Scudder
International
Fund
Annual Report
March 31, 1997
Pure No-Load(TM) Funds
A fund offering opportunities for long-term growth of capital primarily from
foreign equity securities.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
24 Report of Independent Accountants
25 Tax Information
28 Officers and Directors
29 Investment Products and Services
30 Scudder Solutions
In Brief
o For the fiscal year ended March 31, 1997, Scudder International Fund provided
a total return of 10.74%, comparing very favorably to the unmanaged MSCI EAFE
plus Canada Index as world equity markets provided mixed performance over the
period.
o We continue to see many investment opportunities in Europe, where the Fund is
focusing on companies which are restructuring to build value for their
shareholders.
o Valuations in Japan have become more favorable, and Fund holdings there are
tilted toward globally competitive technology exporters positioned to benefit
from a weak yen.
o Morningstar assigned the Fund an overall 4-star rating for its risk-adjusted
performance among 939 international equity funds as of March 31, 1997.*
* Morningstar ratings are subject to change monthly and are calculated from the
Fund's three-, five-, and ten-year average annual returns in excess of 90-day
Treasury bill returns with appropriate fee adjustments, and a risk factor that
reflects Fund performance below 90-day T-bill returns. In an investment
category, 10% of funds receive 5 stars and the next 22.5% receive 4 stars. In
the international equity category, the Fund received a 4-star rating for the
three-, five-, and ten-year periods, among 478, 219, and 79 Funds,
respectively. Past performance is no guarantee of future results.
2 - SCUDDER INTERNATIONAL FUND
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We are pleased to present the annual report for Scudder International Fund
for the fiscal year ended March 31, 1997. As outlined in the portfolio
management discussion that follows, the Fund provided a strong total return over
the period of 10.74%. Economic reforms, corporate restructurings, and improving
growth prospects are providing a favorable backdrop in many non-U.S. investment
venues. We believe Scudder International Fund remains an attractive alternative
for investors seeking broad-based exposure to the opportunities for capital
appreciation to be found in overseas equity markets.
We are also pleased with the recognition that the Scudder Fund family has
recently received from Morningstar. This fund rating service recently ranked the
Scudder Family of Funds in the top 4 among 20 leading mutual fund companies for
stability in management and conformity to investment style.* According to
Morningstar, these attributes "... can be hard to come by in the fund industry.
In fact, investors can't be sure who'll sign next quarter's shareholder letter,
or that this month's large-cap growth fund will still be a large-cap growth fund
next month. But a few fund families have done a better job than most at
retaining talent and keeping their funds predictable." We will seek to maintain
this track record of consistent management.
For those of you who are interested in new products and services, we
recently introduced the Scudder Pathway Series. Pathway simplifies investing
through the "fund of funds" approach offering four distinct portfolios:
Conservative, Balanced, Growth, and International. Each portfolio invests in a
select mix of Scudder Funds, providing flexibility, diversification, and
simplicity for regular and retirement plan investors. For more complete
information on Scudder products and services, please turn to page 29.
Thank you for your continued investment in Scudder International Fund. If
you have questions about your account, please call our Investor Relations
representatives at 1-800-225-2470; they will be happy to assist you. You can
also obtain information by visiting our Internet web site at
http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Fund
* Morningstar Investor, February 1997
3 - SCUDDER INTERNATIONAL FUND
<PAGE>
PERFORMANCE UPDATE as of March 31, 1997
- ----------------------------------------------------------------
Fund Index Comparisons
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/97 $10,000 Cumulative Annual
- --------------------------------------------
Scudder International Fund
- --------------------------------------------
1 Year $ 11,074 10.74% 10.74%
5 Year $ 17,322 73.22% 11.61%
10 Year $ 23,456 134.56% 8.90%
- --------------------------------------------
MSCI EAFE & Canada Index
- --------------------------------------------
1 Year $ 10,212 2.12% 2.12%
5 Year $ 16,493 64.93% 10.52%
10 Year $ 17,935 79.35% 6.01%
- --------------------------------------------
- -----------------------------------------------------------------
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:
SCUDDER INTERNATIONAL FUND
Year Amount
- ----------------------
87 $10,000
88 $ 9,953
89 $11,379
90 $13,323
91 $13,517
92 $13,541
93 $14,776
94 $18,129
95 $17,763
96 $21,181
97 $23,456
MSCI EAFE & CANADA INDEX
Year Amount
- ----------------------
87 $10,000
88 $11,560
89 $12,907
90 $11,503
91 $11,784
92 $10,874
93 $12,068
94 $14,710
95 $15,593
96 $17,563
97 $17,935
Yearly periods ended March 31
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>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------------------------------------------------------------------------------------------------
NET ASSET VALUE... $ 33.43 $ 34.79 $ 37.00 $ 34.69 $ 34.36 $ 35.69 $ 42.96 $ 39.72 $ 45.71 $ 48.07
INCOME DIVIDENDS.. $ .82 $ .13 $ .43 $ .74 $ - $ .83 $ .69 $ - $ .40 $ 1.28
CAPITAL GAINS
DISTRIBUTIONS..... $ 9.39 $ 3.06 $ 3.15 $ 1.98 $ .40 $ .86 $ .09 $ 2.42 $ 1.18 $ 1.19
FUND TOTAL
RETURN (%)........ -.47 14.34 17.08 1.46 .18 9.12 22.69 -2.02 19.25 10.74
INDEX TOTAL
RETURN (%)........ 15.60 11.64 -10.87 2.44 -7.73 10.99 21.87 6.02 12.62 2.12
</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 - SCUDDER INTERNATIONAL FUND
<PAGE>
PORTFOLIO SUMMARY as of March 31, 1997
- ---------------------------------------------------------------------------
Geographical
(Excludes 7% Cash Equivalents)
- ---------------------------------------------------------------------------
Europe 61%
Japan 15%
Pacific Basin 13%
Latin America 9%
Canada 2%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The portfolio is overweighted in
Europe, where we see many
opportunities, at the expense of
Japan.
- --------------------------------------------------------------------------
Sectors
(Excludes 7% Cash Equivalents)
- --------------------------------------------------------------------------
Manufacturing 24%
Financial 14%
Durables 8%
Utilities 7%
Communications 6%
Energy 6%
Health 6%
Service Industries 5%
Media 4%
Other 20%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Many overseas manufacturing and
financial companies are
beneficiaries of corporate
restructuring and economic reform.
- --------------------------------------------------------------------------
Ten Largest Equity Holdings
(14% of Portfolio)
- --------------------------------------------------------------------------
1. TELECOMUNICACOES BRASILEIRAS S.A.
Telecommunication services
2. AEGON INSURANCE GROUP NV
Insurance company
3. BAYER AG CHEMICAL PRODUCER
4. ZENECA GROUP PLC
Pharmaceuticals and agrochemicals
holding company
5. L.M. ERICSSON TELEPHONE CO.
Manufacturer of cellular telephone
equipment
6. SMITHKLINE BEECHAM PLC
Maker of ethical drugs and healthcare products
7. VEBA AG
Electric utility, oil and chemical distributor
8. CENTRAIS ELECTRICAS BRASILEIRAS S/A
Electric Utility
9. DAIMLER-BENZ AG
Automobile and truck manufacturer
10. BRITISH PETROLEUM PLC
International petroleum company
Top holdings include Brazilian
telecommunications and utility
companies in the process of
being privatized.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio, see page
10. A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
5 - SCUDDER INTERNATIONAL FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For the fiscal year ended March 31, 1997, Scudder International Fund provided a
strong total return of 10.74%. The Fund's performance over the period compares
very favorably to the 2.12% return of the unmanaged MSCI Europe, Australia, and
Far East plus Canada Index, the Fund's benchmark.
European Equities Lead Major
Markets
The period covered by this report saw mixed performance in the world equity
markets. Japanese equities remained under pressure for much of the period, as
problems in the banking sector, lackluster growth, the selling of
cross-holdings, and the absence of domestic retail investors continued to create
uncertainty. Weakness in Japan was offset by strong performance from most
European markets. Fund performance relative to the benchmark MSCI index
benefited over the period from an overweighting of Europe at the expense of
Japan. European and Japanese holdings stood at 61% and 15% of equity assets,
respectively, as of March 31.
The developments fueling stock prices in Continental Europe were both cyclical
and structural. While European fiscal policy remains tight in advance of the
Maastricht deadline, falling interest rates and weaker currencies are providing
slightly higher-than-expected growth. Ongoing corporate restructuring provided
an additional impetus and was reflected in strong performance from core markets
such as Germany and France. Smaller European markets fared best led by Finland,
where equities were driven up by falling interest rates and excellent
performance from Nokia, a portfolio holding and substantial part of that
country's market. Despite uncertainty in the first quarter of 1997 over European
Monetary Union (EMU), peripheral markets Spain and Portugal turned in excellent
performance over the 12-month period, supported by falling interest rates and
the expectation that these countries would form part of the first round of EMU.
Emerging markets were mixed, as most Asian countries faltered. Korea and
Thailand were particularly hard hit by problems in the banking sector. Hong
Kong's market, after excellent performance in 1996, became unsettled in the
first quarter of 1997 by an upward trend in U.S. interest rates, local
government moves to dampen the property market, and renewed uncertainty over the
upcoming transition to Chinese sovereignty. Brazil continued to deliver
spectacular returns, propelled by positive news on deregulation and economic
reform.
Economic Reforms, Improved Growth Brighten Investment Outlook
Europe today offers investors a number of opportunities and challenges. From a
cyclical standpoint, the combination of low interest rates and weakening
currencies is leading to upward revisions in economic growth and corporate
earnings forecasts. In addition, there are important structural changes taking
place which we believe should have long term benefits to shareholders in
European companies. Long-standing political and economic structures are losing
viability due to the pressure of global competition, aging dependent
6 - SCUDDER INTERNATIONAL FUND
<PAGE>
populations, and the limits of fiscal support. There is widespread recognition
of the imperative to change -- to deregulate, to privatize, to reduce labor
costs, to cut social welfare spending. It will not be an easy evolution and
investors may be shaken by transitional jitters from time to time, but the
potential rewards are exciting.
The last 12 months marked an important transition point in the development of an
equity culture in Continental Europe, as governments pushed ahead with the
privatization process. The flotation of Deutsche Telecom in late 1996 was a
signal event as the largest single privatization in European stock market
history. While the German equity market is among the larger European markets, it
is still underdeveloped by international standards. The Deutsche Telecom issue
was widely publicized by the government and attracted broad domestic interest.
Given the success of the offering, German investors may well be encouraged to
consider placing more of their large savings in equities. Elsewhere, the very
successful privatization of the final government stake in Telefonica de Espana
was recently heralded as the arrival of popular capitalism in Spain, with demand
from domestic retail investors far exceeding supply. Emerging market Portugal
has made remarkable strides towards the European mainstream, with a virtual
doubling of its market capitalization over a four-year period through the
privatization process.
In Japan, a falling currency and low interest rates provided critical support
for an economy faced with an increase in the consumption tax and ongoing
problems in the banking system. Japanese authorities have announced additional
measures to deregulate the economy and financial system, most notably plans to
remove restrictions on foreign exchange. Economic recovery is forecast for 1997
with an acceleration of growth for 1998. Corporate earnings should improve in a
more positive growth environment, with a weaker yen and historically low
interest rates providing additional impetus.
The Japanese market is undergoing a secular transition to a valuation structure
more in keeping with global standards. While the transition may be a slow one, a
greater focus on international accounting standards together with increased
consolidation of disclosure from fiscal 1998 forward should bring Japanese
corporate accounting closer to that of its global peers. Though deregulation and
reform are ongoing and are as important to Japan as to Europe, Japan's pace
today is slower and there is further to go.
Smaller Asian equity markets have suffered in recent years as a combination of
cyclical forces have slowed growth: restrictive Asian central bank policy,
economic weakness in the major export markets of Europe and Japan, and a plunge
in the electronics and textile sectors. Looking forward, the outlook varies by
market. Thailand and Korea face banking and structural adjustments, while Hong
Kong has the special issue of the transition to Chinese sovereignty. In general,
though, valuations reflect these uncertainties.
7 - SCUDDER INTERNATIONAL FUND
<PAGE>
Focus on European
Restructuring Beneficiaries,
Japanese Global Competitors
In Europe, we have emphasized companies which are restructuring and focusing on
building value for shareholders, such as Daimler Benz in Germany and Alcatel
Alsthom and Generale des Eaux in France. The restructuring theme is also evident
in the purchase of VW, which is realizing substantial cost savings by trimming
production platforms from 16 to four. We are also positioned in European
companies with effective strategies and products in growth markets. These
include telecommunication infrastructure provider Nokia in Finland and
information technology leader SAP in Germany. A focus on telecommunications
stocks in Southern Europe, where restructuring, improved financials, and
developing market opportunities have had a positive impact on the bottom line,
has been rewarded by excellent stock performance from holdings in Portugal
Telecom, Telecom Italia Mobile, and Telefonica de Espana.
Industry consolidation is another theme central to the portfolio. Pharmaceutical
holdings Schering, Novartis, Zeneca, and SmithKline Beecham have benefited from
merger activity designed to cut costs and to achieve economies of scale in view
of global competition. With the German banking sector undergoing fundamental
structural change driven by deregulation, technology, and increasing foreign
competition, we have taken positions in Commerzbank and Bayerische Vereinsbank,
companies we perceive as likely winners in this sector.
Valuations in Japan have become more favorable, but there remains a dichotomy
between those companies which have not moved beyond the local economy and those
companies which are successful global competitors. We have maintained a
portfolio tilt toward high quality technology exporters such as Sony, Canon and
Hitachi. We believe that share prices in this group do not fully reflect the
increasingly competitive position of these global companies arising from a weak
yen, the recovery in semiconductors, and new products. Honda Motors turned in
excellent performance over the period as a result of strong demand at home and
abroad, including a booming recreational vehicle market. Bridgestone has a
strong global position in tires and is a beneficiary of growing demand for cars
in Asia. Among domestically-oriented holdings in Japan, telecommunications
company DDI is benefiting from high traffic growth in mobile and data
communications, has a relatively low investment burden, and is attractively
valued by global standards.
Turning to less-developed investment venues, while improving profitability
combined with attractive stock valuations following three years of market
stagnation may lead to a rebound in selected markets, we remain generally
cautious on the smaller bourses in the Pacific Rim. However, despite weakness in
the region, several of our holdings turned in excellent performance over the
period. Positions such as China Development and Far Eastern Department Store in
Taiwan were amply rewarded as the Taiwanese market bucked the regional trend,
helped by easier liquidity, relaxed criteria for government pension plan
investments, and expectations for stronger growth. In Hong Kong, market jitters
8 - SCUDDER INTERNATIONAL FUND
<PAGE>
were offset in the portfolio by positive stock selection.
Brazil remains our preferred market in Latin America, as lower inflation and
ongoing deregulation have translated into spectacular share price performance.
Our focus in Brazil has largely been on a small number of government-controlled
companies which are in the process of being restructured prior to their eventual
privatization: telecommunications company Telebras, utility Electrobras, and oil
company Petrobras. Though we remain cautious on the broader Mexican market, our
one position there, Telmex, has performed well. When purchased, the company was
one of the few value stories in a market dominated by growth stocks. Telmex has
the potential for aggressive cost cutting and is using its large cash reserves
to repurchase shares.
Going forward, we will continue to seek opportunities presented by the
structural changes well underway in Europe, globally competitive companies in
Japan, and select emerging markets. We believe Scudder International Fund
remains an appropriate vehicle for investors seeking valuable exposure to
overseas equity markets, and we thank you for your continued investment.
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. Rodrigo 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.
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. 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. 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.
9 - SCUDDER INTERNATIONAL FUND
<PAGE>
<PAGE>
Investment Portfolio as of March 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 1.5%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 3/31/97 at 6.375%, to be repurchased at
$38,943,895 on 4/1/97, collateralized by a
$39,800,000 U.S. Treasury
----------
Note, 6.375%, 3/31/01 (Cost $38,937,000) ........................................... 38,937,000 38,937,000
----------
Commercial Paper 5.7%
- ------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank Financial Inc. Discount Note, 4/2/97 ................................... 20,000,000 19,996,822
Dresdner US Finance Inc. Discount Note, 4/3/97 ....................................... 15,000,000 14,995,508
Ford Motor Credit Co. Discount Note, 4/2/97 .......................................... 17,000,000 16,997,497
General Electric Capital Corp. Discount Note, 4/3/97 ................................. 45,000,000 44,986,717
Sun Trust Bank Discount Note, 4/3/97 ................................................. 20,000,000 19,993,744
Texaco Inc. Discount Note, 4/2/97 .................................................... 30,000,000 29,995,600
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $146,965,888) 146,965,888
- ------------------------------------------------------------------------------------------------------------------------------
Convertible Bonds 0.8%
- ------------------------------------------------------------------------------------------------------------------------------
Japan 0.5%
Softbank Corp., 0.5%, 3/29/02 .................................................. JPY 1,500,000,000 12,929,571
----------
Malaysia 0.0%
Renong Berhad ICULS, 4%, 5/21/01 ............................................... MYR 1,620,000 666,761
----------
Philippines 0.3%
International Container Terminal, Inc., 1.75%, 3/13/04 ......................... 7,515,000 7,477,425
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $23,114,612) 21,073,757
- ------------------------------------------------------------------------------------------------------------------------------
Shares
==============================================================================================================================
Common Stocks 92.0%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 0.8%
YPF S.A. "D" (ADR) (Petroleum company) ............................................... 785,000 20,802,500
----------
Australia 1.1%
National Australia Bank, Ltd. (Commercial bank) ...................................... 1,141,784 14,455,885
Woodside Petroleum Ltd. (Major oil and gas producer) ................................. 1,814,600 13,363,484
----------
27,819,369
----------
Brazil 6.9%
Centrais Eletricas Brasileiras S/A "B" (pfd.) (Electric utility) ..................... 81,586,227 35,122,322
Companhia Energetica de Minas Gerais (pfd.) (Electric power utility) ................. 673,000,000 27,701,487
Companhia Vale do Rio Doce (pfd.) (Diverse mining and industrial complex) ............ 710,000 16,187,397
Petroleo Brasileiro S/A (pfd.) (Petroleum company) ................................... 139,000,000 27,622,846
Telecomunicacoes Brasileiras S.A. (pfd.) (Telecommunication services) ................ 420,000,000 43,457,163
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 -- SCUDDER INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Usinas Siderurgicas de Minas Gerais S/A (pfd.) (Non-coated flat
products and electrolytic galvanized products) ...................................... 24,700,000,000 27,748,879
-----------
177,840,094
-----------
Canada 1.8%
Canadian National Railway Co. (Railroad operator) .................................... 670,000 23,737,585
Canadian Pacific Ltd. (Transportation and natural resource conglomerate) ............. 225,000 5,400,000
Canadian Pacific Ltd. (Ord.) ......................................................... 711,914 16,995,030
-----------
46,132,615
-----------
Finland 1.2%
Nokia AB Oy "A" (Leading manufacturer of telecommunications equipment and
cellular telephones) ............................................................... 515,000 30,772,580
-----------
France 9.1%
AXA SA (Insurance group providing insurance, finance and real estate services) ....... 302,857 20,082,583
Alcatel Alsthom (Manufacturer of transportation,
telecommunication and energy equipment) ............................................. 107,700 13,005,717
Carrefour (Hypermarket operator and food retailer) ................................... 55,800 34,695,485
Compagnie Financiere de Paribas (Finance and investment company) ..................... 309,814 21,614,417
Compagnie Generale des Eaux (Water utility) .......................................... 120,000 16,350,521
Lafarge SA (Producer of cement, concrete and aggregates) ............................. 220,000 15,274,023
Pinault-Printemps, SA (Distributor of consumer goods) ................................ 50,000 21,551,340
Rhone-Poulenc SA "A" (Medical, agricultural and consumer chemicals) .................. 681,912 23,112,985
Schneider SA (Manufacturer of electronic components and automated
manufacturing systems) .............................................................. 528,223 30,294,382
Total SA "B" (International oil and gas exploration, development and production) ..... 363,336 31,509,181
Valeo SA (Automobile and truck components manufacturer) .............................. 122,399 8,244,955
-----------
235,735,589
-----------
Germany 13.3%
BASF AG (Leading international chemical producer) .................................... 771,000 29,120,504
Bayer AG (Leading chemical producer) ................................................. 905,000 37,654,077
Bayerische Vereinsbank AG (Commercial bank) .......................................... 550,000 22,784,772
Commerzbank AG* (Worldwide multi-service bank) ....................................... 808,400 23,263,309
Daimler-Benz AG (Automobile and truck manufacturer) .................................. 437,000 34,949,520
Hoechst AG (Chemical producer) ....................................................... 804,000 32,560,072
Mannesmann AG (Bearer) (Diversified construction and technology company) ............. 83,762 32,038,463
RWE AG (pfd.) (Producer and marketer of petroleum and chemical products) ............. 846,100 30,536,703
SAP AG (pfd.) (Computer software manufacturer) ....................................... 113,000 19,375,300
Schering AG (Pharmaceutical and chemical producer) ................................... 243,000 24,518,525
VEBA AG (Electric utility, distributor of oil and chemicals) ......................... 621,500 35,192,251
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 -- SCUDDER INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Volkswagen AG* (Leading automobile manufacturer) ..................................... 39,550 21,861,571
-----------
343,855,067
-----------
Hong Kong 5.7%
First Pacific Co., Ltd. (International management and investment company) ............ 14,387,681 18,289,346
Great Eagle Holdings Ltd. (Property development) ..................................... 2,886,000 9,534,709
Guoco Group Ltd. (Investment holding company) ........................................ 516,000 2,550,467
HSBC Holdings Ltd. (Bank) ............................................................ 1,223,831 28,350,261
Hong Kong & China Gas Co., Ltd. (Gas utility) ........................................ 9,734,408 18,278,632
Hong Kong & China Gas Co., Ltd. Warrants* ............................................ 1,027,867 464,276
Hutchison Whampoa, Ltd. (Container terminal and real estate company) ................. 3,838,584 28,979,979
Kerry Properties Ltd. (Real estate company) .......................................... 8,352,000 18,539,161
Television Broadcasts, Ltd. (Television broadcasting) ................................ 5,810,000 23,618,801
-----------
148,605,632
-----------
Hungary 0.1%
First Hungary Fund (Investment company) (b) .......................................... 3,619 3,365,670
-----------
Indonesia 1.3%
Asia Pacific Resources International Holdings Ltd.* (Manufacturer of rayon
fiber for Asian textile markets, owner of world's leading paper pulp mill) .......... 126,600 609,263
Asia Pulp & Paper Co., Ltd.* (ADR) (Producer of pulp and paper) ...................... 853,495 8,855,011
HM Sampoerna (Foreign registered) (Tobacco company) .................................. 2,400,000 11,245,314
Indah Kiat Pulp & Paper (Foreign registered) (Producer of pulp and paper) ............ 9,056,893 6,695,537
Indah Kiat Pulp & Paper Warrants* .................................................... 822,101 256,800
Pabrik Kertas Tjiwi Kimia (Operator of pulp and paper factory) ....................... 5,800,240 5,797,824
-----------
33,459,749
-----------
Italy 1.3%
Telecom Italia Mobile SpA (Ord.) (Cellular telecommunication services) ............... 11,850,000 34,116,059
-----------
Japan 13.2%
Bridgestone Corp. (Leading automobile tire manufacturer) ............................. 1,505,000 28,233,201
Canon Inc. (Leading producer of visual image and information equipment) .............. 1,488,000 31,884,855
DDI Corp. (Long distance telephone and cellular operator) ............................ 2,975 18,787,701
Hitachi Ltd. (General electronics manufacturer) ...................................... 2,981,000 26,514,919
Honda Motor Co., Ltd. (Leading automobile and motorcycle manufacturer) ............... 712,000 21,244,279
Jusco Co., Ltd. (Major supermarket operator) ......................................... 662,000 18,200,049
Keyence Corp. (Specialized manufacturer of sensors) .................................. 239,800 27,340,341
Kokuyo (Leading manufacturer of paper stationery) .................................... 580,000 12,662,731
Mabuchi Motor Co., Ltd. (Manufacturer of DC motors) .................................. 80,300 3,954,290
Matsushita Electric Industrial Co., Ltd.
(Leading manufacturer of consumer electronic products) .............................. 2,096,000 32,710,277
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Matsushita Electric Works, Inc. (Leading maker of
building materials and lighting equipment) .......................................... 1,400,000 12,792,108
Nichiei Co., Ltd. (Finance company for small- and medium-sized firms) ................ 255,500 19,833,428
Pioneer Electronics Corp. (Leading manufacturer of audio equipment) .................. 750,000 12,250,344
Ricoh Co., Ltd. (Leading maker of copiers and information equipment) ................. 2,130,000 24,284,790
Shiseido Co., Ltd. (Leading cosmetic producer) ....................................... 467,000 6,041,886
Sony Corp. (Consumer electronic products manufacturer) ............................... 366,400 25,627,557
Sumitomo Metal Industries, Ltd. (Leading integrated crude steel producer) ............ 7,650,000 17,320,288
Sumitomo Metal Mining Co., Ltd. (Leading gold, nickel and
copper mining company) .............................................................. 480,000 2,899,329
-----------
342,582,373
-----------
Korea 0.3%
Pohang Iron & Steel Co., Ltd. (Leading steel producer) (b) ........................... 7,030 439,856
Pohang Iron & Steel Co., Ltd. (ADR) .................................................. 292,900 6,956,375
-----------
7,396,231
-----------
Malaysia 1.4%
Malayan Banking Berhad (Leading banking and financial services group) ................ 1,350,000 15,388,883
Malaysian Airline System Berhad* (Air transportation and related services) ........... 2,481,000 6,607,324
Renong Berhad (Holding company involved in engineering, construction,
financial services, telecommunication and information technology) ................... 8,100,000 13,727,429
-----------
35,723,636
-----------
Mexico 0.6%
Telefonos de Mexico S.A. de C.V. "L" (ADR) (Telecommunication services) .............. 375,000 14,437,500
-----------
Netherlands 5.6%
AEGON Insurance Group NV (Insurance company) ......................................... 537,500 37,859,580
Akzo-Nobel NV (Chemical producer) .................................................... 120,000 17,237,463
Elsevier NV (International publisher of scientific, professional,
business, and consumer information books) ......................................... 1,676,000 27,256,392
Heineken Holdings NV "A" (Brewery) ................................................... 160,000 24,143,539
Philips Electronics NV (Leading manufacturer of electrical equipment) ................ 447,000 20,854,995
Wolters Kluwer CVA (Publisher) ....................................................... 154,963 18,665,463
-----------
146,017,432
-----------
New Zealand 0.0%
Telecom Corp. of New Zealand (Telecommunication services) ............................ 64,950 295,541
-----------
Norway 0.7%
Saga Petroleum AS "A" (Oil and gas exploration and production) ....................... 1,023,200 17,590,566
-----------
Philippines 1.6%
C & P Homes, Inc.* (Home construction company) ....................................... 30,477,000 14,449,554
Manila Electric Co. "B" (Electric utility) ........................................... 2,275,000 18,120,614
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 -- SCUDDER INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SM Prime Holdings Corp. (Leader in commercial center operations) ..................... 30,000,000 8,761,616
-----------
41,331,784
-----------
Portugal 0.7%
Cimentos de Portugal SA (Manufacturer of cement, ready mix concrete and aggregates) .. 405,015 8,449,380
Portugal Telecom SA (Telecommunication services) ..................................... 239,300 8,907,603
-----------
17,356,983
-----------
Spain 2.5%
Acerinox, S.A. (Stainless steel producer) ............................................ 147,800 20,871,421
Banco Popular Espanol, S.A. (Retail bank) ............................................ 90,983 16,370,822
Compania Telefonica Nacional de Espana SA (ADR) (Telecommunication services) ......... 381,000 27,336,750
-----------
64,578,993
-----------
Sweden 3.9%
AGA AB "B" (Free) (Producer and distributor of industrial and medical gases) ......... 766,600 11,606,821
L.M. Ericsson Telephone Co. "B" (ADR) (Leading manufacturer of cellular
telephone equipment) ............................................................... 1,075,000 36,348,438
S.K.F. AB "B" (Free) (Manufacturer of roller bearings) ............................... 750,000 19,722,687
Skandia Foersaekrings AB (Free) (Financial conglomerate) ............................. 1,040,000 32,804,739
-----------
100,482,685
-----------
Switzerland 5.9%
ABB AG (Bearer) (Manufacturer of electrical equipment) ............................... 21,110 25,375,417
Credit Suisse Group (Registered) (Provider of bank services,
management services and life insurance) ............................................. 250,000 30,007,991
Ciba Specialty Chemical* (Registered) (Manufacturer of
chemical products for plastics, coatings, fibers and fabrics) ....................... 135,901 11,236,950
Clariant AG* (Registered) (Manufacturer of color chemicals) .......................... 48,447 23,881,457
Novartis AG* (Bearer) (Pharmaceutical company) ....................................... 18,773 23,387,986
Roche Holdings AG* (PC) (Producer of drugs and medicines) ............................ 2,960 25,595,609
SGS Holdings SA (Bearer) (Trade inspection company) .................................. 5,755 11,796,310
-----------
151,281,720
-----------
Taiwan 0.7%
China Development Corp. (Provider of loan and guarantee
services to manufacturing and service industries) ................................... 2,587,500 10,522,876
Far Eastern Department Store (Department store chain) ................................ 5,601,750 8,278,548
-----------
18,801,424
-----------
United Kingdom 12.3%
BOC Group PLC (Producer of industrial gases) ......................................... 863,709 13,611,271
British Petroleum PLC (Major integrated world oil company) ........................... 3,005,199 34,901,464
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 -- SCUDDER INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carlton Communications PLC (Television post production products and services) ........ 3,487,500 29,832,062
General Electric Co., PLC (Manufacturer of power, communications and
defense equipment and other various electrical components) .......................... 4,450,000 27,377,723
Glaxo Wellcome PLC (Pharmaceutical company) .......................................... 1,095,000 20,102,220
Pearson PLC (Diversified media and entertainment holding company) .................... 1,619,000 19,521,651
PowerGen PLC (Electric utility) ...................................................... 2,538,059 24,800,125
RTZ Corp., PLC (Mining and finance company) .......................................... 1,688,460 26,747,474
Reuters Holdings PLC (International news agency) ..................................... 2,219,600 22,637,691
SmithKline Beecham PLC (Manufacturer of ethical drugs and healthcare products) ....... 2,383,476 35,444,179
WPP Group PLC (Advertising agency) ................................................... 6,215,000 26,070,360
Zeneca Group PLC (Holding company: manufacturing and marketing of
pharmaceutical and agrochemical products and specialty chemicals) ................... 1,285,000 37,266,716
-----------
318,312,936
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,716,243,233) 2,378,694,728
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $1,925,260,733) (a) 2,585,671,373
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $1,935,783,363. At March 31,
1997, net unrealized appreciation for all securities based on tax cost was
$649,888,010. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $686,152,816 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$36,264,806.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $3,805,526 (.15% 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 March 31, 1997 aggregated $4,402,614. These securities
may also have certain restrictions as to resale.
(c) Principal amount is stated in U.S. dollars unless otherwise specified.
Currency Abbreviations: JPY Japanese Yen MYR Malaysian Ringgit
Transactions in written call options during the year ended March 31, 1997
were:
Premiums
Principal Amount Received ($)
-----------------------------------------
Outstanding at
March 31, 1996 ............. JPY 32,532,000,000 12,317,038
Contracts written .......... JPY 34,500,000,000 5,801,750
Contracts closed ........... JPY (53,852,000,000) (13,849,598)
Contracts expired .......... JPY (13,180,000,000) (4,269,190)
-----------------------------------------
Outstanding at
March 31, 1997 ............. JPY -- --
=============== ===========
The accompanying notes are an integral part of the financial statements.
15 -- SCUDDER INTERNATIONAL FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of March 31, 1997
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $1,925,260,733) ............... $2,585,671,373
Foreign currency holdings, at market (identified cost $661,283) ....... 644,512
Receivable on investments sold ........................................ 22,346,663
Receivable on Fund shares sold ........................................ 427,141
Dividends and interest receivable ..................................... 7,588,958
Foreign taxes recoverable ............................................. 1,802,579
Other assets .......................................................... 65,085
--------------
Total assets .......................................................... 2,618,546,311
Liabilities
- ----------------------------------------------------------------------------------------------------------
Payable for investments purchased ..................................... 28,939,107
Due to custodian bank ................................................. 891,121
Payable for Fund shares redeemed ...................................... 2,910,287
Accrued management fee ................................................ 1,752,228
Other payables and accrued expenses ................................... 1,022,882
--------------
Total liabilities ..................................................... 35,515,625
----------------------------------------------------------------------------------------
Net assets, at market value $2,583,030,686
----------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... 1,417,347
Unrealized appreciation (depreciation) on:
Investments ........................................................ 660,410,640
Foreign currency related transactions .............................. (89,236)
Accumulated net realized gain ......................................... 249,360
Paid-in capital ....................................................... 1,921,042,575
----------------------------------------------------------------------------------------
Net assets, at market value $2,583,030,686
----------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($2,583,030,686/53,734,143 shares of capital stock outstanding, --------------
$.01 par value, 200,000,000 shares authorized) ...................... $ 48.07
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 -- SCUDDER INTERNATIONAL FUND
<PAGE>
Statement of Operations
year ended March 31, 1997
<TABLE>
<CAPTION>
Investment Income
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest (net of foreign taxes withheld of $10,018) ................... 7,385,262
-------------
45,699,933
-------------
Expenses:
Management fee ........................................................ 20,989,160
Services to shareholders .............................................. 4,647,354
Custodian and accounting fees ......................................... 2,741,989
Directors' fees and expenses .......................................... 61,815
Reports to shareholders ............................................... 464,757
Auditing .............................................................. 138,975
Legal ................................................................. 57,268
Registration fees ..................................................... 64,044
Other ................................................................. 230,086
-------------
29,395,448
----------------------------------------------------------------------------------------
Net investment income 16,304,485
----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------
Net realized gain from:
Investments ........................................................... 61,540,056
Written options ....................................................... 15,862,488
Foreign currency related transactions ................................. 27,424,026
-------------
104,826,570
-------------
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................... 152,717,827
Written options ....................................................... (12,108,301)
Foreign currency related transactions ................................. (36,175)
-------------
140,573,351
----------------------------------------------------------------------------------------
Net gain on investment transactions 245,399,921
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 261,704,406
----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 -- SCUDDER INTERNATIONAL FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended March 31,
Increase (Decrease) in Net Assets 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 16,304,485 $ 20,332,419
Net realized gain from investment transactions ......... 104,826,570 97,431,462
Net unrealized appreciation on investment transactions
during the period ................................... 140,573,351 293,552,612
--------------- ---------------
Net increase in net assets resulting from operations ... 261,704,406 411,316,493
--------------- ---------------
Distributions to shareholders from:
Net investment income .................................. (68,670,750) (20,899,123)
--------------- ---------------
Net realized gains ..................................... (64,600,067) (61,655,254)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold .............................. 563,459,224 566,171,226
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................ 117,795,156 75,365,736
Cost of shares redeemed ................................ (741,611,600) (647,503,731)
--------------- ---------------
Net decrease in net assets from Fund share transactions (60,357,220) (5,966,769)
--------------- ---------------
Increase in net assets ................................. 68,076,369 322,795,347
Net assets at beginning of period ...................... 2,514,954,317 2,192,158,970
Net assets at end of period (including undistributed net
investment income of $1,417,347 and accumulated
distributions in excess of net investment income of
--------------- ---------------
($14,026,160), respectively) .......................... $ 2,583,030,686 $ 2,514,954,317
--------------- ---------------
Other Information
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .............. 55,022,967 55,183,581
--------------- ---------------
Shares sold ............................................ 11,978,853 12,911,834
Shares issued to shareholders in reinvestment of
distributions .......................................... 2,508,054 1,726,196
Shares redeemed ........................................ (15,775,731) (14,798,644)
--------------- ---------------
Net decrease in Fund shares ............................ (1,288,824) (160,614)
--------------- ---------------
Shares outstanding at end of period .................... 53,734,143 55,022,967
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18---SCUDDER INTERNATIONAL FUND
<PAGE>
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>
Years Ended March 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
---------------------------------------------------------------------------------------
period ........................ $45.71 $39.72 $42.96 $35.69 $34.36 $34.69 $37.00 $34.79 $33.43 $44.05
---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ............ .30 .38 .21 .31 .38 .44 .80 .49 .40 .45
Net realized and unrealized gain
(loss) on investment
transactions .................. 4.53 7.19 (1.03) 7.74 2.64 (.37) (.39) 5.30 4.15 (.86)
Total from investment
---------------------------------------------------------------------------------------
operations .................... 4.83 7.57 (.82) 8.05 3.02 .07 .41 5.79 4.55 (.41)
---------------------------------------------------------------------------------------
Less distributions:
From net investment income ....... (1.28) (.40) -- (.63) (.83) -- (.74) (.43) (.13) (.82)
In excess of net investment income -- -- -- (.06) -- -- -- -- -- --
From net realized gains on
investment transactions ....... (1.19) (1.18) (2.42) (.09) (.86) (.40) (1.98) (3.15) (3.06) (9.39)
---------------------------------------------------------------------------------------
Total distributions .............. (2.47) (1.58) (2.42) (.78) (1.69) (.40) (2.72) (3.58) (3.19) (10.21)
---------------------------------------------------------------------------------------
Net asset value, end of
---------------------------------------------------------------------------------------
period ........................ $48.07 $45.71 $39.72 $42.96 $35.69 $34.36 $34.69 $37.00 $34.79 $33.43
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................. 10.74 19.25 (2.02) 22.69 9.12 .18 1.46 17.08 14.34 (.47)
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................... 2,583 2,515 2,192 2,198 1,180 933 929 783 550 559
Ratio of operating expenses to
average net assets (%) ........ 1.15 1.14 1.19 1.21 1.26 1.30 1.24 1.18 1.22 1.21
Ratio of net investment income to
average net assets (%) ........ .64 .86 .48 .75 1.13 1.25 2.22 1.33 1.20 1.16
Portfolio turnover rate (%) ...... 35.8 45.2 46.3 39.9 29.2 50.4 70.1 49.4 48.3 54.8
Average commission rate paid (b) . $.0002 -- -- -- -- -- -- -- -- --
</TABLE>
(a) Based on monthly average share Based on monthly average shares outstanding
during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after March 31, 1997.
19 -- SCUDDER INTERNATIONAL FUND
<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.
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.
20 -- SCUDDER INTERNATIONAL FUND
<PAGE>
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 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, is equal to at least 100.5% of the repurchase price.
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:
(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.
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.
21 -- SCUDDER INTERNATIONAL FUND
<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 Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
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.
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.
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, options on currencies, and foreign denominated investments. 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, 1997, purchases and sales of investment securities
(excluding short-term investments) aggregated $874,321,294 and $1,039,474,034,
respectively.
C. Related Parties
On September 5, 1996, the Fund's Board of Directors approved a new Investment
Management Agreement (the "Management Agreement") with Scudder, Stevens & Clark,
Inc. (the "Adviser"). Under the Management Agreement 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, the Adviser provides certain
administrative services in accordance with the Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of approximately 0.90% of the first $500,000,000 of average daily net assets,
0.85% of the next $500,000,000 of such net assets, 0.80% of the next
22 -- SCUDDER INTERNATIONAL FUND
<PAGE>
$1,000,000,000 of such net assets, 0.75% of the next $1,000,000,000 of such net
assets, and 0.70% of such net assets in excess of $3,000,000,000, computed and
accrued daily and payable monthly.
Under the Investment Management Agreement between the Fund and the Adviser which
was in effect prior to September 5, 1996 (the "Agreement"), the Fund agreed 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. The
agreements also provide that if the Fund's expenses, exclusive of taxes,
interest, and extraordinary expenses, exceed specified limits, such excess, up
to the amount of the management fee, will be paid by the Adviser. For the year
ended March 31, 1997, the fee pursuant to both agreements amounted to
$20,989,160 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 $3,050,321 charged to the Fund by SSC for the
year ended March 31, 1997, of which $296,627 is unpaid at March 31, 1997.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended March 31, 1997,
the amount charged to the Fund by STC aggregated $930,582, of which $111,209 is
unpaid at March 31, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
March 31, 1997, the amount charged to the Fund by SFAC aggregated $795,122, of
which $65,991 is unpaid at March 31, 1997.
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, 1997, Directors' fees and expenses aggregated $61,815.
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.
23 -- SCUDDER INTERNATIONAL FUND
<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, 1997,
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, 1997 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, 1997, 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 16, 1997
24 -- SCUDDER INTERNATIONAL FUND
<PAGE>
Tax Information
The Fund paid distributions of $1.19 per share from net long-term capital gains
during its year ended March 31, 1997. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $36,901,570 as capital gain dividends for its
fiscal year ended March 31, 1997.
The Fund paid foreign taxes of $5,218,633 and the Fund recognized $33,186,627 of
foreign source income during the year ended March 31, 1997. Pursuant to section
853 of the Internal Revenue Code, the Fund designates $0.097 per share of
foreign taxes paid and $0.618 of income earned from foreign sources in the year
ended March 31, 1997.
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.
25 - SCUDDER INTERNATIONAL FUND
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27 - SCUDDER INTERNATIONAL FUND
<PAGE>
Officers and Directors
Daniel Pierce*
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; Consultant; Guest Scholar, Brookings Institute
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director; Vice President and Assistant Secretary
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 Emeritus and Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Joyce E. Cornell*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
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
Carol L. Franklin*
Vice President
Richard W. Desmond*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
28 - SCUDDER INTERNATIONAL FUND
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +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.
29 - SCUDDER INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
Scudder Solutions
Convenient ways to invest, quickly and reliably:
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan AutoBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is higher and electronically debited from that account.
fewer when it's lower, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ---------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan AutoSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ---------------------------------------------------------------------------------------------------------------------------------
30 - SCUDDER INTERNATIONAL FUND
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder Developed for investors who prefer the benefits of no-load
shareholders can take advantage of a Scudder Scudder funds but want ongoing professional assistance in
Brokerage account already reserved for them, with managing a portfolio. Personal Counsel(SM) is a highly
no minimum investment. For information about customized, fee-based asset management service for
Scudder Brokerage Services, call 1-800-700-0820. individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Service, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ---------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ---------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Funds Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Funds Centers. Check for a Funds Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
New From Scudder: Pathway Series
In a complex financial world, Scudder Pathway Series is a refreshingly simple concept. With one
investment, Pathway gives you instant access to broad diversification in U.S. markets and
across the globe. Select from four Portfolios -- Growth, Balanced, Conservative, or
International -- each with a distinct investment objective that can match your goals. Each
Portfolio, rather than investing in individual securities, invests in carefully selected
Scudder mutual funds.
The share price of each Pathway Series portfolio will fluctuate and the risk associated with
each portfolio is determined by the securities held in each underlying Scudder fund. Contact
Scudder Investor Services, Inc., Distributor, for a prospectus which contains more complete
information, including management fees and other expenses. Please read it carefully before you
invest or send money.
</TABLE>
31 - SCUDDER INTERNATIONAL FUND
<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 over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
