,000
6/96 $ 10,066
9/96 $ 9,934
12/96 $ 10,372
3/97 $ 10,538
6/97 $ 11,810
9/97 $ 12,034
12/97 $ 11,303
MSCI EAFE & CANADA INDEX
Year Amount
- ----------------------
4/96* $ 10,000
6/96 $ 9,871
9/96 $ 9,879
12/96 $ 10,075
3/97 $ 9,919
6/97 $ 11,205
9/97 $ 11,163
12/97 $ 10,303
The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far East
(EAFE) & Canada Index is an unmanaged capitalization-weighted measure of stock
markets in Europe, Australia, the Far East and Canada. Index returns assume
dividends reinvested net of withholding tax and, unlike Portfolio returns, do
not reflect any fees or expenses.
- ----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- ----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Periods Ended December
1996* 1997
---- ----
NET ASSET VALUE........... $ 12.48 $ 13.34
INCOME DIVIDENDS.......... $ .11 $ .14
CAPITAL GAINS
DISTRIBUTIONS............. -- .12
FUND TOTAL RETURN (%)..... 4.93 8.98
INDEX TOTAL RETURN (%).... .76 2.26
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 Manager had not maintained
the Portfolio's expenses, total return for the one year and life of the
Portfolio would have been lower.
4
<PAGE>
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO/BARRETT INTERNATIONAL SHARES
PORTFOLIO SUMMARY
December 31, 1997
- ---------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COUNTRY/REGION (Excludes Cash Equivalents of 5%)
- ---------------------------------------------------------------------------
Germany 18%
Japan 16%
France 16%
United Kingdom 15%
Switzerland 9%
Emerging Markets 8%
Netherlands 5%
Sweden 4%
Italy 3%
Other 6%
- ------------------------------------
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 5%)
- --------------------------------------------------------------------------
Financial 28%
Manufacturing 21%
Health 7%
Durables 6%
Energy 6%
Technology 5%
Communications 5%
Media 4%
Utilities 4%
Other 14%
- ------------------------------------
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 (17% of Portfolio)
1. TELECOM ITALIA MOBILE SPA Cellular telecommunication
services in Italy
2. SKANDIA FOERSAEKRINGS AB Financial conglomerate
in Sweden
3. SAP AG Computer software manufacturer in Germany
4. COMMERZBANK AG Worldwide multi-service bank in Germany
5. BAYERISCHE VEREINSBANK AG Commercial bank in Germany
6. NOVARTIS AG Manufacturer of healthcare products in
Switzerland
7. PORTUGAL TELECOM SA Telecommunication services in
Portugal
8. CREDIT SUISSE GROUP Provider of bank services,
management services and life insurance in Switzerland
9. ALLIANZ AG Multi-line insurance company in Germany
10. MUENCHENER RUECKVERSICHERUNGS-GESELLSCHAFT AG
Insurance company in Germany
For more complete details about the Portfolio's investment portfolio, see
page 10.
5
<PAGE>
Dear Shareholder:
The Institutional International Equity Portfolio series of Scudder
Institutional Fund, Inc. finished the year well ahead of its benchmark index,
providing a total return of 8.98% for the twelve months ended December 31, 1997
versus the MSCI EAFE & Canada Index return of 2.26%.
The two primary reasons for the Portfolio's relative outperformance for the
year related to the Portfolio's Japanese position. During the year, the
Portfolio had an exposure to Japan that was much lower than that of the EAFE
Index. In addition, the returns from our stock selection in Japan were
significantly above the returns of the Japanese index component of the EAFE
Index.
Investment Outlook
1997 will likely be remembered as a year in which turmoil in Asia
destabilized capital markets globally. Falling equity prices and declining
currency values in the Asian region led to some dramatic one-day declines in
both European and U.S. markets. While the European and U.S. markets managed to
recover much, if not all, of the lost ground, the Asian markets faced continued
selling pressure throughout much of the year. A recent economic slowdown in the
Asian region has exposed the frailties of the Asian financial model, which
relies heavily on bank debt that is oftentimes lent for non-economic reasons,
i.e., generally political reasons, and is collateralized by real estate at
values that are often inflated. The International Monetary Fund (IMF) has
structured rescue packages for three of Asia's economies: Thailand, Indonesia
and Korea. The last one of these, Korea, is the eleventh largest economy in the
world. The support of the IMF should help to stabilize and, ultimately, reform
these economies and their financial systems. However, equity and currency market
volatility is likely to continue in the near term as investors attempt to assess
the current state of the financial environment and the prices they are willing
to pay for assets.
Stock market declines in Asia were extremely severe. Combined with
coincident currency devaluations, the U.S. investor could purchase stocks today
at prices significantly below those demanded one year ago. The table below
illustrates the severity of the price declines in 1997:
Local Terms (%) US$ Terms (%)
--------------- -------------
Indonesia -37.0 -72.5
Korea -42.2 -69.6
Malaysia -52.0 -68.7
Philippines -41.0 -60.8
Thailand -55.2 -75.5
Source: Bloomberg
6
<PAGE>
The largest market in the Asian region, Japan, was still in the process of
recovering from its own long-running financial troubles when the problems in
Asia began to surface. This contributed to further turmoil in the Japanese
equity market. The Japanese market is 25.3% of the EAFE Index, and during the
year it declined 14.5% in local currency terms and 24.0% in U.S. dollar terms.
Japanese authorities have taken a more aggressive stance toward the resolution
of the bad debt problems that have been overhanging the financial system since
the downfall of the "bubble economy," the period in the late eighties that saw
land and share prices skyrocket. The failure of two major brokerage houses and
the failure of a major bank, all in the fourth quarter, are clear evidence of a
change in the attitudes and tactics of the authorities. The uncertainty
surrounding the consequences of this change, combined with the slow progress of
the economy and the high valuation of share prices, resulted in the poor returns
for the overall equity market. However, significant differences were evident in
the Japanese equity market. The performance of the portfolio's holdings in
leading global exporters (Bridgestone +15%, Fujitsu +16% and SMC Corp. +32%) was
in stark contrast to the performance of the Tokyo Stock Exchange Banking Index,
which declined 42.7% in U.S. dollar terms. It is important to note that returns
in Japan for U.S. investors were negatively impacted by the weakness of the
Japanese yen, which declined 11.1% versus the U.S. dollar.
Activity in Europe was marked by continuing consolidation and corporate
restructuring as companies prepare for a borderless market in Europe following
the planned introduction of the common currency, the euro. The financial sector
has seen much of this activity. Union Bank of Switzerland announced a merger
with Swiss Bank Corporation, a portfolio holding, to create the second largest
bank in the world. As a result of this activity, the portfolio's holdings in
banks and insurance companies across Europe were some of the strongest
performers during the year (Aegon +40%, ING +17%, Bayerisch Vereinsbank + 62%,
Swiss Bank Corp. +64%). The preparations for European Monetary Union (EMU) are
impacting both governments, which are attacking spending to reduce deficits, and
corporations, which are cutting costs and readying themselves for an
increasingly competitive environment. The ability to cut costs and improve
profitability has been a driving force in the performance of some of the
portfolio's more successful holdings (Philips +48%, Royal Dutch +25%, Alcatel
Alshtom +59%). The strong returns in Europe were impacted negatively by the
strength of the U.S. dollar relative to the European currencies. The German
mark, which can be used as a general guide, declined 14.3% versus the U.S.
dollar during the year.
Portfolio Positioning
A number of the Portfolio's European holdings performed extremely well over
the last year. As a result, we have reduced our exposure to some of these
holdings, due to our belief that their share prices have fully discounted their
future financial performance. Carrefour, Daimler Benz, Hennes & Mauritz,
Mannesmann, SAP and Schering are all companies that have been sold completely or
7
<PAGE>
significantly reduced. Many of these names have served the Portfolio well over
the last three to five years. At the end of the year, Europe still represented
roughly two-thirds of the Portfolio's equity exposure, and it is likely to
continue to be the region where the Portfolio has the greatest exposure during
1998. One area within Europe where we see particular opportunity is the
financial sector. The pace of consolidation is likely to continue in the
financial services industry as the scope for reducing capacity is quite
significant. We believe the Portfolio's substantial exposure to banks and
insurance companies in Europe, currently more than 10%, will benefit from the
drive to deliver financial products more cheaply across all of the continent.
The magnitude of the declines in Asian share prices has been astounding.
The financial troubles stem from an inefficient system for allocating capital
where the exercise of influence was often more important than earning an
economic return. To the extent that the reforms being mandated by the IMF are
implemented, we believe better financial systems will be the result. However,
the road to recovery is likely to be very bumpy. The turmoil has, and will
likely continue, to push the share prices of many Asian companies to levels
below their intrinsic value. We have been purchasing shares in some of our
existing Hong Kong holdings where we have found attractive valuations. We have
also added to some of our existing Indonesian holdings. It is important to
emphasize that these have been relatively small shifts, and we are approaching
our purchases on a stock-by-stock basis. At the end of 1997, the portfolio's
exposure to the Asian region, excluding Japan, was approximately 9%.
1998 should be an interesting year. Europe is in the final stages of
preparing for EMU, and Asia is in the midst of resolving a difficult financial
crisis. We believe the portfolio is well positioned to benefit from the changes
that are occurring.
Sincerely,
Your Portfolio Management Team
/s/Irene T. Cheng /s/J. Gregory Garrett
Irene T. Cheng J. Gregory Garrett
Lead Portfolio Manager Portfolio Manager
8
<PAGE>
A Team Approach to Investing
Lead Portfolio Manager Irene Cheng joined Scudder in 1993. Ms. Cheng, who has
over 13 years of industry experience, focuses on portfolio management, research,
and equity analysis for Scudder's international equity accounts. J. Gregory
Garrett, Portfolio Manager, joined Scudder in 1990, and the Portfolio's team in
1997. Mr. Garrett specializes in international client service and international
equity management and has over ten years of investment experience.
9
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Investment Portfolio
December 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount (b) Value ($)
------------ ----------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 5.2%
Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 12/31/97 at 6.5% to be repurchased at $1,003,362 on 1/2/98,
collateralized by a $685,000, U.S. Treasury Bond, 13.75%,
8/15/04 (Cost $1,003,000) ....................................... 1,003,000 1,003,000
------------
CONVERTIBLE BONDS -- 0.2%
Japan
Softbank Corp., 0.5%, 3/29/02 (Cost $63,199) ....................... JPY 5,000,000 29,874
------------
Shares
------------
COMMON STOCKS -- 94.6%
Argentina 1.2%
YPF S.A. "D" (Sponsored ADR) (Petroleum company) ................... 6,500 222,219
------------
Brazil 0.9%
Companhia Vale do Rio Doce (pfd.) (Diverse mining and
industrial complex) ............................................. 5,900 117,096
Usinas Siderurgicas de Minas Gerais S.A. (pfd.) (Steel
manufacturer) ................................................... 9,254 54,726
------------
171,822
------------
Canada 0.9%
Canadian National Railway Co. (Major railroad operator) ............ 3,800 178,958
------------
China 0.4%
Anhui Expressway Co., Ltd. (Developer and manager of toll
highways in Anhui province) ..................................... 136,000 23,518
China Telecommunications (Telecommunication services)* ............. 6,000 10,298
GZI Transport Ltd. (Developer and operator of toll highways in
Guangdong Province) ............................................. 13,000 4,362
Jiangsu Expressway Co., Ltd. (Builder and manager of the
Shanghai-Nanjing expressway)* ................................... 109,000 22,506
Shenzhen Expressway Co. (Highway developer)* ....................... 109,000 21,100
------------
81,784
------------
</TABLE>
See notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
------------ ----------
<S> <C> <C>
Finland 2.4%
Nokia AB Oy "A" (Leading manufacturer of telecommunications
equipment and cellular telephones) .............................. 2,950 209,508
Pohjola Insurance Co., Ltd. "B" (Insurance company) ................ 6,800 252,074
------------
461,582
------------
France 14.8%
AXA S.A. (Insurance group providing insurance, finance and
real estate services) ........................................... 2,639 204,150
Accor S.A. (Catering, hotels, travel services) ..................... 977 181,605
Alcatel Alsthom (Manufacturer of transportation, telecommunication
and energy equipment) ........................................... 1,672 212,472
Assurances Generales de France (Markets health, life,
and liability insurance) ........................................ 5,012 265,503
Carrefour (Hypermarket operator and food retailer) ................. 300 156,478
Compagnie Financiere de Paribas (Finance and investment
company) ........................................................ 1,156 100,430
Credit Commercial de France (Bank) ................................. 1,600 109,635
France Telecom S.A. (Telecommunication services)* .................. 2,745 99,540
Lagardere S.C.A. (Holding company with interests in publishing,
defense, audiovisual production and services,
telecommunications and media) ................................... 1,731 57,221
Renault S.A. (Manufacturer of automobiles, buses, industrial and
agricultural vehicles) .......................................... 567 168,593
Rhone-Poulenc S.A. "A" (Medical, agricultural and consumer
chemicals) ...................................................... 4,695 210,261
Schneider S.A. (Manufacturer of electronic components and
automated manufacturing systems) ................................ 4,164 226,046
Societe Lyonnaise des Eaux S.A. (Water utility) .................... 1,987 219,824
Societe Nationale Elf Aquitaine (Petroleum company) ................ 2,368 275,349
Thomson CSF (Manufacturer of aerospace systems and industrial
electronics products) ........................................... 4,406 138,840
Total S.A. "B" (International oil and gas exploration, development
and production) ................................................. 2,052 223,266
------------
2,849,213
------------
</TABLE>
See notes to financial statements.
11
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Investment Portfolio (continued)
<TABLE>
<CAPTION>
Market
Shares Value ($)
------------ ----------
<S> <C> <C>
Germany 17.0%
Allianz AG (Multi-line insurance company) .......................... 1,091 282,605
BASF AG (Leading international chemical producer) .................. 4,350 154,148
Bayerische Vereinsbank AG (Commercial bank) ........................ 4,800 314,041
Commerzbank AG (Worldwide multi-service bank) ...................... 8,100 318,777
Dresdner Bank AG (Universal bank) .................................. 4,590 211,768
Heidelberger Druckmaschinen (Manufacturer of printing
machinery)* ..................................................... 725 39,897
Hoechst AG (Chemical producer) ..................................... 3,631 127,156
Mannesmann AG (Bearer) (Diversified construction and
technology company) ............................................. 450 227,376
Muenchener Rueckversicherungs-Gesellschaft AG (Registered)
(Insurance company) ............................................. 744 280,396
RWE AG (pfd.) (Producer and marketer of petroleum and
chemical products) .............................................. 6,400 270,372
SAP AG (pfd.) (Computer software manufacturer) ..................... 1,100 359,839
Schering AG (Pharmaceutical and chemical producer) ................. 2,000 192,885
Thyssen AG (Manufacturer of capital goods and steel products) ...... 646 138,249
VEBA AG (Electric utility, distributor of oil and chemicals) ....... 3,630 247,179
VIAG AG (Provider of electrical power and natural gas services,
aluminum products, chemicals, ceramics and glass) ............... 182 98,031
------------
3,262,719
------------
Hong Kong 3.5%
Cheung Kong Holdings Ltd. (Real estate company) .................... 12,000 78,591
Citic Pacific Ltd. (Diversified holding company) ................... 7,000 27,913
Cosco Pacific Ltd. (Investment holding company) .................... 46,000 37,398
HSBC Holdings Ltd. (Bank holding company) .......................... 6,805 167,732
Hutchison Whampoa, Ltd. (Container terminal and real estate
company) ........................................................ 14,000 87,624
Kerry Properties, Ltd. (Real estate company) ....................... 54,000 89,199
New World Development Co., Ltd. (Property investment and
development, construction and engineering, hotels and
restaurants, telecommunications) ................................ 21,000 72,629
New World Infrastructure Ltd. (Investment and operation of
infrastructure projects)* ....................................... 5,000 11,324
</TABLE>
See notes to financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
------------ ----------
<S> <C> <C>
Television Broadcasts, Ltd. (Television broadcasting) .............. 29,000 82,707
Zhejiang Expressway Co., Ltd. (Road construction and
management)* .................................................... 118,000 23,908
------------
679,025
------------
Italy 3.3%
Istituto Nazionale delle Assicurazione (Insurance company) ......... 108,700 220,288
Telecom Italia Mobile SPA (Cellular telecommunication services) .... 87,900 405,711
------------
625,999
------------
Japan 15.5%
Advantest Corp. (Producer of measuring instruments and
semiconductor testing devices) .................................. 2,800 158,713
Bridgestone Corp. (Leading automobile tire manufacturer) ........... 7,000 151,743
Canon Inc. (Leading producer of visual image and information
equipment) ...................................................... 9,000 209,575
Daiwa Securities Co., Ltd. (Brokerage and other financial
services) ....................................................... 24,000 82,727
Fujitsu Ltd. (Leading manufacturer of computers) ................... 11,000 117,962
Keyence Corp. (Specialized manufacturer of sensors) ................ 1,100 162,620
Matsushita Electric Works, Inc. (Leading maker of building materials
and lighting equipment) ......................................... 5,000 43,278
Minebea Co., Ltd. (Manufacturer of bearings, electronic equipment,
machinery parts) ................................................ 9,000 96,515
Nichiei Co., Ltd. (Finance company for small and medium-sized
firms) .......................................................... 2,100 223,592
Nintendo Co., Ltd. (Game equipment manufacturer) ................... 2,100 205,898
Nippon Telegraph & Telephone Corp. (Leading telecommunications
company) ........................................................ 14 120,107
Nomura Securities Co., Ltd. (Financial advisor, securities
broker and underwriter) ......................................... 10,000 133,282
Orix Corp. (Major leasing company) ................................. 2,000 139,410
Ricoh Co., Ltd. (Leading maker of copiers and information
equipment) ...................................................... 13,000 161,318
SMC Corp. (Leading maker of pneumatic equipment) ................... 2,000 176,178
Secom Co., Ltd. (Electronic security system operator) .............. 1,000 63,884
Shohkoh Fund & Co., Ltd. (Finance company for small and
medium-sized firms) ............................................. 400 121,946
</TABLE>
See notes to financial statements.
13
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Investment Portfolio (continued)
<TABLE>
<CAPTION>
Market
Shares Value ($)
------------ ----------
<S> <C> <C>
Sony Corp. (Consumer electronic products manufacturer) ............. 3,000 266,565
Sumitomo Electric Industries, Ltd. (Leading manufacturer of
electric wires and cables) ...................................... 11,000 149,981
Sumitomo Metal Industries, Ltd. (Leading integrated crude steel
producer) ....................................................... 45,000 57,564
Tokyo Electron Ltd. (Leading semiconductor production equipment
manufacturer) ................................................... 4,000 128,074
------------
2,970,932
------------
Malaysia 0.4%
Arab Malaysian Finance Berhad (Licensed finance company) ........... 37,000 7,420
Arab Malaysian Corp. (Investment holding company with interests
in financial services, infrastructure and property) ............. 25,000 7,392
Malayan Banking Berhad (Leading banking and financial services
group) .......................................................... 12,000 34,863
Malaysian Resources Corp. (Property development and investment) .... 40,333 9,333
Multi-Purpose Holdings Berhad (Investment holding company) ......... 40,000 10,284
United Engineers Berhad (Leading comprehensive contractor) (c) ..... 18,000 14,994
------------
84,286
------------
Netherlands 4.5%
AEGON Insurance Group NV (Insurance company) ....................... 2,800 249,248
Akzo-Nobel NV (Chemical producer) .................................. 600 103,447
Elsevier NV (International publisher of scientific, professional,
business, and consumer information books) ....................... 9,000 145,584
Heineken Holdings NV "A" (Brewery) ................................. 700 107,708
Philips Electronics NV (Leading manufacturer of electrical
equipment) ...................................................... 2,725 163,417
Royal Dutch Petroleum Co. (Owner of 60% of Royal Dutch/
Shell Group) .................................................... 1,800 98,802
------------
868,206
------------
</TABLE>
See notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
------------ ----------
<S> <C> <C>
Philippines 1.2%
C & P Homes, Inc. (Home construction company) ...................... 308,600 17,983
Manila Electric Co. "B" (Electric utility) ......................... 25,350 83,874
Metropolitan Bank and Trust Company (Commercial bank and
trust company) .................................................. 5,728 38,540
SM Prime Holdings Corp. (Leader in commercial center operations) ... 552,000 81,778
------------
222,175
------------
Portugal 1.6%
Portugal Telecom S.A. (Telecommunication services) ................. 6,500 301,603
------------
Sweden 4.0%
AGA AB "B" (Free) (Producer and distributor of industrial and
medical gases) .................................................. 8,600 113,748
L.M. Ericsson Telephone Co. "B" (ADR) (Leading manufacturer of
cellular telephone equipment) ................................... 7,000 261,188
Skandia Foersaekrings AB (Free) (Financial conglomerate) ........... 8,500 400,984
------------
775,920
------------
Switzerland 8.6%
Ciba Specialty Chemical (Registered) (Manufacturer of chemical
products for plastics, coatings, fibers and fabrics)* ........... 1,878 223,587
Clariant AG (Registered) (Manufacturer of color chemicals) ......... 328 273,801
Credit Suisse Group (Registered) (Provider of bank services,
management services and life insurance) ......................... 1,920 296,900
Nestle S.A. (Registered) (Food manufacturer) ....................... 114 170,746
Novartis AG (Registered) (Manufacturer of healthcare products) ..... 190 308,108
Roche Holdings AG (PC) (Producer of drugs and medicines) ........... 25 248,118
Union Bank of Switzerland (Bearer) (Bank) .......................... 92 132,948
------------
1,654,208
------------
United Kingdom 14.4%
BOC Group PLC (Producer of industrial gases) ....................... 12,938 212,700
Barclays PLC (Commercial and investment banking, insurance and
other financial services) ....................................... 8,750 232,911
British Petroleum PLC (Major integrated world oil company) ......... 14,329 189,534
Carlton Communications PLC (Television post production products
and services) ................................................... 25,500 196,836
</TABLE>
See notes to financial statements.
15
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Investment Portfolio (continued)
<TABLE>
<CAPTION>
Market
Shares Value ($)
------------ ----------
<S> <C> <C>
General Electric Co., PLC (Manufacturer of power, communications
and defense equipment and other various electrical components) .. 25,000 161,977
Glaxo Wellcome PLC (Pharmaceutical company) ........................ 8,934 212,972
Imperial Chemical Industries PLC (Leading international chemical
producer) ....................................................... 10,840 169,307
Pearson PLC (Diversified media and entertainment holding
company) ........................................................ 14,000 181,874
Pilkington PLC (Manufacturer of glass for building and transport
markets) ........................................................ 44,000 92,136
PowerGen PLC (Electric utility) .................................... 16,913 219,994
RTZ Corp., PLC (Mining and finance company) ........................ 7,481 92,210
Reuters Holdings PLC (International news agency) ................... 12,000 131,059
SmithKline Beecham PLC (Manufacturer of ethical drugs and
healthcare products) ............................................ 19,400 199,931
WPP Group PLC (Advertising agency) ................................. 51,200 227,879
Zeneca Group PLC (Holding company: Manufacturing and
marketing of pharmaceutical and agrochemical products
and specialty chemicals) ........................................ 7,000 247,927
------------
2,769,247
------------
Total Common Stocks (Cost $16,304,326) ................................ 18,179,898
------------
- ----------------------------------------------------------------------------------------------------------------
Total Investments -- 100.0% (cost $17,370,525) (a) .................... $19,212,772
============
</TABLE>
(a) Cost for federal income tax purposes was $17,392,405. At December 31,
1997, net unrealized appreciation for all securities based on tax cost was
$1,820,367. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $3,261,387 and unrealized depreciation for all securities in which
there was an excess of tax cost over market value of $1,441,020.
(b) Principal amount stated in U.S. dollars unless otherwise noted.
Currency Abbreviations
----------------------
JPY Japanese Yen
(c) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $14,994 (0.08% 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 December 31, 1997 aggregated $107,167. These
securities may also have certain restrictions as to resale.
* Non-income producing security
16
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<S> <C> <C>
Assets
Investments, at market (identified cost $17,370,525) ....................... $ 19,212,772
Cash ....................................................................... 3,191
Receivable for investments sold ............................................ 50,631
Dividend and interest receivable ........................................... 10,705
Foreign tax recoverable .................................................... 16,261
Due from Manager ........................................................... 106,076
Deferred organizational expenses ........................................... 18,842
Other assets ............................................................... 265
-------------
Total assets ......................................................... 19,418,743
Liabilities
Payable for investments purchased .......................................... $ 98,606
Other payables and accrued expenses ........................................ 98,447
----------
Total liabilities .................................................... 197,053
-------------
Net assets, at market value ................................................ $ 19,221,690
=============
Net Assets Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments .......................................................... $ 1,842,247
Foreign currency related transactions ................................ (1,106)
Accumulated net realized gain ........................................... 154,523
Paid-in capital ......................................................... 17,226,026
-------------
Net assets, at market value ................................................ $ 19,221,690
=============
Net asset value, offering and redemption price per share
($19,221,690 / 1,441,090 outstanding shares of
Capital Stock, $.001 par value, 100,000,000
shares authorized) ...................................................... $13.34
======
</TABLE>
See notes to financial statements.
17
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Statement of Operations
For the year ended December 31, 1997
<TABLE>
<S> <C> <C>
Investment Income
Dividend (net of foreign taxes withheld of $41,717) ........................ $ 306,935
Interest ................................................................... 63,383
-----------
370,318
Expenses:
Management fee ............................................................. $ 173,388
Custodian and accounting fees .............................................. 142,205
Shareholder services ....................................................... 48,613
Directors' fees and expenses ............................................... 7,731
Auditing ................................................................... 34,833
Reports to shareholders .................................................... 12,340
Amortization of organization expenses ...................................... 5,745
Registration fees .......................................................... 16,311
Legal ...................................................................... 31,112
Miscellaneous fees ......................................................... 9,391
-----------
Total expenses before reductions ........................................... 481,669
Expense reductions ......................................................... (279,464)
-----------
Expenses, net ........................................................... 202,205
-----------
Net investment income ...................................................... 168,113
-----------
Net realized and unrealized gain (loss) on investments
Net realized gain (loss) from:
Investments ............................................................. 490,693
Foreign currency related transactions ................................... (18,750) 471,943
-----------
Net unrealized appreciation (depreciation) from:
Investments ............................................................. 970,777
Foreign currency related transactions ................................... (1,106) 969,671
----------- -----------
Net gain on investments .................................................... 1,441,614
-----------
Net increase in net assets resulting from operations ....................... $ 1,609,727
===========
</TABLE>
See notes to financial statements.
18
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period
Year April 3, 1996
Ended (commencement of
December 31, operations) to
1997 December 31, 1996
------------ -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income ..................................................... $ 168,113 $ 143,757
Net realized gain (loss) on investments ................................... 471,943 (174,257)
Net unrealized appreciation on investments during the period .............. 969,671 871,470
------------- -----------
Net increase in net assets resulting from operations ...................... 1,609,727 840,970
------------- -----------
Distributions to shareholders from net investment income .................. (198,898) (156,525)
------------- -----------
Distributions to shareholders from net realized gains ..................... (170,484) --
------------- -----------
Capital Stock Transactions:
Proceeds from sale of shares .............................................. 372,493 17,436,410
Reinvestment of distributions ............................................. 271,824 88,761
Cost of shares redeemed ................................................... (560,480) (313,308)
------------- -----------
Net increase in assets from Portfolio share transactions .................. 83,837 17,211,863
------------- -----------
Increase in net assets .................................................... 1,324,182 17,896,308
------------- -----------
Net Assets:
Beginning of period ....................................................... 17,897,508 1,200
------------- -----------
End of period (including distributions in excess of net investment
income of $853 for the period ended December 31, 1996) ................. $ 19,221,690 $17,897,508
------------- -----------
Other Information
Increase (decrease) in Portfolio shares
Shares outstanding at beginning of period ................................. 1,433,768 100
------------- -----------
Shares sold ............................................................... 28,954 1,451,638
Shares issued to shareholders in reinvestment of distributions ............ 20,392 7,199
Shares redeemed ........................................................... (42,024) (25,169)
------------- -----------
Net increase in Portfolio shares .......................................... 7,322 1,433,668
------------- -----------
Shares outstanding at end of period ....................................... 1,441,090 1,433,768
============= ===========
</TABLE>
See notes to financial statements.
19
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the period
April 3, 1996
(commencement
Year Ended of operations)
December 31, to December 31,
1997 1996
------------- ---------------
<S> <C> <C>
Net asset value, beginning of period ..................................... $ 12.48 $ 12.00
------- -------
Income from Investment Operations:
Net investment income .................................................... .12 .11
Net realized and unrealized gain on investments .......................... 1.00 .48
------- -------
Total from investment operations ......................................... 1.12 .59
------- -------
Less distributions:
From net investment income ............................................... (.14) (.11)
From net realized gains on investment transactions ....................... (.12) --
------- -------
Total distributions ...................................................... (.26) (.11)
Net asset value, end of period ........................................... $ 13.34 $ 12.48
======= =======
Total return (%) (b) 8.98 4.93**
Ratios and Supplementary Data
Net assets, end of period ($ millions) ................................... 19 18
Ratio of operating expenses, to average daily net assets (%) ............. 1.04 .95*
Ratio of operating expenses before expense reductions,
to average daily net assets (%) ........................................ 2.47 2.55*
Ratio of net investment income, to average daily net assets (%) .......... .86 1.24*
Portfolio turnover rate (%) .............................................. 62.1 10.1*
Average commission rate paid (c) ......................................... $ .0043 $ .0004
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns would have been lower had certain expenses not been reduced.
(c) Average commission rate paid per share of common and preferred stocks.
* Annualized
** Not annualized
20
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Notes to Financial Statements
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 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 most recent 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 purchased with original 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. 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.
(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) 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.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
21
<PAGE>
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 Portfolio gives up the
opportunity to profit from favorable exchange rate movements during the term of
the contract.
(d) Federal Income Taxes--The Portfolio intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, as amended,
and to distribute all taxable income, including any realized net capital gains,
to shareholders. Therefore, no federal income tax provision is required.
(e) 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 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. These
differences primarily relate to foreign currency denominated securities. 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.
(f) 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.
(g) 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 Portfolio. Payment by the Portfolio in respect of a
repurchase agreement is authorized only when proper delivery of the underlying
securities is made to the Portfolio's custodian. The Portfolio's investment
manager values such underlying securities each business day using quotations
obtained from a reputable, independent source. If the Portfolio'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
Portfolio'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 Portfolio
may be delayed or limited.
4. Purchases and Sales of Securities
For the year ended December 31, 1997, purchases and sales of securities
(excluding short-term investments) aggregated $11,903,983 and $11,219,931,
respectively.
5. Management Fee and Other Transactions with Affiliates
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder")
and The Zurich Insurance Company ("Zurich"), an international insurance and
financial services organization, formed a new global investment organization by
combining Scudder's business with that of Zurich's subsidiary, Zurich Kemper
Investments, Inc. As a result of the transaction, Scudder changed its name to
Scudder Kemper Investments Inc. ("Scudder Kemper" or the"Adviser"). The
transaction between Scudder and Zurich resulted in the termination of the Fund's
Investment Management Agreement with Scudder. However, a new Investment
Management Agreement (the "Management
22
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Notes to Financial Statements (continued)
Agreement") between the Company and Scudder Kemper was approved by the Company's
Board of Directors and by the Portfolio's Shareholders. The Management
Agreement, which is effective December 31, 1997, is the same in all material
respects as the corresponding previous Investment Management Agreement, except
that Scudder Kemper is the new investment adviser to the Portfolio.
The Portfolio retains Scudder Kemper as investment manager for the
Portfolio, pursuant to an investment advisory agreement between Scudder Kemper
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 Kemper agreed not to impose all or a portion of
its management fee until July 31, 1997, to maintain the annualized expense of
the Portfolio at not more than 0.95% of the average daily net assets. Scudder
Kemper has also agreed not to impose all or a portion of its management fee to
maintain the annualized expenses of the Portfolio at not more than 1.15% of
average daily net assets.
For the year ended December 31, 1997, Scudder did not impose any of its
fee amounting to $173,388. In addition, Scudder reimbursed expenses amounting to
$106,076.
Scudder Service Corporation ("SSC"), a subsidiary of Scudder Kemper, is
the Portfolio's shareholder service, transfer and dividend disbursing agent. For
the year ended December 31, 1997, the amount charged by SSC aggregated $45,973
of which $4,859 is unpaid at December 31, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder
Kemper, is responsible for determining the daily net asset value per share and
maintaining the portfolio and general accounting records for the Portfolio. For
the year ended December 31, 1997, the amount charged to the Portfolio by SFAC
aggregated $53,511, of which $4,167 is unpaid at December 31, 1997.
The Portfolio 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 year ended December 31, 1997, Directors' fees and
expenses amounted to $7,731. The accumulated balance of deferred Directors' fees
and interest thereon relating to the Portfolio aggregated $2,306, which is
included in accrued expenses of the Portfolio.
6. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations
not typically associated with investing in the United States. These risks
include revaluation of currencies, high rates of inflation, repatriation
restrictions on income and capital, and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid,
subject to government ownership controls, delayed settlements, and their prices
more volatile than those of comparable securities in the United States.
7. Plan of Reorganization
On October 23, 1997, the Stockholders of the Portfolio approved a Plan of
Reorganization (the "Plan") that previously had been approved by the Company's
Board of Directors. The Plan provides for the transfer of substantially all of
the assets and all of the identified and stated liabilities of the Portfolio to
International Fund, a series of shares of common stock of International Fund
Inc., in a tax free exchange of shares.
As a result of the Reorganization, each stockholder of the Institutional
International Equity Portfolio will become a stockholder of the International
Fund and will hold, immediately after the closing of the Reorganization (the
"Closing"), that number of full and fractional voting shares of common stock of
the Barrett International Shares class of the International Fund having an
aggregate net asset value equal to the aggregate net asset value of such
stockholder's shares held in the Institutional International Equity Portfolio as
of the close of business on the business day preceding the Closing. The
investment objective, policies and restrictions of the Barrett Shares class of
Institutional International Fund will be substantially similar to those of the
International Equity Portfolio at the time of the Closing.
23
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
SCUDDER INSTITUTIONAL FUND, INC.
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 the Institutional International
Equity Portfolio, a portfolio of Scudder Institutional Fund, Inc. (hereafter
referred to as the "Portfolio") at December 31, 1997, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period April 3, 1996
(commencement of operations) through December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
As discussed in Note 7 to the financial statements, on October 23, 1997 the
stockholders of the Portfolio approved a Plan of Reorganization. The Plan
provides for the transfer of substantially all of the assets and all of the
identified and stated liabilities of the Portfolio to the International Fund, a
series of shares of common stock of International Fund, Inc., in a tax free
exchange of shares.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
February 23, 1998
- --------------------------------------------------------------------------------
Federal Tax Status of 1997 dividends (Unaudited)
The Fund paid distributions of $0.120 per share from net long-term capital
gains during the year ended December 31, 1997, of which 0.00% represents 20%
gains. Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$359,541 as capital gain dividends for the year ended December 31, 1997, of
which 33.38% represents 20% rate gains.
The Fund paid foreign taxes of $41,738 and recognized $190,254 of foreign
source income during the period ended December 31, 1997. Pursuant to section 853
of the Internal Revenue Code, the fund designates $0.0314 per share of foreign
taxes as having been paid and $0.1320 of income from foreign sources as having
been earned in the year ended December 31, 1997.
- --------------------------------------------------------------------------------
24
<PAGE>
Institutional International Equity Portfolio/Barrett International Shares
Stockholder Meeting Results
December 31, 1997
A Special Meeting of Stockholders (the "Meeting") of Institutional International
Equity Portfolio ("International Equity Portfolio") was held on October 23,
1997, at the offices of Scudder Kemper Investments, Inc. (formerly Scudder,
Stevens & Clark, Inc.), 25th Floor, 345 Park Avenue (at 51st Street), New York,
New York 10154. The following matters were voted upon by the stockholders (the
resulting votes for each matter are presented below).
1. To approve an Agreement and Plan of Reorganization.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
1,386,319 0 0 0
2. To approve the new Investment Management Agreement between International
Equity Portfolio and Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
1,386,319 0 0 0
3. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Dr. Rosita P. Chang 1,386,319 0
Edgar R. Fiedler 1,386,319 0
Peter B. Freeman 1,386,319 0
Dr. J. D. Hammond 1,386,319 0
Richard M. Hunt 1,386,319 0
25
<PAGE>
4. To ratify the selection of Price Waterhouse LLP as the independent
accountants for the International Equity Portfolio's current fiscal year.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
1,386,319 0 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.
26
<PAGE>
<PAGE>
BARRETT INTERNATIONAL SHARES
345 Park Avenue, New York, New York 10154
(800) 854-8525
Investment Manager
Scudder Kemper Investments, 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
Dechert, Price & Rhoads
Boston, Massachusetts
-----------------
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.
BARRETT INTERNATIONAL
SHARES
-----------------------------------
ANNUAL REPORT
DECEMBER 31, 1997
