Scudder International Fund
Annual Report
March 31, 1996
o A fund offering opportunities for long-term growth of capital primarily from
foreign equity securities.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
CONTENTS
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
11 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
29 Report of Independent Accountants
30 Tax Information
33 Officers and Directors
34 Investment Products
and Services
35 How to Contact
Scudder
IN BRIEF
o Scudder International Fund provided a total return of 19.25% for the fiscal
year ended March 31, 1996. This performance exceeds that of the Fund's
benchmark index and also compares favorably with the return for the same
period of the average international equity fund.
o While weak economies and falling interest rates determined market
leadership overseas in 1995 and into this year, sentiment abroad has
shifted towards stronger economic growth with a focus on cyclical stocks.
o Going forward, sector consolidation in Europe will continue to be a
significant part of Fund strategy. The portfolio is also positioned to
benefit from the restructuring of European corporations, which is gathering
momentum most clearly in Germany.
o In Japan, we are focusing on companies that are beneficiaries of a weaker
yen or that are cyclical in nature and sensitive to economic strength.
2
<PAGE>
Dear Shareholders,
We are pleased to present the Scudder International Fund Annual Report
for the fiscal year ended March 31, 1996. It was a successful year for the Fund,
which provided a total return of 19.25%, well in excess of the average return
for international equity funds and the broadly defined overseas stock market.
Scudder International Fund was the first international fund available
to U.S. investors. As a pioneer in international investing, we believe strongly
in the value of adopting a global approach to structuring an investment
portfolio. The past 12 months have provided very positive investment returns in
most equity markets, particularly the United States. Not surprisingly, with the
sustained strength in the U.S. equity market, most U.S. mutual fund investors
have focused their investments on domestic equities. We believe now is an
appropriate time for investors to consider rebalancing and restructuring their
equity portfolios.
While the United States is home to many of the world's finest
companies, we believe the arguments for investing a significant portion of one's
equity portfolio overseas are as compelling today as they have been in some
time. Not only does the pool of well-managed, competitive companies worldwide
continue to expand, but valuations of many of these companies are very
attractive today, especially in comparison to their U.S. counterparts.
Scudder International Fund provides a way to structure the core portion
of your international equity exposure. The Fund provides access in a diversified
manner to large, well-capitalized companies and markets worldwide. Other funds
such as Scudder Emerging Markets Growth Fund, which became available to
investors on May 8 and which seeks to provide long-term growth of capital by
investing in the stock markets of developing regions of the Pacific Rim, Latin
America and Eastern Europe, offer a way of rounding out your international
exposure. For more information about Scudder Emerging Markets Growth Fund and
other Scudder products and services, please see page 34. For questions about
Scudder International Fund, please contact us at 1-800-225-2470.
Thank you for your continued investment and confidence in Scudder
International Fund.
Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman, Scudder International Fund
3
<PAGE>
SCUDDER INTERNATIONAL FUND
PERFORMANCE UPDATE as of March 31, 1996
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER INTERNATIONAL FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,925 19.25% 19.25%
5 Year $15,670 56.70% 9.40%
10 Year $29,692 196.92% 11.50%
MSCI EAFE & CANADA INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,262 12.62% 12.62%
5 Year $14,907 49.07% 8.30%
10 Year $28,034 180.34% 10.85%
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:
YEARLY PERIODS ENDED MARCH 31,
Scudder International Fund
Year Amount
- ----------------------
'86 $10,000
'87 $14,018
'88 $13,952
'89 $15,952
'90 $18,676
'91 $18,948
'92 $18,982
'93 $20,713
'94 $25,413
'95 $24,900
'96 $29,692
MSCI EAFE & Canada Index
Year Amount
- ----------------------
'86 $10,000
'87 $15,959
'88 $18,447
'89 $20,596
'90 $18,358
'91 $18,806
'92 $17,355
'93 $19,263
'94 $23,479
'95 $24,892
'96 $28,034
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 Fund returns, do not reflect any fees
or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED MARCH 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
--------------------------------------------------------------------------------
NET ASSET VALUE... $44.05 $33.43 $34.79 $37.00 $34.69 $34.36 $35.69 $42.96 $39.72 $45.71
INCOME DIVIDENDS.. $ .49 $ .82 $ .13 $ .43 $ .74 $ -- $ .83 $ .69 $ -- $ .40
CAPITAL GAINS
DISTRIBUTIONS..... $ 5.93 $ 9.39 $ 3.06 $ 3.15 $ 1.98 $ .40 $ .86 $ .09 $ 2.42 $ 1.18
FUND TOTAL
RETURN (%)........ 40.18 -.47 14.34 17.08 1.46 .18 9.12 22.69 -2.02 19.25
INDEX TOTAL
RETURN (%)........ 59.59 15.60 11.64 -10.87 2.44 -7.73 10.99 21.87 6.02 12.62
</TABLE>
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.
4
<PAGE>
PORTFOLIO SUMMARY as of March 31, 1996
- ---------------------------------------------------------------------------
GEOGRAPHICAL (Excludes 6% Cash Equivalents)
- ---------------------------------------------------------------------------
Europe 51% Investments in Europe
Japan 27% remain significant, as we
Pacific Basin 15% foresee the potential for
Canada 4% favorable long-term equity
Latin America 3% performance there.
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS (Excludes 6% Cash Equivalents)
- --------------------------------------------------------------------------
Manufacturing 22%
Metals & Minerals 12%
Financial 11% Our 12% position in metals
Service Industries 8% and minerals helped us to
Energy 7% benefit from the surge in
Health 6% the price of gold early in
Durables 6% 1996.
Technology 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.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- --------------------------------------------------------------------------
1. SAP AG
German computer software manufacturer
2. CANON INC.
Leading producer of visual image and information equipment in Japan
3. MATSUSHITA ELECTRICAL INDUSTRIAL CO., LTD.
Japanese consumer electronic products manufacturer
4. BROWN, BOVERI & CIE. AG
Manufacturer of electrical equipment in Switzerland
5. REUTERS HOLDINGS PLC
International news agency in the U.K.
6. L.M. ERICSSON TELEPHONE CO.
Leading manufacturer of cellular telephone equipment in Sweden
7. AEGON INSURANCE GROUP N.V.
Insurance company in the Netherlands
8. CARREFOUR
Hypermarket and food retailing in France
9. HEINEKEN HOLDINGS N.V.
Brewery in the Netherlands
10. ASTRA AB
Swedish pharmaceutical company
The portfolio is positioned to benefit from a weak yen and a stronger
economy in Japan.
- -----------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 11.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
Dear Shareholders,
We are pleased to report that Scudder International Fund provided a total
return of 19.25% for the fiscal year ended March 31, 1996. This performance
exceeds that of the Fund's benchmark, the unmanaged MSCI EAFE and Canada Index,
which returned 12.62%. It also compares favorably with the 16.08% return for the
same period of the average international equity fund tracked by Lipper
Analytical Services.
For much of the period, a combination of low inflation, slow but
sustainable growth, and declining interest rates predominated in industrialized
economies, providing a benign environment for holders of financial assets. Most
major international markets displayed strong performance over the last twelve
months, although returns in Japan lagged.
European Markets Weather Political Transition
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 (EMU). This tradeoff has intensified the debate on EMU, and it remains to
be seen if the Maastricht criteria can be met within the 1997 timetable. The
political commitment to EMU is significant, however, and the process will remain
at the heart of the European agenda for the foreseeable future.
Two events in the past year marked the end of political eras in Europe: the
passing of Mitterand in France after 14 years as President and the failure of
Spanish Prime Minister Gonzalez to win elections after 13 years of Socialist
rule. Despite this transition in the political arena, the governments involved
seem to have pulled through. After experiencing widespread strikes and urban
paralysis in the wake of EMU-motivated proposals to cut social spending, the
political situation in France has stabilized. In Spain, the market appears to be
anticipating a period of political stability as well.
Most European markets provided handsome returns for the 12-month period.
The "core" markets of the U.K., Germany, and France all provided double digit
total returns of 13.97%, 17.37%, and 10.10%, respectively. Some of the
"peripheral" markets experienced exceptional increases, notably Spain (38.36%),
Sweden (45.21%), and Switzerland (37.57%).
6
<PAGE>
Falling Yen Lifts Japanese Stocks from Doldrums
In Japan, the overriding factor the last 12 months has been a reversal of
the yen, which had reached a historic high relative 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. As the year
progressed, the government began to implement a concerted policy of monetary and
fiscal easing, resulting in a weaker yen and the first signs of recovery. Driven
by stocks sensitive to economic strength, the Japanese market started to perform
better towards the end of 1995 and into 1996. The emergence of a possible
resolution to the budget debate, which centers around how to finance the
unwinding of Japan's banking crisis, improved sentiment as well. For the
12-month period, Japanese stocks in the aggregate returned a modest 3.25%.
Turning to the emerging markets, most of the small but expanding venues of
Asia and Latin America suffered in 1995 from the ripple effects of the Mexican
currency and stock market collapse. Early in 1996, however, these markets
appeared to turn the corner on this crisis, with many experiencing substantial
appreciation.
Overseas Outlook: Increased Economic Activity
While weak economies and falling interest rates determined market
leadership overseas in 1995 and into this year, sentiment abroad has shifted
towards stronger economic growth with a focus on cyclical stocks. Moreover, most
international bourses entered the second quarter of 1996 on a positive note
pursuant to some combination of favorable corporate activity, currency levels,
and political developments.
In Europe, Germany's market has received a lift from both a weaker
Deutschemark expected to boost the export sector and the major restructuring
being carried out by German corporations. Investors in France should benefit
going forward from a stabilized political environment. In Sweden, a country long
plagued by fiscal largesse, stocks were propelled by a government commitment to
address this burden. In the U.K., while stocks 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. In addition, the possibility of a less business-friendly environment
if political party leadership should change is overhanging that market.
7
<PAGE>
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. The anticipated $11 billion privatization--one of the
largest in European stock market history--in Germany this year of Deutsche
Telekom should help create an equity culture in a country where there has been
little interest in stocks. Europe will continue to feature privatizations,
consolidations, and restructurings, providing the underpinnings for favorable
long-term equity performance.
In Japan, corporate profits are expected to grow at a rate of 18% this
year. Exports should be sustained not only by a depreciating currency but also
by improved competitiveness as Japanese corporations restructure and shift
production overseas. Although problems in the banking sector are far from
resolved, systemic risk has waned and the government is coming to terms with
problem loans inherited from the "bubble" years. In the wake of looser
regulation, companies such as Toyota have announced share buy backs to enhance
earnings. An additional source of support for Japanese stocks may lie in the
return of domestic investors to the market after a long absence. Of course,
there are reasons for caution as well, including stubbornly high unemployment
levels, the slow pace of deregulation, and the continued fragility of the
banking system.
Elsewhere, Hong Kong appears to have disregarded the saber rattling in the
Pacific between China and Taiwan, ending March strongly with foreign investors
providing much of the momentum. Among emerging markets, Brazil is buoyed by a
favorable inflation outlook and ongoing political and economic reform.
European Consolidation and Restructuring Keys to Strategy
Going forward, sector consolidation in Europe will continue to be a
significant part of Fund strategy. For example, the need for healthcare
companies to cut costs and focus business activities has prompted a number of
alliances. The recent merger between Ciba-Geigy and Sandoz, both long-standing
holdings in the portfolio, was recognized and rewarded by the market as an
important step forward. In this vein, the Fund owns a number of pharmaceutical
companies such as Astra (Sweden), Schering (Germany), Zeneca (U.K.), and
Smithkline Beecham (U.K.).
8
<PAGE>
The portfolio is also positioned to benefit from the restructuring of
European corporations, which is most clearly gathering momentum in Germany.
Hoechst, the world's largest chemical and pharmaceutical company in terms of
sales, is a Fund holding that represents this theme. The company has been
reshaping its business portfolio through both acquisitions and divestitures and
is focusing on core, profitable operations.
Increased Focus on Japan
In Japan, concerns over the financial system and the pressures created by
the upward spiraling yen had prompted us to reduce the Fund's weighting to as
low as 17% in the second quarter of 1995, a decision that helped Fund
performance. Encouraged by the turn in the yen and signs of economic recovery,
we increased our Japanese exposure in stages as the period progressed.
Currently, the Fund has a 27% weighting in Japan, with approximately half of the
underlying exposure hedged against further declines in the yen.
We continue to focus on Japanese companies that are beneficiaries of a
weaker yen or that are cyclical in nature and sensitive to economic strength. In
the former category is Canon, a global leader in office automation with 78% of
sales represented by exports. An example on the cyclical side is Bridgestone,
the world's third largest manufacturer of automobile tires and, with a 50% share
of the domestic market, poised to be a prime beneficiary of any rebound in
demand for tires and new cars in Japan.
Emerging markets have benefited recently as investors moved in looking for
value on the heels of a poor 1995. One of the more attractive emerging markets
in our view is the Philippines, a country that has moved from the boom and bust
cycles of the past to more sustainable growth under a relatively stable
political regime. A recent addition to the portfolio is C&P Homes, the largest
private low-cost housing developer in the Philippines, positioned to capitalize
on pent-up demand for inexpensive housing.
9
<PAGE>
Finally, portfolio allocations to two industry sectors--gold/gold mining
and energy--are worth noting. In mid-1995 we initiated holdings in several gold
mining companies, and were thus well-positioned to benefit from the surge in the
price of gold in early 1996. Increasing demand for gold from emerging countries
such as China and India, in conjunction with a tightening gold supply, has led
us to further extend the Fund's exposure to this sector; in particular, by
adding Ashanti Capital Corp., the largest gold mine in Ghana and one of the
lowest-cost producers in the world. With energy stocks, we have gone the other
direction, reducing the portfolio's exposure. This reflects concerns that Iraq
may return to the oil market and awareness that countries like Venezuela,
Algeria, and Qatar are investing in new capacity.
Scudder International Fund continues to provide increasingly important
exposure to a broad range of world equity markets. While short-term
fluctuations are inevitable, we believe the Fund is well-positioned to
benefit over time from the positive developments taking place in many
international economies and markets.
Sincerely,
Your Portfolio Management Team
/s/Carol L. Franklin /s/Nicholas Bratt
Carol L. Franklin Nicholas Bratt
/s/Irene T. Cheng /s/Joan R. Gregory
Irene T. Cheng Joan R. Gregory
/s/Francisco S. Rodrgo III
Francisco S. Rodrigo III
Scudder International Fund:
A Team Approach to Investing
Scudder International Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Carol L. Franklin joined Scudder International
Fund's portfolio management team in 1986 and has been responsible for setting
the Fund's investment strategy and overseeing security selection since 1992.
Carol, who has 19 years of experience in finance and investing, joined Scudder
in 1981. Nicholas Bratt, portfolio manager, directs Scudder's overall global
equity investment strategies. Nick joined Scudder and the team in 1976. Irene T.
Cheng joined Scudder and the team in 1993 as a portfolio manager, and has 12
years of experience in finance and investing. Francisco S. Rodrigo III,
portfolio manager, joined Scudder and the team in 1994. Francisco has been
involved with investment in global and international stocks and bonds as a
portfolio manager and analyst since 1989. Joan R. Gregory, portfolio manager,
focuses on stock selection, a role she has played since she joined Scudder in
1992. Joan, who joined the team in 1994, has been involved with investment in
global and international stocks since 1989.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of March 31, 1996
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount($) Value($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------
2.1% REPURCHASE AGREEMENTS
-------------------------------------------------------------------------------
53,597,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 3/29/96 at 5.35%
to be repurchased at $53,620,895 on 4/1/96,
collateralized by a $25,264,000 U.S. Treasury
Bond, 7.125%, 2/15/23, and by a $29,101,000
U.S. Treasury Bill, 1/9/97 (Cost $53,597,000) .... 53,597,000
----------
-------------------------------------------------------------------------------
3.4% COMMERCIAL PAPER
-------------------------------------------------------------------------------
20,000,000 Ford Motor Credit Co., 4/12/96 .................... 19,967,183
15,000,000 Ford Motor Credit Co., 4/24/96 .................... 14,948,633
20,000,000 General Electric Capital Corp., 6/19/96 ........... 19,769,583
30,000,000 New Center Asset Trust, 4/15/96 ................... 29,938,400
----------
Total Commercial Paper (Cost $84,623,799) ......... 84,623,799
----------
-------------------------------------------------------------------------------
1.7% CONVERTIBLE BONDS
-------------------------------------------------------------------------------
GHANA 0.7% 17,608,000 Ashanti Capital Corp., 5.5%, 3/15/03 .............. 18,136,240
----------
JAPAN 0.8% 1,500,000,000 Softbank Corp., 0.5%, 3/29/02 ..................... 19,088,359
----------
PHILIPPINES 0.2% 7,000,000 International Container Terminal
Services, Inc., 5%, 9/15/01 ...................... 5,985,000
----------
Total Convertible Bonds (Cost $39,571,944) ........ 43,209,599
----------
-------------------------------------------------------------------------------
2.9% PREFERRED STOCKS
-------------------------------------------------------------------------------
Shares
-------------------------------------------------------------------------------
GERMANY 2.6% 700,000 RWE AG (Producer and marketer of
petroleum and chemical products) ................. 21,170,454
303,000 SAP AG (Computer software manufacturer) ........... 43,633,149
----------
64,803,603
----------
KOREA 0.3% 176,858 Samsung Electronics Co., Ltd. (GDS)
(Non-voting)(Major electronics manufacturer) ..... 6,366,888
62,101 Samsung Electronics Co., Ltd. (GDS)
(Non-voting)(New(c)) ............................. 2,080,384
----------
8,447,272
----------
Total Preferred Stocks (Cost $27,424,600) ......... 73,250,875
----------
-------------------------------------------------------------------------------
87.9% COMMON STOCKS
-------------------------------------------------------------------------------
ARGENTINA 0.6% 785,000 YPF S.A. "D" (ADR) (Petroleum company) ............ 15,794,536
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
11
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL FUND
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUSTRALIA 2.2% 6,184,644 Ampol Exploration Ltd.(Oil and gas
exploration company)* ............................ 20,781,864
1,100,000 National Australia Bank, Ltd.(Commercial bank) .... 9,799,386
5,860,300 Poseidon Gold Ltd.(Growing gold producer) ......... 15,799,388
1,480,100 Woodside Petroleum Ltd.(Major oil and gas producer) 8,281,431
----------
54,662,069
----------
BRAZIL 2.4% 43,226,227 Centrais Eletricas Brasileiras S/A "B" (pfd.)
(Electric utility) ............................... 11,814,629
241,379 Companhia Cervejaria Brahma (pfd.)
(Leading beer producer and distributor) .......... 116,554
132,060,000 Companhia Vale do Rio Doce (pfd.)
(Diverse mining and industrial complex) .......... 20,721,061
108,000,000 Petroleo Brasileiro S/A (pfd.)
(Petroleum company) .............................. 12,900,744
300,000,000 Telecomunicacoes Brasileiras S.A.(pfd.)
(Telecommunication services) ..................... 14,941,540
----------
60,494,528
----------
CANADA 2.9% 755,000 Barrick Gold Corp(Gold exploration and
production in North and South America) ........... 22,983,679
670,000 Canadian National Railway Co. (Operator
of one of Canada's two principal railroads) ...... 11,557,500
225,000 Canadian Pacific Ltd. (Transportation and
resource conglomerate) ........................... 4,500,000
707,076 Canadian Pacific Ltd. (Ord.) ...................... 14,068,906
1,496,000 Hemlo Gold Mines, Inc. (Large gold producer,
with single mine in Ontario; active
exploration company) ............................. 20,713,002
----------
73,823,087
----------
FINLAND 1.8% 600,000 Nokia AB Oy "A"(Leading manufacturer
of cellular telephones) .......................... 20,783,201
1,393,000 Outokumpu Oy "A" (Metals and minerals) ............ 23,449,407
----------
44,232,608
----------
FRANCE 5.6% 302,857 AXA SA (Insurance group providing insurance,
finance and real estate services) ................ 18,607,294
44,200 Carrefour (Hypermarket and food retailing) ........ 32,359,226
185,000 Compagnie Bancaire SA (Bank) ...................... 18,913,151
62,000 LVMH Moet-Hennessy Louis Vuitton SA
(Producer of wines, spirits and luxury products) . 15,729,231
241,608 Societe Nationale Elf Aquitaine
(Petroleum company) ............................... 16,378,984
353,976 Total SA "B" (International oil and gas
exploration, development and production) ......... 23,891,184
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
292,465 Valeo SA (Automobile and truck components
manufacturer) .................................... 15,530,400
-----------
141,409,470
-----------
GERMANY 7.1% 80,000 Bayer AG (Leading chemical producer) .............. 27,250,991
43,700 Daimler-Benz AG (Automobile and
truck manufacturer) .............................. 23,768,822
80,400 Hoechst AG (Chemical producer) .................... 28,481,864
71,162 Mannesmann AG (Bearer) (Diversified
construction and technology company) ............. 25,932,303
243,000 Schering AG (Pharmaceutical and
chemical producer) ............................... 19,241,169
44,000 Siemens AG (Bearer)(Manufacturer of
electrical and electronic equipment) ............. 24,215,125
621,500 VEBA AG (Electric utility, distributor of
oil and chemicals) ............................... 30,204,643
-----------
179,094,917
-----------
HONG KONG 4.7% 14,250,000 First Pacific Co., Ltd. (International
management and investment company) ............... 20,267,649
1,718,844 HSBC Holdings Ltd.(Bank) .......................... 25,891,560
10,278,674 Hong Kong & China Gas Co., Ltd. (Gas utility) ..... 20,267,621
4,838,584 Hutchison Whampoa, Ltd. (Container
terminal and real estate company) ................ 30,405,377
5,810,000 Television Broadcasts, Ltd.
(Television broadcasting) ........................ 21,372,446
-----------
118,204,653
-----------
HUNGARY 0.1% 3,619 First Hungary Fund (Investment company)(b) ........ 3,226,881
-----------
INDIA 0.4% 2,110,000 The India Fund (Investment company)* .............. 10,466,605
-----------
INDONESIA 1.4% 538,900 Asia Pulp & Paper Co., Ltd. (Producer of
pulp and paper) (ADR)* ........................... 5,186,913
1,200,000 HM Sampoerna (Foreign registered)
(Tobacco company) ................................ 12,536,356
597,000 Indah Kiat Pulp & Paper
(Producer of pulp and paper) ..................... 466,007
3,888,000 Indah Kiat Pulp & Paper (Foreign registered) ...... 3,034,902
728,000 Indocement Tunggal (Foreign registered)
(Cement producer) ................................ 2,638,922
3,369,600 Kalbe Farma (Foreign registered)
(Pharmaceutical producer and distributor) ........ 10,268,777
82,000 Kalbe Farma (Ord.) ................................ 249,893
1,069,500 Pabrik Kertas Tjiwi Kimia (Operator of a
pulp and paper factory) .......................... 1,040,681
-----------
35,422,451
-----------
ITALY 1.1% 15,250,000 Telecom Italia Mobile SpA (Ord.)
(Cellular telecommunication services)*............ 27,720,287
-----------
JAPAN 24.1% 1,505,000 Bridgestone Corp. (Leading automobile
tire manufacturer) ............................... 25,188,873
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
13
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL FUND
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2,258,000 Canon Inc. (Leading producer of visual
image and information equipment) ................. 43,069,846
2,975 DDI Corp. (Long distance telephone and
cellular operator) ............................... 22,670,640
3,700 East Japan Railway Co.(Railroad operator) ......... 19,027,583
1,015,000 Fujitsu Ltd.(Leading manufacturer of computers) ... 9,367,041
2,981,000 Hitachi Ltd.(General electronics manufacturer) .... 28,987,751
1,800,000 Hitachi Metals, Ltd.(Major producer of
high-quality specialty steels) ................... 20,532,959
250,000 Horipro Inc. (Growing entertainment
production company) .............................. 3,716,690
443,000 Ito-Yokado Co., Ltd.(Leading supermarket
operator) ........................................ 26,302,478
3,170,000 Itochu Corp.(Leading general trading company) ..... 22,230,014
610,000 Jusco Co., Ltd.(Major supermarket operator) ....... 15,913,043
975,000 Kajima Corp.(Leading contractor engaged
in large-scale civil engineering projects) ....... 10,483,871
5,100,000 Kawasaki Steel Corp. (Major integrated
steelmaker) ...................................... 18,263,675
192,000 Keyence Corp.(Specialized manufacturer
of sensors) ...................................... 22,978,962
352,000 Kyocera Corp.(Leading ceramic package
manufacturer) .................................... 23,894,530
265,000 Mabuchi Motor Co., Ltd.(Manufacturer
of DC motors) .................................... 15,089,762
1,400,000 Matsushita Electric Works, Inc. (Leading
maker of building materials and lighting
equipment) ....................................... 15,053,763
2,376,000 Matsushita Electrical Industrial Co., Ltd.
(Consumer electronic products manufacturer) ...... 38,655,820
1,900,000 Mitsubishi Heavy Industries, Ltd.
(Diversified heavy machinery manufacturer
and leading shipbuilder) ........................ 16,415,147
1,300,000 NSK Ltd.(Leading manufacturer of bearings
and other machinery parts) ....................... 9,894,343
234,000 Nichiei Co., Ltd.(Finance company for small-
and medium-sized firms) .......................... 15,643,759
285,000 Nippon Electric Glass Co., Ltd.(Leading
producer of cathode-ray tube glass) .............. 5,223,001
4,150,000 Nisshin Steel Co., Ltd.(Blast furnace steelmaker) . 16,568,957
1,850,000 Ricoh Co., Ltd.(Leading maker of copiers
and information equipment) ....................... 19,892,473
350,000 SMC Corp.(Leading maker of pneumatic
equipment) ....................................... 24,773,259
170,000 Secom Co., Ltd.(Electronic security
system operator) ................................. 11,110,799
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,650,000 Sekisui Chemical Co., Ltd.(Leading chemical
producer, PVC resin processor) ................... 21,598,878
1,150,000 ShinMaywa Industries, Ltd. (Leading maker of
dump trucks and other specialty vehicles) ........ 10,215,054
1,450,000 Sumitomo Corp.(Leading general trading company) ... 15,320,243
7,650,000 Sumitomo Metal Industries, Ltd.
(Leading integrated crude steel producer) ........ 23,962,132
2,200,000 Sumitomo Metal Mining Co., Ltd. (Leading
gold, nickel and copper mining company) .......... 21,187,471
515,000 THK Co., Ltd.(Manufacturer of linear motion
systems for industrial machinery) ................ 13,194,016
-----------
606,426,833
-----------
KOREA 1.1% 465,100 Korea Electric Power Corp.(ADR)
(Electric utility) ............................... 10,697,300
257,668 Korea Long Term Credit Bank(New(c))
(Major commercial bank) .......................... 7,279,595
7,030 Pohang Iron & Steel Co., Ltd.
(Leading steel producer)(b) ...................... 595,130
292,900 Pohang Iron & Steel Co., Ltd.(ADR) ................ 7,102,825
26,979 Samsung Electronics Co., Ltd.(GDS)(Voting)
(Major electronics manufacturer) ................. 1,598,506
8,130 Samsung Electronics Co., Ltd. (GDS) (Voting)
(New(c)) ......................................... 447,150
-----------
27,720,506
-----------
MALAYSIA 1.0% 1,350,000 Malayan Banking Bhd.(Leading banking
and financial services group) .................... 12,592,885
8,100,000 Renong Bhd (Holding company
involved in engineering, construction,
financial services, telecommunication and
information technology) .......................... 13,190,514
2,632,500 Renong Bhd. Rights(ICUL and WTS)(b) ............... 3,202
-----------
25,786,601
-----------
NETHERLANDS 5.9% 695,500 AEGON Insurance Group NV
(Insurance company) .............................. 32,836,390
120,000 Akzo-Nobel N.V.(Chemical producer) ................ 13,343,018
1,676,000 Elsevier NV (International publisher of
scientific, professional, business, and
consumer information books) ...................... 25,666,001
160,000 Heineken Holdings N.V. "A" (Brewery) .............. 31,475,092
282,500 Koninklijke PTT Nederland
(Telecommunication services) ..................... 11,114,642
447,000 Philips Electronics N.V.(Leading manufacturer
of electrical equipment) ......................... 16,260,941
154,963 Wolters Kluwer CVA (Publisher) .................... 17,052,402
-----------
147,748,486
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
15
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL FUND
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW ZEALAND 0.5% 2,729,000 Telecom Corp. of New Zealand
(Telecommunication services) .................. 12,268,469
------------
NORWAY 0.9% 1,823,200 Saga Petroleum AS "A"
(Oil and gas exploration and production) ...... 23,315,851
------------
PHILIPPINES 0.4% 12,070,000 C&P Homes, Inc.(Home construction company) ..... 9,105,519
------------
SPAIN 4.9% 217,800 Acerinox, S.A (Stainless steel producer) ....... 24,567,538
1,500,000 Autopistas Concesionaria Espanol SA
(Motorway builder and operator) ............... 15,227,813
147,600 Banco Popular Espanol, S.A.(Retail bank) ....... 25,496,870
381,000 Compania Telefonica Nacional de Espana
SA (ADR)(Telecommunication services) .......... 18,097,500
163,300 Repsol SA (Integrated oil company) ............. 6,157,547
513,000 Repsol SA (ADR)(Integrated oil company) ........ 19,173,375
2,700,000 Union Electrica Fenosa SA (Producer and
distributor of electrical energy) ............. 14,749,225
------------
123,469,868
------------
SWEDEN 4.1% 668,100 Astra AB "A" (Free)(Pharmaceutical company) .... 30,899,357
1,540,000 L.M. Ericsson Telephone Co. "B" (ADR)
(Leading manufacturer of cellular
telephone equipment) .......................... 32,917,500
750,000 S.K.F. AB "B" (Free)(Manufacturer
of roller bearings) ........................... 16,531,056
1,040,000 Skandia Foersaekrings AB (Free)
(Financial conglomerate) ...................... 22,923,064
------------
103,270,977
------------
SWITZERLAND 5.0% 27,610 Brown, Boveri & Cie. AG (Bearer)
(Manufacturer of electrical equipment) ........ 33,595,417
17,600 Ciba-Geigy AG (Bearer)
(Pharmaceutical company) ...................... 21,829,802
14,737 Nestle SA (Registered) (Food manufacturer) ..... 16,630,553
14,490 SGS Holdings SA (Bearer)
(Trade inspection company) .................... 30,278,885
20,000 Sandoz Ltd. AG (Registered)
(Pharmaceutical company) ...................... 23,461,150
------------
125,795,807
------------
TAIWAN 0.4% 3,915,000 Taiwan Semiconductor Manufacturing Co.
(Manufacturer of integrated circuits and
other semiconductor devices)* ................ 10,767,327
------------
THAILAND 1.4% 1,250,000 Bangkok Bank Ltd.(Foreign registered)
(Leading commercial bank) ..................... 16,833,016
1,500,000 Thai Farmers Bank (Foreign registered)
(Commercial bank) ............................. 17,585,551
------------
34,418,567
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED KINGDOM 7.9% 27,801 Argyll Group PLC (Owner and operator
retail food supermarkets) 130,268
2,899,559 British Petroleum PLC
(Major integrated world oil company) .......... 25,358,681
3,487,500 Carlton Communications PLC (Television
post production products and services) ........ 24,219,526
719,698 De La Rue PLC (Printer of commercial bank
notes and securities) ......................... 7,854,099
2,464,382 PowerGen PLC (Electric utility) ................ 20,067,001
1,673,770 RTZ Corp. PLC (Mining and finance company) ..... 24,243,874
3,089,600 Reuters Holdings PLC (International news agency) 33,528,327
2,300,147 SmithKline Beecham PLC "A"
(Manufacturer of ethical drugs and healthcare
products) .................................... 23,065,400
430,000 Thorn EMI PLC (Amusement and
recreational services) ........................ 11,048,965
1,435,000 Zeneca Group PLC (Holding company
manufacturing and marketing of pharmaceutical
and agrochemical products and
specialty chemicals) .......................... 29,743,475
--------------
199,259,616
--------------
TOTAL COMMON STOCKS(Cost $1,793,298,752) ....... 2,213,906,519
--------------
------------------------------------------------------------------------------
2.0% PURCHASED OPTIONS
------------------------------------------------------------------------------
JPY 8,452,000,000 Put on Japanese Yen, strike price 96,
expire 8/15/96 ............................ 8,386,074
JPY 5,300,000,000 Put on Japanese Yen, strike price 100,
expire 11/12/96 ........................... 2,983,900
JPY 3,100,000,000 Put on Japanese Yen, strike price 88,
expire 7/10/96 ............................ 5,837,300
JPY 5,600,000,000 Put on Japanese Yen, strike price 91.47,
expire 8/6/96 ............................. 7,974,400
JPY10,080,000,000 Put on Japanese Yen, strike price 84.8,
expire 4/11/96 ............................ 24,756,480
-------------
TOTAL PURCHASED OPTIONS (Cost $12,317,038) ..... 49,938,154
-------------
===================================================================================================
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $2,010,833,133)(a) ...................... 2,518,525,946
=============
- ----------
<FN>
(a) The cost for federal income tax purposes was $2,024,689,248. At March 31,
1996, net unrealized appreciation for all securities based on tax cost was
$493,836,698. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $550,581,354 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$56,744,656.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
17
<PAGE>
SCUDDER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities at March 31, 1996 aggregated
$4,402,614. See Note A of the Notes to Financial Statements.
(c) New shares issued during 1996, eligible for a pro rata share of 1996
dividends.
* Non-income producing security.
Sector breakdown of the Fund's equity securities is noted on page 5.
<TABLE>
At March 31, 1996, outstanding written call options were as follows (Note
A):
<CAPTION>
PRINCIPAL EXPIRATION STRIKE MARKET
AMOUNT DATE PRICE VALUE($)
------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen ..... JPY 8,452,000,000 Aug. 96 JPY 88.88 17,749
Japanese Yen ..... JPY 5,600,000,000 Aug. 96 JPY 82.62 56
Japanese Yen ..... JPY 10,080,000,000 Apr. 96 JPY 75.00 101
Japanese Yen ..... JPY 3,100,000,000 Jul. 96 JPY 78.25 31
Japanese Yen ..... JPY 5,300,000,000 Nov. 96 JPY 91.18 190,800
-------
Total outstanding written options (Premiums received $12,317,038) .... 208,737
=======
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
Transactions in written call options during the year ended March 31, 1996 were:
<CAPTION>
PREMIUMS
PRINCIPAL AMOUNT RECEIVED ($)
---------------------------------------------------
<S> <C> <C>
Outstanding at
March 31, 1995 ........ -- --
Contracts written ..... JPY 32,532,000,000 12,317,038
---------------------------------------------------
Outstanding at
March 31, 1996 ........ JPY 32,532,000,000 12,317,038
============== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
18
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------
MARCH 31, 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $1,998,516,095)
(Note A) .......................................... $2,468,587,792
Purchased options, at market (identified cost $12,317,038)
(Note A) .......................................... 49,938,154
Cash ................................................. 808
Foreign currency holdings, at market (identified cost
$344,717) (Note A) ................................ 343,814
Other receivables:
Investments sold .................................. 6,528,769
Fund shares sold .................................. 2,948,983
Dividends and interest ............................ 6,265,241
Foreign taxes recoverable ......................... 2,344,203
Other assets ......................................... 8,141
--------------
Total assets .................................. 2,536,965,905
LIABILITIES
Payables:
Investments purchased ............................. $9,320,368
Fund shares redeemed .............................. 3,134,431
Accrued management fee (Note C) ................... 1,687,913
Other accrued expenses (Note C) ................... 891,533
Payable on closed forward foreign currency
exchange contracts (Note A) ................... 6,768,606
Written options, at market (premiums
received $12,317,038) (Note A) ................. 208,737
---------
Total liabilities .............................. 22,011,588
--------------
Net assets, at market value .......................... $2,514,954,317
==============
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net
investment income .............................. $ (14,026,160)
Unrealized appreciation (depreciation) on:
Investments ................................... 507,692,813
Written options ............................... 12,108,301
Foreign currency related transactions ......... (53,061)
Accumulated net realized gain .................... 27,744,228
Capital stock .................................... 550,230
Additional paid-in capital ....................... 1,980,937,966
--------------
Net assets, at market value .......................... $2,514,954,317
==============
NET ASSET VALUE, offering and redemption price per
share ($2,514,954,317 / 55,022,967 shares of
capital stock outstanding, $.01 par value,
100,000,000 shares authorized) ................... $45.71
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
19
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL FUND
- ----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $5,018,105) ........ $ 38,093,291
Interest (net of foreign taxes withheld of $1,398) ............. 9,164,288
------------
47,257,579
Expenses:
Management fee (Note C) ........................................ $19,502,443
Services to shareholders (Note C) .............................. 3,749,405
Custodian and accounting fees (Note C) ......................... 2,521,881
Directors' fees (Note C) ....................................... 69,578
Reports to shareholders ........................................ 641,121
Auditing ....................................................... 146,660
Legal .......................................................... 49,485
Other .......................................................... 244,587 26,925,160
----------------------------------
Net investment income .......................................... 20,332,419
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ................................................ 97,793,456
Foreign currency related transactions (361,994) 97,431,462
-----------
Net unrealized appreciation (depreciation)
during the period on:
Investments ............................................... 282,105,591
Written options ........................................... 12,108,301
Foreign currency related transactions (661,280) 293,552,612
----------------------------------
Net gain on investment transactions ........................... 390,984,074
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... $411,316,493
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
20
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED MARCH 31,
---------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ......................... $ 20,332,419 $ 11,123,382
Net realized gain from investment
transactions .............................. 97,431,462 47,380,473
Net unrealized appreciation (depreciation) on
investment transactions during the period . 293,552,612 (110,709,497)
-------------- --------------
Net increase (decrease) in net assets
resulting from operations ................. 411,316,493 (52,205,642)
-------------- --------------
Distributions to shareholders from:
Net investment income ($.40 per share) .... (20,899,123) --
-------------- --------------
Net realized gains ($1.18 and $2.42
per share, respectively) .................. (61,655,254) (129,363,905)
-------------- --------------
Proceeds from shares sold ..................... 566,171,226 718,118,586
Net asset value of shares issued to
shareholders in reinvestment
of distributions .......................... 75,365,736 121,144,225
Cost of shares redeemed ....................... (647,503,731) (663,875,447)
-------------- --------------
Net increase (decrease) in net assets
from Fund share transactions .............. (5,966,769) 175,387,364
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS ............. 322,795,347 (6,182,183)
Net assets at beginning of period ............. 2,192,158,970 2,198,341,153
-------------- --------------
NET ASSETS AT END OF PERIOD (including
accumulated distributions in excess
of net investment income of $14,026,160
and $20,685,063, respectively) ............ $2,514,954,317 $2,192,158,970
============== ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ..... 55,183,581 51,177,699
-------------- --------------
Shares sold ................................... 12,911,834 16,848,858
Shares issued to shareholders in
reinvestment of distributions ............. 1,726,196 2,949,426
Shares redeemed ............................... (14,798,644) (15,792,402)
-------------- --------------
Net increase (decrease) in Fund shares ........ (160,614) 4,005,882
-------------- --------------
Shares outstanding at end of period ........... 55,022,967 55,183,581
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
--
21
<PAGE>
SCUDDER INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD (A) AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<CAPTION>
YEARS ENDED MARCH 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........... $39.72 $42.96 $35.69 $34.36 $34.69 $37.00 $34.79 $33.43 $44.05 $36.93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income ....................... .38 .21 .31 .38 .44 .80 .49 .40 .45 .47
Net realized and
unrealized gain (loss)
on investment
transactions ................. 7.19 (1.03) 7.74 2.64 (.37) (.39) 5.30 4.15 (.86) 13.07
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .................... 7.57 (.82) 8.05 3.02 .07 .41 5.79 4.55 (.41) 13.54
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment income .... (.40) -- (.63) (.83) -- (.74) (.43) (.13) (.82) (.49)
In excess of net
investment income ........... -- -- (.06) -- -- -- -- -- -- --
From net realized gains
on investment transactions .. (1.18) (2.42) (.09) (.86) (.40) (1.98) (3.15) (3.06) (9.39) (5.93)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ............ (1.58) (2.42) (.78) (1.69) (.40) (2.72) (3.58) (3.19) (10.21) (6.42)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ................. $45.71 $39.72 $42.96 $35.69 $34.36 $34.69 $37.00 $34.79 $33.43 $44.05
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) ............... 19.25 (2.02) 22.69 9.12 .18 1.46 17.08 14.34 (.47) 40.18
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of period
($ millions) .................. 2,515 2,192 2,198 1,180 933 929 783 550 559 791
Ratio of operating
expenses to average
net assets (%) ................ 1.14 1.19 1.21 1.26 1.30 1.24 1.18 1.22 1.21 1.09
Ratio of net investment
income to average
net assets (%) ................ .86 .48 .75 1.13 1.25 2.22 1.33 1.20 1.16 1.19
Portfolio turnover rate (%) .... 45.2 46.3 39.9 29.2 50.4 70.1 49.4 48.3 54.8 66.5
- ----------
<FN>
(a) Based on monthly average shares outstanding during the period.
</FN>
</TABLE>
--
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder International Fund (the "Fund") is a diversified series of Scudder
International Fund, Inc. (the "Corporation"). The Corporation is organized as a
Maryland corporation and is registered under the Investment Company Act of 1940,
as amended, as an open-end, management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the 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 Fund, 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. Securities valued in good
faith by the Valuation Committee of the Board of Directors at fair value
amounted to $3,825,213 (.15% of net assets) and have been noted in the
investment portfolio as of March 31, 1996.
--
23
<PAGE>
SCUDDER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on currencies as a
hedge against potential adverse price movements in the value of portfolio
assets.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium
--
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
initially paid. In addition, certain risks may arise upon entering into option
contracts including the risk that an illiquid secondary market will limit the
Fund's ability to close out an option contract prior to the expiration date and,
that a change in the value of the option contract may not correlate exactly with
changes in the value of the securities or currencies hedged.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
--
25
<PAGE>
SCUDDER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
(i) market value of investment securities, other assets and other liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest income
and certain expenses at the rates of exchange prevailing on the respective
dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. The Fund paid
no federal income taxes and no federal income tax provision was required.
From November 1, 1995 through March 31, 1996, the Fund incurred approximately
$314,000 of net realized currency losses. As permitted by tax regulations, the
Fund intends to elect to defer these losses and treat them as arising in the
fiscal year ended March 31, 1997.
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 Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax. Earnings
and profits distributed to shareholders on redemption of Fund shares ("tax
equalization") may be utilized by the Fund, to the extent permissible, as part
of the Fund's dividends paid deduction on its federal income tax return.
--
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
primarily relate to investments in forward contracts, passive foreign investment
companies, foreign denominated investments, and certain securities sold at a
loss. As a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
OTHER. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the year ended March 31, 1996, purchases and sales of investment securities
(excluding short-term investments) aggregated $999,127,835 and $1,008,258,813,
respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay to the Adviser a
fee equal to an annual rate of 0.90% on the first $500,000,000 of the Fund's
average daily net assets, 0.85% on the next $500,000,000, 0.80% on the next
$1,000,000,000, and 0.75% of such net assets in excess of $2,000,000,000,
computed and accrued daily and payable monthly. As manager of the assets of the
Fund, the Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and restrictions. The Adviser determines the
securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Agreement. The Agreement also provides that if the Fund's expenses,
exclusive of taxes, interest, and extraordinary expenses, exceed
--
27
<PAGE>
SCUDDER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
specified limits, such excess, up to the amount of the management fee, will be
paid by the Adviser. For the year ended March 31, 1996, the fee pursuant to the
Agreement amounted to $19,502,443 which was equivalent to an annual effective
rate of 0.82% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. Included
in services to shareholders is $3,080,856 charged to the Fund by SSC for the
year ended March 31, 1996, of which $258,520 is unpaid at March 31, 1996.
Effective April 12, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, assumed responsibility for determining the daily net
asset value per share and maintaining the portfolio and general accounting
records of the Fund. For the year ended March 31, 1996, the amount charged to
the Fund by SFAC aggregated $739,050, of which $65,156 is unpaid at March 31,
1996.
The Fund pays each Director not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the year ended
March 31, 1996, Directors' fees aggregated $69,578.
D. LINES OF CREDIT
- --------------------------------------------------------------------------------
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
--
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF SCUDDER INTERNATIONAL FUND, INC. AND TO THE
SHAREHOLDERS OF SCUDDER INTERNATIONAL FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
International Fund, including the investment portfolio, as of March 31, 1996,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder International Fund as of March 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the ten years
in the period then ended, in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
May 14, 1996
--
29
<PAGE>
SCUDDER INTERNATIONAL FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund paid distributions of $1.18 per share from net long-term capital gains
during its year ended March 31, 1996. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $89,603,111 as capital gain dividends for its
year ended March 31, 1996.
The Fund paid foreign taxes of $5,019,503 and the Fund recognized $21,334,350 of
foreign source income during the year ended March 31, 1996. Pursuant to section
853 of the Internal Revenue Code, the Fund designates $.09 per share of foreign
taxes paid and $.39 of income earned from foreign sources in the year ended
March 31, 1996.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
--
30
<PAGE>
(This page intentionally left blank.)
31
<PAGE>
(This page intentionally left blank.)
32
<PAGE>
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
Daniel Pierce*
Director
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting,
Columbia University Graduate School of Business
Robert W. Lear
Honorary Director
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
33
<PAGE>
<TABLE>
<CAPTION>
The Scudder Family of Funds
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Emerging Markets Growth Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Fund
Scudder Massachusetts Tax Free Fund* Scudder Global Discovery Fund
Scudder Medium Term Tax Free Fund Scudder Gold Fund
Scudder New York Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Ohio Tax Free Fund* Scudder International Fund
Scudder Pennsylvania Tax Free Fund* Scudder Latin America Fund
Growth and Income Scudder Pacific Opportunities Fund
Scudder Balanced Fund Scudder Quality Growth Fund
Scudder Growth and Income Fund Scudder Small Company Value Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,(TM) an institutional cash management
service that utilizes certain portfolios of Scudder Fund, Inc. ($100,000
minimum), call 1-800-541-7703.
34
<PAGE>
Account Service and Information
- --------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund SCUDDER AUTOMATED
INFORMATION LINE (SAIL) 1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
- --------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
- --------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
- --------------------------------------------------------------------------------
For information on Scudder Treasurer's Trust(TM), an institutional
cash management service for corporations, non-profit organizations and
trusts that uses certain portfolios of Scudder Fund, Inc.,* ($100,000
minimum), call 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to
meet the broad investment management and service needs of banks and
other institutions, call 1-800-854-8525.
- --------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus
with more complete information, including management fees and expenses.
Please read it carefully before you invest or send money.
35
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 38 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
