Scudder
Latin America
Fund
Annual Report
October 31, 1997
Pure No-Load(TM) Funds
For investors seeking long-term capital appreciation through investment
primarily in the securities of Latin American issuers.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
In Brief
o Scudder Latin America Fund provided a total return of 23.25% for the fiscal
year concluded October 31, 1997.
o An October reversal in Latin American stock markets reflected growing concern
among investors for the financial health of all emerging markets in the wake of
the earlier collapse of stock markets and exchange rates in southeast Asia.
o In light of a Brazilian austerity program designed to boost investor
confidence, the Fund took advantage of distressed prices to add to select
holdings in both Brazil and Mexico.
Table of Contents
3 Letter from the Fund's Chairman 18 Notes to Financial Statements
4 Performance Update 22 Report of Independent Accountants
5 Portfolio Summary 23 Tax Information
6 Portfolio Management Discussion 24 Stockholder Meeting Results
11 Investment Portfolio 28 Officers and Directors
14 Financial Statements 29 Investment Products and Services
17 Financial Highlights 30 Scudder Solutions
2 - Scudder Latin America Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the annual report for Scudder Latin America Fund,
covering the 12-month period ended October 31, 1997.
As detailed in the management discussion that follows, the Fund provided a
strong total return of 23.25% over the fiscal year, despite a crisis of
confidence in emerging markets that spread to Latin America in October. Recent
volatility in world stock markets has highlighted the importance of maintaining
a diversified investment portfolio. As an investor in Scudder Latin America
Fund, you already know that a well-rounded investment program should include
international stocks, in addition to small- and large-capitalization domestic
equity, fixed-income, and cash holdings. For most investors, a properly
diversified portfolio, combined with a long-term perspective based on one's
financial objectives has proven the best approach. We believe Scudder Latin
America Fund remains well-positioned to capitalize on the opportunities for
long-term capital appreciation to be found in the region's equity markets.
For those of you interested in hearing about new products, we would like to
take this opportunity to introduce Scudder International Growth and Income Fund.
The Fund employs a yield-oriented approach to international investing and seeks
to provide long-term growth of capital plus current income. Investors who desire
international exposure but who wish to take a more conservative approach or add
balance to more aggressive overseas holdings may appreciate the Fund's emphasis
on the dividend-paying stocks of established companies listed on foreign
exchanges. For a complete listing of Scudder's mutual fund offerings, see page
29.
If you have any questions regarding Scudder Latin America Fund or any other
Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470. Thank you for your continued investment in Scudder Latin America
Fund.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Latin America Fund
3 - Scudder Latin America Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/97 $10,000 Cumulative Annual
- ------------------------------------------------
SCUDDER LATIN AMERICA FUND
TICKER SYMBOL: SLAFX
- ------------------------------------------------
1 Year $ 12,325 23.25% 23.25%
Life of Fund* $ 22,348 123.48% 17.84%
- ------------------------------------------------
IFC LATIN AMERICA INVESTABLE TOTAL RETURN INDEX
- ------------------------------------------------
1 Year $ 12,268 22.68% 22.68%
Life of Fund* $ 16,796 67.96% 11.32%
- ------------------------------------------------
*The Fund commenced operations on December 8, 1992.
Index comparisons begin December 31, 1992.
- ----------------------------------------------------------------
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 LATIN AMERICA FUND
Year Amount
- ----------------------
12/92* $10,000
4/93 $10,560
10/93 $14,728
4/94 $16,603
10/94 $19,651
4/95 $13,558
10/95 $13,567
4/96 $16,623
10/96 $17,407
4/97 $21,907
10/97 $21,455
IFC LATIN AMERICA INVESTABLE
TOTAL RETURN INDEX
Year Amount
- ----------------------
12/92* $10,000
4/93 $10,047
10/93 $13,041
4/94 $15,042
10/94 $18,352
4/95 $11,760
10/95 $11,480
4/96 $13,412
10/96 $13,691
4/97 $16,928
10/97 $16,796
The IFC Latin America Investable Total Return Index is prepared by
International Finance Corporation. It is an unmanaged, market
capitalization-weighted representation of stock performance in seven Latin
American markets, and measures the returns of stocks that are legally and
practically available to investors. Unlike Fund returns, Index returns do not
reflect 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.
<TABLE>
<S> <C> <C> <C> <C> <C>
1993* 1994 1995 1996 1997
-----------------------------------------------------------
NET ASSET VALUE......... $ 18.41 $ 24.44 $ 16.22 $ 20.63 $ 25.12
INCOME DIVIDENDS........ $ -- $ .06 $ -- $ .15 $ .26
CAPITAL GAINS
DISTRIBUTIONS........... $ -- $ .06 $ .73 $ -- $ --
FUND TOTAL RETURN (%)... 53.42** 33.43 -30.96 28.31 23.25
INDEX TOTAL RETURN (%).. 28.72 48.17 -37.44 19.26 22.68
</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. If the Adviser had not maintained the
Fund's expenses, the total returns for the life of Fund period would have been
lower.
**Total return does not reflect the effect to the shareholder of the applicable
redemption fees.
4 - Scudder Latin America Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1997
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 5% Cash Equivalents)
- ---------------------------------------------------------------------------
Brazil 42%
Mexico 33%
Argentina 17%
Chile 2%
Peru 2%
Other 4%
- --------------------------------------
100%
- --------------------------------------
Holdings in the three major markets of
Brazil, Mexico and Argentina account
for more than 90% of the Fund's equity
position.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS
(Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------
Consumer Staples 26%
Communications 21%
Energy 12%
Utilities 10%
Financial 9%
Manufacturing 8%
Consumer Discretionary 6%
Other 8%
- --------------------------------------
100%
- --------------------------------------
Latin America has a huge and growing
consumer base, and the region's
industrialization is supporting the
communications, energy, and utility
sectors as well.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(44% of Portfolio)
- --------------------------------------------------------------------------
1. TELEFONOS DE MEXICO S.A. DE C.V.
Telecommunication services in Mexico
2. YPF S.A.
Petroleum company in Argentina
3. TELECOMUNICACOES BRASILEIRAS S.A.
Telecommunication services in Brazil
4. KIMBERLY CLARK DE MEXICO S.A. DE C.V.
Producer of consumer paper products in Mexico
5. COMPANHIA ENERGETICA DE MINAS GERAIS
Electric power utility in Brazil
6. CIFRA S.A. DE C.V.
Discount retailer in Mexico
7. CENTRAIS ELECTRICAS BRASILEIRAS S/A
Electric Utility in Brazil
8. PANAMERICAN BEVERAGES, INC.
Soft drink bottler in Mexico
9. COMPANHIA CERVEJARIA BRAHMA
Leading beer producer and distributor in Brazil
10. BANCO BRADESCO S.A.
Bank in Brazil
Privatization has created
investment opportunities among
telecommunications and utility
companies.
For more complete details about the Fund's investment portfolio, see page 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
5 - Scudder Latin America Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Latin America Fund provided a total return of 23.25% for the fiscal year
concluded October 31, 1997. This compared with a total return of 22.68% for the
unmanaged International Finance Corporation's Latin America Investable Total
Return Index. Details of the performance of the country components of the IFC
Index for the fiscal year are provided in the adjacent table.
While the Fund's performance for the period was satisfactory, returns to
shareholders would have been dramatically higher were it not for the collapse of
Latin American stock markets during the month of October, as indicated by the
decline of the Fund's net asset value from $31.07 per share at the end of
September to $25.12 on October 31. The 19.2% decrease in net asset value over
October essentially mirrored the fall that month in the IFC-Brazil Index of
24.6%, the 18.9% decline in the IFC-Mexico Index, and the 18.5% reversal in the
IFC-Argentina Index. Holdings in these three important Latin American countries
accounted for 75% of the IFC Investable Index on October 31, and 92% of the
Fund's equity portfolio. It was essentially impossible for any diversified Latin
American equity portfolio to escape the damage to the region's stock prices in
October.
Southeast Asian Difficulties Impact Latin America
October's stock market reversal no doubt reflected growing concern among
investors for the financial health of all emerging markets in the wake of the
collapse of stock markets and exchange rates for the so-called southeast Asian
Tigers: Thailand, Indonesia, Malaysia, Singapore, and the Philippines. Brazil
was especially vulnerable to heightened sensitivity to country risk among
investors due to the country's prominence in the emerging market universe and
its procrastination in dealing forcefully with a sizable budget deficit and
growing current account deficit. As we saw in 1995 following the devaluation of
the Mexican peso, financial shocks in one Latin American market can spill over
into others, even in the absence of any economic logic for this to occur. All of
the other major regional stock markets were caught in the downdraft of the
Brazilian market.
PRINTED DOCUMENT CONTAINS A HORIZONTAL BAR CHART HERE:
CHART TITLE:
Investment Returns in Latin American
Stock Markets
CHART PERIOD:
(12 months ended October 31, 1997)
Argentina +21.5%
Brazil +19.7%
Chile + 3.4%
Colombia +37.3%
Mexiao +36.4%
Peru + 9.7%
Venezuela +52.2%
IFC Latin America +22.7%
Investable Index
Source: IFC Emerging Markets Database.
Past performance is no guarantee of future results.
The linkage between Brazil and the misfortunes of the Asian Tigers is not that
clear on first analysis. Brazil's economy is greater than the combined gross
domestic product of the five Tigers, and it has little in common with their most
publicized sources of vulnerability. The Brazilian banking system, for example,
6 - Scudder Latin America Fund
<PAGE>
is sound, its corporate sector is not highly leveraged, exports are not a
significant source of economic activity, the stock market's capitalization is
not exaggerated relative to the size of the economy, the real estate market is
not a speculative bubble, and the economy is clearly not overheated.
What Brazil has in common with the southeast Asian countries is a fragile
external account position. Brazil's current account deficit for 1997 is
estimated to be $34 billion, equal to about 4.4% of projected gross domestic
product. This is not a danger in and of itself, but the current account deficit
plus the estimated public and private sector debt amortizations of $21 billion
point to a financing requirement for the current year of some $55 billion. This
is approximately $30 billion more than the projected $25 billion inflow from
foreign portfolio and direct investments. In addition, some economists had
forecast a financing requirement of an additional $30 billion for next year.
Closing the gap in the country's 1997-98 external financing requirement would
require either a rolling over of debt and/or interest payments or a drawdown in
the country's foreign exchange reserves (estimated at $62 billion at the end of
September), or some combination of both.
Brazil's ability to persuade investors to rollover maturing debt depends on its
ability to hold investor confidence in the government's management of the
economy. With confidence in scarce supply following the crisis in southeast
Asia, fears of a major currency devaluation took hold, nourished in large part
by the limited room for maneuvering that appeared to characterize the management
of Brazil's external balances.
Brazil Responds to Crisis of Confidence
During the peak of the October crisis, stock prices for many of Brazil's leading
corporations were marked down by 35% to 40% or more in dollar terms. This was,
in effect, a devaluation of the country's productive assets that was well in
excess of any potential devaluation of the exchange rate, and the Fund took
advantage of distressed prices to add to select holdings in Brazil and Mexico. A
similar investment opportunity was presented the Fund in 1995, when Argentina's
stock market was ravaged by fears of an exchange rate devaluation that never
occurred.
It is easy for investors to lose confidence in a government's ability to manage
a crisis when one is in the middle of a financial meltdown, which is what Brazil
experienced during October. Events in southeast Asia were a wake-up call for
Brazil to address its external account imbalances quickly and with credibility.
President Cardoso's administration responded with an austerity plan that
entailed a sharp cut in the fiscal deficit, imposition of sky-high real interest
rates, higher taxes and tariffs, and an acceleration of the privatization
program. As we saw in 1995 in both Mexico and Argentina, a speedy government
response with a tough austerity program quickly soothes a jittery market. Brazil
learned this lesson well.
As a result of the government's austerity program, the Brazilian economy will
grow from 1% to 2% next year, the lowest growth rate within the region. There is
7 - Scudder Latin America Fund
<PAGE>
a chance, in fact, that the economy will show no growth at all in 1998. On the
other hand, demand for imports clearly should decline, and a lower trade deficit
and the receipt of upwards of $40 billion of privatization revenues in 1998,
coupled with a decline in the amortization requirement for external debt, could
bring the external financing gap to less than $10 billion. This funding gap
would be managed without the need for a major currency devaluation. We believe,
in fact, that Brazil will be able to avoid a devaluation. Apart from the tough
measures taken by the Cardoso administration to dampen demand and bolster the
confidence of investors, Congress has at last begun to address the government's
public employment and social security reforms.
Brazil's brush with financial market volatility reminds us how dependent most of
the Latin American countries are on external savings to finance their economic
development. Chile is an important exception to this, due to that country's high
savings rate. To the extent domestic savings are not sufficient to replace a
country's dependence on external funds, except at the cost of lower investment
and economic growth, Latin American governments are not autonomous agents in
setting and executing public policy, even though they may believe otherwise.
Strictly speaking, Latin American governments are free to reject the monetary
and fiscal disciplines foreign investors may from time to time seek to impose as
a condition for their continued willingness to finance the development process.
Such sovereign pride carries a steep cost, as the aftermath of the debt crises
of the 1980s so clearly demonstrated. Mexico and Argentina in 1995 and Brazil in
1997 were willing to impose growth-threatening austerity programs in order to
deal with external account imbalances and the loss of investor confidence
because the longer-term costs of not doing so were greater.
Economic Growth Forecasts (GDP)
-------------------------------
Country 1996 1997* 1998*
------- ---- ----- -----
Argentina 4.4% 6-7% 5-6%
Brazil 2.9% 3-4% 1-2%
Chile 7.2% 5-6% 5-6%
Colombia 2.1% 1-2% 4-5%
Mexico 5.1% 5-6% 5-6%
Peru 2.8% 5-6% 5-6%
Venezuela (1.6%) 4-5% 5-6%
* Estimated. Estimates may prove inaccurate and, even if accurate, may not
correlate with market activity. Source: Scudder Latin America Group.
Austerity Program Supports Outlook in Brazil
Since the Mexican peso devaluation in late 1994, most of the volatility in the
Fund's performance has been attributable to country risk rather than risks
specific to companies held by the portfolio. As long as Latin America depends on
a significant amount of external savings, generally in the form of debt
8 - Scudder Latin America Fund
<PAGE>
financings, to supplement inadequate domestic savings, the region will continue
to be vulnerable to the investment decisions and preferences of investors over
whom local governments have no direct control. The potential for a divergence of
interest between governments and foreign investors will likely remain an
important source of volatility until domestic savings are able to play the
dominant role in financing growth. That may take years to achieve, although the
importance of promoting higher domestic savings rates is well-understood and
reforms are in place in most countries to achieve that goal.
Country Weightings
(October 31, 1997)
------------------------------------
Scudder Latin IFC Index
Country America Fund* Weighting
------- ------------- ---------
Argentina 17% 10.8%
Brazil 42% 32.5%
Chile 2% 15.1%
Colombia 2% 3.6%
Mexico 33% 31.9%
Panama 1% 0%
Peru 2% 3.0%
Venezuela 1% 3.1%
* Excludes Fund's assets in cash equivalents.
Scudder Latin America Fund:
A Team Approach to Investing
Scudder Latin America 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. 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 Edmund B. Games, Jr. has set the Fund's investment
strategy and overseen its daily operation since the Fund was introduced in 1992.
Mr. Games joined Scudder's equity research area in 1960 and has focused on Latin
American stocks since 1988. Tara C. Kenney, Portfolio Manager, assists with the
Fund's research and investment strategy. Ms. Kenney, who joined the Fund's team
in 1996, has 10 years of financial industry experience. Paul Rogers, Portfolio
Manager, also joined the Fund's team in 1996 and is primarily responsible for
research on Latin American corporations. Mr. Rogers joined Scudder in 1994 and
has over 10 years of investment experience.
9 - Scudder Latin America Fund
<PAGE>
The Fund has pursued a strategy of adding to its equity holdings when periods of
economic stress have required a government to place its country on an austerity
path. Austerity programs seem to work relatively quickly in Latin America for a
variety of historical reasons, and stock markets there also tend to recover
rapidly. Almost all of the Mexican companies which the Fund owned prior to the
1994 devaluation, for example, are currently worth more in dollar terms than
they were prior to the devaluation. We believe the Brazilian portion of the
portfolio will also recover from its recent depressed levels, as that country
manages through its currency crisis. We cannot avoid country risk, of course,
but we can build the portfolio around companies with a demonstrated record of
dealing successfully with the risks of location.
Sincerely,
Your Portfolio Management Team
/s/Edmund B. Games, Jr. /s/Tara C. Kenney
Edmund B. Games, Jr. Tara C. Kenney
/s/Paul H. Rogers
Paul H. Rogers
10 - Scudder Latin America Fund
<PAGE>
Investment Portfolio as of October 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount (U.S.$) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 2.5%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/97 at 5.7%,
to be repurchased at $21,712,308 on 11/3/97, collateralized by a ------------
$21,434,000 U.S. Treasury Note, 6%, 7/31/02 (Cost $21,702,000) ........................ 21,702,000 21,702,000
------------
Certificates Of Deposit 2.9%
- ------------------------------------------------------------------------------------------------------------------------------
Societe Generale North America, 5.59%, 11/4/97 (Cost $25,000,000) ....................... 25,000,000 25,000,000
------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Equity Securities 94.6%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 15.9%
Astra CAPSA (Petroleum company) ......................................................... 974,100 1,520,516
BI S.A. "A" (Venture capital company) (b) ............................................... 3,000,000 3,240,000
Bagley y Cia Ltd. S.A. "B" (Producer of cookies and biscuits) ........................... 2,868,651 5,051,882
Nobleza Piccardo S.A. (Tobacco company) ................................................. 1,004,177 5,325,360
Perez Companc S.A. "B" (Industrial conglomerate) ........................................ 3,034,245 19,005,872
Quilmes Industrial S.A. (Leading beer distributor) ...................................... 942,443 11,780,538
Quilmes Industrial S.A. (ADR) ........................................................... 638,500 7,901,438
Telecom Argentina S.A. "B" (Telecommunication services) ................................. 2,007,106 10,041,605
Telecom Argentina S.A. "B" (ADR) ........................................................ 440,000 11,137,500
Telefonica de Argentina S.A. "B" (Telecommunication services) ........................... 1,004,962 2,835,708
Telefonica de Argentina S.A. "B" (ADR) .................................................. 300,000 8,437,500
YPF S.A. "D" (ADR) (Petroleum company) .................................................. 1,600,000 51,200,000
------------
137,477,919
------------
Brazil 39.8%
Aracruz Celulose S.A. "B" (ADR) (Producer of eucalyptus kraft pulp) ..................... 720,400 10,806,000
Banco Bradesco S.A. (pfd.) (Commercial bank) ............................................ 3,736,277,111 27,790,351
Banco Itau S.A. (pfd.) (Bank) ........................................................... 61,009,600 24,626,307
Centrais Eletricas Brasileiras S/A "B" (pfd.) (Electric utility) ........................ 75,000,000 32,450,451
Cia. Brasileira de Distribuicao Grupo Pao de Acucar (ADR) (Operator of
hypermarkets, supermarkets and convenience stores) .................................... 304,800 5,638,800
Companhia Cervejaria Brahma (pfd.) (Leading beer producer and distributor) .............. 47,026,569 29,432,929
Companhia Energetica de Minas Gerais (pfd.) (Electric power utility) .................... 925,875,000 36,952,696
Companhia Paranaense de Energia (pfd.) (Electric utility) ............................... 370,400,000 4,471,880
Companhia Paranaense de Energia (voting) ................................................ 678,600,400 7,940,446
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Latin America Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Companhia Petroquimica do Sul S.A. (voting) (Chemical producer) ......................... 65,808,000 2,357,854
Companhia Suzano de Papel e Celulose S.A. (pfd.) (Paper products) ....................... 2,995,840 6,494,678
Companhia Vale do Rio Doce (pfd.) (Diverse mining and industrial complex) ............... 300,800 5,866,207
Empresa Brasileira de Compressores S.A. (pfd.) (Manufacturer of electrical
equipment) ............................................................................ 3,469,000 1,195,719
Industrias Klabin de Papel e Celulose S.A. (pfd.) (Producer of paper and
paper products, newsprint, and cardboard boxes) ....................................... 15,480,000 11,935,235
Lojas Americanas S.A. (pfd.)* (Discount department store chain) ......................... 157,100,000 1,282,507
Lojas Americanas S.A. (voting)* (b) ..................................................... 438,708,380 3,979,395
Petroleo Brasileiro S.A. (pfd.) (Petroleum company) ..................................... 140,000,000 26,032,927
S/A White Martins (voting) (Chemical company) ........................................... 4,056,655 6,807,391
Telecomunicacoes Brasileiras S.A. (ADR) (Telecommunication services) .................... 500,000 50,750,000
Telecomunicacoes de Sao Paulo S.A. (pfd.) (Telecommunication services) .................. 80,410,000 21,006,014
Telecomunicacoes de Sao Paulo S.A. Rights* ............................................. 4,193,409 1,997
Telecomunicacoes do Parana S.A. (pfd.) (Telecommunication services) ..................... 14,131,986 7,370,630
Usinas Siderurgicas de Minas Gerais S.A. (pfd.) (Non-coated flat products and
electrolytic galvanized products) ..................................................... 2,730,000 19,810,422
------------
345,000,836
------------
Chile 2.1%
Compania de Telefonos de Chile, S.A. (ADR) (Telecommunication services) ................. 432,500 12,001,875
Santa Isabel S.A. (ADR) (Supermarket chain) ............................................. 330,000 6,105,000
------------
18,106,875
------------
Colombia 1.9%
Bavaria S/A (Producer and distributor of beer and other malt beverages,
mineral water and soft drinks) ........................................................ 801,761 8,469,196
Colombiana de Tabaco S.A. (Tobacco producer) ............................................ 821,871 3,011,338
Compania Nacional de Chocolates (Chocolate and coffee producer) ......................... 406,643 3,265,190
Industrias Alimenticias Noel (Food products company) .................................... 502,816 1,959,914
------------
16,705,638
------------
Mexico 31.0%
Apasco, S.A. de C.V. (Cement producer) .................................................. 1,908,000 11,618,866
Cifra S.A. de C.V. "A" (Discount retailer) .............................................. 1,182,623 2,171,790
Cifra S.A. de C.V. "C" .................................................................. 17,801,000 30,819,642
Grupo Continental, S.A. "B" (Soft drink bottler) ........................................ 7,005,750 19,239,672
Grupo Embotellador de Mexico S.A. de C.V. "B" (Soft drink bottler) (b) .................. 6,544,500 5,704,460
Grupo Embotelladora Unidas S.A. de CV "B"* (Soft drink producer) ........................ 1,859,134 3,995,751
Grupo Financiero Inbursa, S.A. de C.V. "B" (Brokerage, insurance, banking and
leasing services) ..................................................................... 3,334,000 11,743,642
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Latin America Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Grupo Industrial Bimbo, S.A. de C.V. "A" (Producer of bread and other baked
goods) ................................................................................ 1,810,000 13,637,134
Grupo Industrial Maseca S.A. de C.V. (ADR) (Food producer) .............................. 822,600 11,979,113
Grupo Modelo S.A. "C" (Leading brewery) ................................................. 2,303,000 17,324,060
Kimberly Clark de Mexico S.A. de C.V. "A" (Consumer paper products and
newsprint) ............................................................................ 9,213,000 40,427,194
Organizacion Soriana S.A. de CV "A" (Retailer) ......................................... 3,947,022 13,148,885
Panamerican Beverages Inc. "A" (Soft drink bottler) ..................................... 991,600 30,739,600
TV Azteca, S.A. de C.V.* (Owner and operator of television networks) .................... 331,024 1,581,010
Telefonos de Mexico S.A. de C.V. "L" (ADR) (Telecommunication services) ................. 1,200,000 51,900,000
Tubos de Acero de Mexico SA* (New) (Manufacturer of various types of pipes,
casings and tubing) ................................................................... 125,000 2,523,438
------------
268,554,257
------------
Panama 1.1%
Banco Latinoamericano de Exportaciones, S.A. "E" (Bank) ................................. 245,700 9,766,575
------------
Peru 2.2%
Cementos Lima S.A. "T" (Cement producer) ................................................ 1,478,352 3,055,842
Embotellador Latinoamericana S.A. "T"* (Soft drink bottler) ............................. 6,834,249 4,595,617
Industrias Pacocha S.A. "T" (Food producer) ............................................. 4,755,022 2,225,084
Union de Cerveceria Backus & Johnston S.A. "T" (Producer of malted,
nonalcoholic and carbonated drinks) ................................................... 9,435,397 8,621,881
------------
18,498,424
------------
Venezuela 0.6%
Mavesa S.A. (ADR) (Food processor) ...................................................... 682,875 5,121,563
- ------------------------------------------------------------------------------------------------------------------------------
Total Equity Securities (Cost $713,440,030) 819,232,087
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $760,142,030) (a) 865,934,087
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $763,202,132. At October 31,
1997, net unrealized appreciation for all securities based on tax cost was
$102,731,955. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $155,047,738 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$52,315,783.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $12,923,855 (1.46% of net assets).
Their values have been estimated by the Valuation Committee in the absence
of readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at October 31, 1997 aggregated $19,211,045. These
securities may also have certain restrictions as to resale.
The accompanying notes are an integral part of the financial statements.
13 - Scudder Latin America Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1997
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $760,142,030) .................. $ 865,934,087
Foreign currency holdings, at market (identified cost
$5,925,521) ............................................................ 5,925,915
Receivable for investments sold ........................................ 19,595,046
Receivable for Fund shares sold ........................................ 2,617,098
Dividends and interest receivable ...................................... 1,308,124
Deferred organization expenses ......................................... 1,544
Other assets ........................................................... 20,052
----------------
Total assets ........................................................... 895,401,866
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 5,567,395
Payable for Fund shares redeemed ....................................... 5,037,662
Accrued management fee ................................................. 1,186,601
Other payables and accrued expenses .................................... 1,055,159
----------------
Total liabilities ...................................................... 12,846,817
--------------------------------------------------------------------------------------------
Net assets, at market value $ 882,555,049
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................... 5,604,292
Unrealized appreciation (depreciation) on:
Investments ......................................................... 105,792,057
Foreign currency related transactions ............................... (61,232)
Accumulated net realized gain .......................................... 35,934,603
Paid-in capital ........................................................ 735,285,329
--------------------------------------------------------------------------------------------
Net assets, at market value $ 882,555,049
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($882,555,049 / 35,131,733 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares ----------------
authorized) ......................................................... $25.12
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Latin America Fund
<PAGE>
Statement of Operations
year ended October 31, 1997
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividends (net of foreign taxes withheld of $851,259) .................. $ 22,783,195
Interest ............................................................... 3,617,820
----------------
26,401,015
----------------
Expenses:
Management fee ......................................................... 11,527,321
Services to shareholders ............................................... 2,835,182
Custodian and accounting fees .......................................... 2,418,626
Directors' fees and expenses ........................................... 63,327
Reports to shareholders ................................................ 293,300
Auditing ............................................................... 84,172
Legal .................................................................. 17,897
Registration fees ...................................................... 103,664
Amortization of organization expenses .................................. 16,093
Other .................................................................. 76,995
----------------
Total expenses before reductions ....................................... 17,436,577
Expense reductions ..................................................... (28,889)
----------------
Expenses, net .......................................................... 17,407,688
--------------------------------------------------------------------------------------------
Net investment income 8,993,327
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................................ 109,466,337
Foreign currency related transactions (net of CPMF tax
of $374,347) ........................................................... (1,270,623)
----------------
108,195,714
----------------
Net unrealized appreciation (depreciation) during the period
on:
Investments ............................................................ 26,945,985
Foreign currency related transactions .................................. (37,673)
----------------
26,908,312
--------------------------------------------------------------------------------------------
Net gain on investment transactions 135,104,026
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 144,097,353
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Latin America Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ....................................... $ 8,993,327 $ 7,818,361
Net realized gain (loss) from investment transactions ....... 108,195,714 (6,217,760)
Net unrealized appreciation (depreciation) on investment
transactions during the period ........................... 26,908,312 136,952,370
-------------- --------------
Net increase in net assets resulting from operations ........ 144,097,353 138,552,971
-------------- --------------
Distributions to shareholders from net investment income .... (7,655,243) (4,560,568)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................... 737,548,712 119,002,707
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................ 7,123,139 4,261,866
Cost of shares redeemed ..................................... (620,473,602) (154,821,892)
Redemption fees ............................................. -- 226,801
-------------- --------------
Net increase (decrease) in net assets from Fund share
transactions ............................................. 124,198,249 (31,330,518)
-------------- --------------
Increase (decrease) in net assets ........................... 260,640,359 102,661,885
Net assets at beginning of period ........................... 621,914,690 519,252,805
Net assets at end of period (including undistributed net
investment income of $5,604,292 and $5,240,925, -------------- --------------
respectively) ............................................ $882,555,049 $621,914,690
-------------- --------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 30,148,974 32,011,664
-------------- --------------
Shares sold ................................................. 27,610,297 6,222,218
Shares issued to shareholders in reinvestment of
distributions ............................................... 334,106 250,550
Shares redeemed ............................................. (22,961,644) (8,335,458)
-------------- --------------
Net increase (decrease) in Fund shares ...................... 4,982,759 (1,862,690)
-------------- --------------
Shares outstanding at end of period ......................... 35,131,733 30,148,974
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Latin America Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
December 8, 1992
(commencement
of operations) to
Years Ended October 31, October 31,
1997 (a) 1996 (a) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
Net asset value, beginning of period ......... $20.63 $16.22 $24.44 $18.41 $12.00
Income from investment operations: --------------------------------------------------------------------------
Net investment income (loss) ................. .26 .25 .09 (.03) .03
Net realized and unrealized gain (loss) on
investment transactions ................... 4.49 4.30 (7.62) 6.10 6.36
--------------------------------------------------------------------------
Total from investment operations ............. 4.75 4.55 (7.53) 6.07 6.39
--------------------------------------------------------------------------
Less distributions:
From net investment income ................... (.26) (.15) -- -- --
In excess of net investment income ........... -- -- -- (.06) --
From net realized gains on investment
transactions .............................. -- -- (.73) (.06) --
--------------------------------------------------------------------------
Total distributions .......................... (.26) (.15) (.73) (.12) --
--------------------------------------------------------------------------
Redemption fees (c) .......................... -- .01 .04 .08 .02
--------------------------------------------------------------------------
Net asset value, end of period ............... $25.12 $20.63 $16.22 $24.44 $18.41
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............................. 23.25 28.31(d) (30.96)(d) 33.43(d) 53.42**(d)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ....... 883 622 519 809 261
Ratio of operating expenses, net to
average daily net assets (%) .............. 1.89 1.96 2.08 2.01 2.00*
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) ...................... 1.89 1.96 2.11 2.05 2.69*
Ratio of net investment income (loss) to
average daily net assets (%) .............. .98 1.32 .52 (.20) .44*
Portfolio turnover rate (%) .................. 41.8 22.4 39.5 22.4 4.6*
Average commission rate paid (b) ............. $.0002 $.0001 $ -- $ -- $ --
</TABLE>
(a) Based on monthly average of 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 October 31, 1996.
(c)Until September 5, 1996, upon the redemption or exchange of shares held by
shareholders for less than one year, a fee of 2% was assessed and retained by
the Fund for the benefit of the remaining shareholders.
(d)Total return does not reflect the effect to the shareholder of the 2%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
17 - Scudder Latin America Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Latin America Fund (the "Fund") is a non-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 Nasdaq System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the most recent bid quotation.
Securities which are not quoted on the Nasdaq System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities other than money market securities 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. Money market
instruments purchased with an original maturity of sixty days or less are valued
at amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
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 liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the daily 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.
18 - Scudder Latin America Fund
<PAGE>
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.
Taxation. The Fund's policy is to comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required.
Effective January 23, 1997, the Fund is also subject to a .20% Contribuicao
Provisoria sobre Movimentacoes Financeiras (CPMF) tax which is applied to
foreign exchange transactions representing capital inflows or outflows to the
Brazilian market. This tax has been reported as part of the net realized gain
(loss) on foreign currency related transactions.
Distribution of Income and Gains. Distribution of net investment income is 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 tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in foreign denominated investments,
passive foreign investment companies, and certain securities sold at a loss. As
a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
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.
Organization Costs. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
19 - Scudder Latin America Fund
<PAGE>
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. Dividend
income from certain portfolio companies may fluctuate significantly from year to
year due to dividend distribution policies of such companies.
B. Purchases and Sales of Securities
For the year ended October 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $441,643,000 and
$347,157,403, respectively.
C. Related Parties
On September 11, 1997, the Fund's Board of Directors approved a new Investment
Management Agreement (the "Agreement") with Scudder, Stevens & Clark, Inc. (the
"Adviser"). 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 management fee
payable under the Agreement is equal to an annual rate of 1.25% on the first $1
billion of the Fund's average daily net assets, and 1.15% of such net assets in
excess of $1 billion, 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 11, 1997 (the "Prior Agreement"), the Fund agreed to
pay the Adviser an annual rate of 1.25% of the Fund's average daily net assets.
For the period July 1, 1997 to September 11, 1997, the Adviser agreed to waive a
portion of its management fee amounting to 0.10% of average daily net assets
over $1 billion. For the year ended October 31, 1997, the fee pursuant to both
the Agreement and the Prior Agreement amounted to $11,498,432, which was
equivalent to an annual effective rate of 1.25% of the Fund's average daily net
assets.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close by the end of the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1997, the amount charged to the Fund by SSC aggregated
$2,362,155, of which $189,399 is unpaid at October 31, 1997.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be
20 - Scudder Latin America Fund
<PAGE>
invested in the Underlying Funds. For the year ended October 31, 1997, the
Special Servicing Agreement expense charged to the Fund amounted to $8,913.
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 October 31,
1997, the amount charged to the Fund by STC aggregated $24,787, of which $2,912
is unpaid at October 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
October 31, 1997, the amount charged to the Fund by SFAC aggregated $447,599, of
which $85,629 is unpaid at October 31, 1997.
The Fund pays each of its Director not affiliated with the Adviser $4,000
annually, plus specified amounts for attended board and committee meetings. For
the year ended October 31, 1997, Directors' fees and expenses aggregated
$63,327.
D. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. 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 25 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
21 - Scudder Latin America Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and to the
Shareholders of Scudder Latin America Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Latin America Fund including the investment portfolio, as of October 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 four years in the period then ended
and for the period December 8, 1992 (commencement of operations) to October 31,
1993. 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
October 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 Latin America Fund as of October 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 four
years in the period then ended and for the period December 8, 1992 (commencement
of operations) to October 31, 1993 in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 15, 1997
22 - Scudder Latin America Fund
<PAGE>
TAX INFORMATION
The Fund paid foreign taxes of $851,259 and the Fund recognized $8,439,908 of
foreign source income during the fiscal year ended October 31, 1997. Pursuant to
section 853 of the Internal Revenue Code, the Fund designates $.0242 per share
of foreign taxes and $.240 of income from foreign sources as having been paid in
the fiscal year ended October 31, 1997.
Pursuant to section 852 of the Internal Revenue Code of 1986, as amended, the
Fund designates $38,726,806 as a long-term capital gain dividend for the fiscal
year ended October 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 Service Representative at
1-800-225-5163.
23 - Scudder Latin America Fund
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder Latin America Fund
(the "Fund") was held on October 27, 1997, at the offices of Scudder, Stevens &
Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street), New York, New York
10154. At the Meeting, as adjourned and reconvened, the following matters were
voted upon by the stockholders (the resulting votes for each matter are
presented below.) With regard to certain proposals, it was recommended that the
Meeting be reconvened in order to provide stockholders with an additional
opportunity to return their proxies. The date of the reconvened meeting at which
the matters were decided is noted after the proposed matter.
1. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Paul Bancroft III 19,945,904 930,220
Sheryle J. Bolton 19,954,373 921,751
William T. Burgin 19,963,209 912,915
Thomas J. Devine 19,937,091 939,033
Keith R. Fox 19,977,483 898,641
William H. Gleysteen, Jr. 19,938,774 937,350
William H. Luers 19,947,896 928,228
Wilson Nolen 19,953,978 922,145
Daniel Pierce 19,965,716 910,408
Kathryn L. Quirk 19,945,558 930,566
2. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
<TABLE>
<CAPTION>
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
<S> <C> <C> <C>
19,259,365 936,296 680,463 1,187,750
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise. (Approved on December 2, 1997.)
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
18,621,515 2,177,635 1,043,445 1,123,443
24 - Scudder Latin America Fund
<PAGE>
4. To approve the revision of certain fundamental investment policies.
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
4.1 Diversification 17,120,134 1,529,079 1,039,161 1,187,750
4.2 Borrowing 16,993,639 1,655,808 1,038,927 1,187,750
4.3 Senior securities 17,069,665 1,577,124 1,041,585 1,187,750
4.4 Purchase of physical 17,050,997 1,589,387 1,047,990 1,187,750
commodities
4.5 Concentration 17,071,417 1,576,333 1,040,624 1,187,750
4.6 Underwriting of securities 17,103,474 1,539,574 1,045,326 1,187,750
4.7 Investment in real estate 17,109,234 1,548,839 1,030,301 1,187,750
4.8 Lending 17,064,544 1,415,114 1,208,716 1,187,750
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
19,753,989 391,831 730,304
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
25 - Scudder Latin America Fund
<PAGE>
This Page
intentionally
left blank.
26 - Scudder Latin America Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder Latin America Fund
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board and
Director
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Chief Executive
Officer, Scientific Learning
Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter
Capital Management
Corporation
William H. Gleysteen, Jr.
Director; Consultant; Guest
Scholar, Brookings Institute
William H. Luers
Director; President, The
Metropolitan Museum of Art
Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Robert W. Lear
Honorary Director;
Executive-in-Residence, Visiting
Professor, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Elizabeth J. Allan*
Vice President
Joyce E. Cornell*
Vice President
Richard W. Desmond*
Assistant Secretary
Carol L. Franklin*
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
*Scudder, Stevens & Clark, Inc.
28 - Scudder Latin America Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
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
Scudder S&P 500 Index 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 Growth and Income 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, Inc.
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 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 Spain and Portugal 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. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **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 Latin America Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
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 lower and electronically debited from that account.
fewer when it's higher, 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 QuickSell
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 Latin America 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
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
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 Services, 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 Investor 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 Investor Centers. Check for an Investor 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: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. 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 Latin America 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
[LOGO]
