Scudder
International
Fund
Semiannual Report
September 30, 1997
Pure No-Load(TM) Funds
A fund seeking 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 (logo)
<PAGE>
In Brief
o For the one-year period ended September 30, 1997, Scudder International Fund
provided a total return of 21.61%, substantially outperforming the MSCI EAFE
plus Canada Index return of 13.00%. For the six-month period ended September 30,
1997, the Fund provided a total return of 13.90%, exceeding that of the Index,
which returned 12.54%.
o The Fund's relative outperformance was helped by the portfolio's emphasis on
European markets at the expense of Japan, as well as positive stock selection.
Turmoil in the smaller markets of Asia had a limited impact on Fund returns due
to their minor weighting in the portfolio.
o Morningstar assigned the Fund an overall rating of 4 stars for its
risk-adjusted performance among 601 international equity funds as of September
30, 1997.^(1)
o Through the end of September 1997, the Fund's total return performance for the
trailing one-, three-, five-, and ten-year periods exceeded that of the average
international equity fund tracked by Lipper Analytical Services.
(1)Source: 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.
The Fund received 3-star ratings for the three- and five-year periods among
601 and 258 international equity funds, respectively, and a 4-star rating for
the ten-year period among 91 international equity funds. In an investment
category, the top 10% of funds receive 5 stars and the next 22.5% receive 4
stars. Past performance is no guarantee of future results.
Table of Contents
2 Letter from the Fund's Chairman 21 Financial Highlights
4 Performance Update 22 Notes to Financial Statements
5 Portfolio Summary 26 Report of Independent Accountants
6 Portfolio Management Discussion 28 Officers and Directors
10 Glossary of Investment Terms 29 Investment Products and Services
12 Investment Portfolio 30 Scudder Solutions
18 Financial Statements
2 - Scudder International Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present this semiannual report for Scudder International
Fund. For the period of six months ending September 30, 1997, the Fund provided
a gratifying total return of 13.90%, outperforming international equity markets
in the aggregate as measured by the MSCI EAFE plus Canada Index. Performance
over the trailing twelve months through September has been strong as well, as
the Fund's 21.61% return substantially exceeded that of the benchmark index.
As outlined in the management discussion that follows, performance across
international markets varied widely over the six-month period, with Europe
leading the way while Japanese equities remained stalled and much of Asia
experienced a sharp downturn. This divergence in performance reinforces the
value of a broad-based vehicle, such as Scudder International Fund, for
accessing the potential for capital appreciation offered by overseas equity
markets. The economies and corporate sectors of Europe, Japan, and many
developing countries are at varying stages in the process of reform and
restructuring, providing a range of opportunities to invest for growth. We
believe your Fund is well-positioned to capitalize on the economic changes
sweeping across the globe, and thank you for your continued investment in
Scudder International Fund.
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 International Fund or any other
Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Fund
3 - Scudder International Fund
<PAGE>
Performance Update as of September 30, 1997
- -------------------------------------------
Fund Index Comparisons
- -------------------------------------------
Total Return
- -------------------------------------------
Period Ended Growth of Average
9/30/97 $10,000 Cumulative Annual
- -------------------------------------------
Scudder International Fund
Ticker Symbol: SCINX
- -------------------------------------------
1 Year $12,161 21.61% 21.61%
5 Year $19,285 92.85% 14.04%
10 Year $22,521 125.21% 8.46%
- -------------------------------------------
MSCI EAFE & Canada Index
- -------------------------------------------
1 Year $11,300 13.00% 13.00%
5 Year $18,000 80.00% 12.47%
10 Year $17,899 78.99% 5.99%
- -------------------------------------------
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:
Yearly periods ended September 30
Scudder International Fund
Year Amount
- ---------------------
'87 $10,000
'88 $ 8,185
'89 $11,171
'90 $10,119
'91 $11,728
'92 $11,678
'93 $14,419
'94 $15,956
'95 $17,085
'96 $18,519
'97 $22,521
MSCI EAFE & Canada Index
Year Amount
- ---------------------
'87 $10,000
'88 $ 9,881
'89 $12,102
'90 $ 8,828
'91 $10,723
'92 $ 9,944
'93 $12,482
'94 $13,725
'95 $14,330
'96 $15,839
'97 $17,899
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 September 30
<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 $31.96 $39.20 $32.65 $35.30 $34.25 $40.93 $43.73 $45.32 $46.90 $54.70
Income Dividends $ .49 $ -- $ .62 $ .55 $ .51 $ .35 $ .34 $ -- $ .40 $ 1.32
Capital Gains
Distributions $ 5.37 $ 3.65 $ 2.61 $ 1.77 $ .40 $ -- $ 1.18 $ 1.33 $ 1.69 $ .69
Fund Total
Return (%) -18.15 36.48 -9.42 15.90 -.45 23.48 10.66 7.07 8.39 21.61
Index Total
Return (%) -1.20 22.49 -27.05 21.47 -7.27 25.54 9.96 5.87 9.01 13.00
</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 September 30, 1997
- -------------------------------
Geographical
(Excludes 5% Cash Equivalents)
- -------------------------------
Europe 69%
Japan 20%
Pacific Basin 8%
Latin America 2%
Canada 1%
- -------------------------------
100%
- -------------------------------
The Fund is overweighted in Europe,
where economic deregulation and
corporate restructuring are in full
force, and underweighted in Japan.
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)
- ------------------------------
Manufacturing 24%
Financial 19%
Durables 8%
Health 6%
Technology 6%
Energy 6%
Consumer Discretionary 6%
Service Industries 5%
Utilities 5%
Other 15%
- ------------------------------
100%
- ------------------------------
Many companies in the financial
sector are in the early stages
of restructuring, presenting an
investment opportunity.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -------------------------------
Ten Largest Equity Holdings
(15% of Portfolio)
- -------------------------------
1. Skandia Foersaekrings AB
Financial conglomerate in Sweden
2. Nokia AB Oy
Leading manufacturer of telecommunications
equipment and cellular telephones in Finland
3. British Petroleum PLC
International petroleum company
4. L.M. Ericsson Telephone Co.
Leading manufacturer of cellular telephone equipment in Sweden
5. Societe Nationale Elf Aquitaine
Petroleum company in France
6. Canon Inc.
Leading producer of visual image and information equipment in Japan
7. AEGON Insurance Group NV
Insurance company in the Netherlands
8. Bayerische Vereinsbank AG
Commercial bank in Germany
9. Mannesmann AG
Diversified construction and technology company in Germany
10. Clariant AG
Manufacturer of color chemicals in Switzerland
Top holdings include major European
manufacturing and financial companies.
For more complete details about the Fund's investment portfolio, see page 12. 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 six-month period ended September 30, 1997, Scudder International Fund
provided a total return of 13.90%. This performance exceeded that of the Fund's
benchmark, the unmanaged MSCI (Morgan Stanley Capital International) EAFE plus
Canada Index, which returned 12.54% for the same period. For the last twelve
months through September, the Fund also outperformed the benchmark index,
returning 21.61% against an index gain of 13.00%.
For the past six months, maintaining a cautious stance towards the Japanese
equity market has apparently been the appropriate decision. The Fund's relative
outperformance was helped both by staying materially underexposed to this
market, and by focusing its Japanese positions on quality companies that are
either globally competitive or blue chips in their domestic context. On the
flipside, emphasizing the European markets was favorable for performance, as
these markets continued to reach new highs. Stock selection in Europe was
positive as well, as restructuring themes continued to be well-rewarded. The
emerging markets offered a widely divergent picture. Latin American exposure,
particularly to Brazil and some of Mexico, contributed strongly to portfolio
gains. In contrast, the smaller markets of Asia suffered steep declines but did
limited damage to portfolio returns due to their minor overall weighting.
Market Summary: Europe Continues to Lead
Many of the major global equity markets began this half-year period with a
strong upward thrust. For U.S. investors, this solid performance in local market
terms was offset in part by continued weakness of local currencies against the
dollar, with the major exception of the Japanese yen. In recent months, as most
stock exchanges outside of Asia reached for new heights, volatility returned to
the markets. Sporadic U.S. market jitters, political changes within Europe,
turmoil in Southeast Asia, and economic disappointment in Japan offered ample
justification for those looking for reasons to be nervous.
During the period, the best performing markets were the smaller ones of the
European periphery, with Italy, Spain and Finland up by 26% to 32% in dollar
terms. Among the major markets, the star performers were Switzerland, the
Netherlands, the UK and Germany, clocking total dollar-based returns of 20% to
23%. These markets, particularly the peripherals, were propelled forward by
renewed optimism for a propitious outcome to European Monetary Union ("EMU").
In contrast, the Japanese market offered less than 4% in dollar gains. The
market experienced a bounce in the second quarter of 1997 on the expectation
that the economy was starting to recover, but these gains slipped away through
the summer, as evidence mounted that the economy was on the edge of lapsing back
into recession. The increase in consumption taxes proved to be a staggering blow
to domestic demand and confidence.
6 - Scudder International Fund
<PAGE>
In the emerging markets, turmoil in the smaller markets of Asia -- beginning in
Thailand and spreading out into Malaysia, Indonesia and the Philippines -- was
the headline-grabbing event of the summer months. Although reputedly at the
heart of the great Asian miracle, these are small, unsophisticated economies
that have proven themselves unable to deploy constructively the vast amounts of
capital thrown their way. These economies had built themselves up by relying too
heavily on exports, structurally inadequate financial systems, and debt. Now
this economic mismanagement has been called to task, and these markets have
witnessed 20-30% declines, and that amount again in currency devaluations. Latin
America has so far resisted any spillover from Asia's difficulties. Most
notably, Brazil pushed up another 25% in dollar terms over the period, driven by
continued macroeconomic stability and deregulation initiatives.
Outlook: Reforms,
Restructurings Enhance Prospects in Europe, Japan
Europe in the last several months has witnessed a number of significant
political and economic milestones that all point towards the same general
conclusion: Governments continuing to extract themselves from the business of
running the economy and allowing the markets to rule. As governments can no
longer afford protectionist shields to coddle inefficient companies, businesses
are doing what is necessary to get themselves into shape to compete globally. It
is in these companies that we focus our investment efforts, as we believe they
are most likely to succeed in the wake of Europe's economic integration, however
it evolves.
In Japan, as well, we are witnessing the slow realization that free market
influences must prevail. All other options have been exhausted. Interest rates
have been reduced to near zero. The budget deficit has already been driven to
unacceptably high levels by earlier public spending packages. The objective of
sustainable economic growth was not obtained. They are now biting the bullet,
and appear to be seriously committing to what we believe is the only remaining
true alternative -- that of market deregulation and structural reforms. As
companies adapt to a deregulated environment, exciting investment opportunities
are bound to arise.
In the smaller markets of Asia, it is precisely this issue of free market
capitalism that has been raised by the attempts of governments like that in
Malaysia to interfere in the free flow of capital now that it is going against
them. The longer these countries resist the discipline of the capital markets,
the deeper the potential damage that will be inflicted on the underlying
economies. As it is, the damage is severe and deep structural adjustments are
needed. Odds are high that a period of difficult economic retrenchment is in
store for the region before growth reaccelerates on a sounder footing.
For the rest of the world, this turmoil in Asia could have potentially
significant ripple effects. Inasmuch as the mature economies have been counting
on this region to provide a key growth engine for them, a retrenchment of the
smaller countries can only be detrimental for their growth prospects, with Japan
7 - Scudder International Fund
<PAGE>
probably the most vulnerable to an Asian slowdown. For other developing
economies, to the extent events in Asia lead to a realignment of trade or
liquidity flows amongst or from emerging markets, there could be significant
after-shocks.
Portfolio Strategy: Stay Ahead of Restructuring Curve
The intrinsic strategy of the Fund did not undergo much change during the past
six months, reflecting the fact that the fundamental conditions were in large
part unchanged. The backdrop of easy money, benign inflation and cautious fiscal
policies has continued to offer a potent fuel for the global equity markets.
Your portfolio remains overweighted in Europe, at 69% of equity assets versus
59% in the EAFE plus Canada benchmark, and significantly underweighted in Japan,
at 20% versus 28% in the index. Most of the activity that took place during the
period reflected a stock-by-stock response to shifting valuation relationships.
The investment strategy in Europe continues to focus on two broad categories of
companies. In one group are those companies which are already well-positioned
for the challenges of global integration and competition. Included among these
are some long-standing holdings in the portfolio like Ericcson in Sweden,
Carrefour in France, and SAP in Germany. In the other group are those companies
that are becoming better prepared for global competition by restructuring. A
corollary to this theme is an ongoing change to a more shareholder-oriented
mindset. Included in this group are holdings like Philips Electronics in the
Netherlands, VEBA in Germany, Accor in France and Clariant in Switzerland.
Our portfolio strategy has been to ride the wave as restructuring advances, and
gradually shift the emphasis toward opportunities where the process is just
beginning and, therefore, less discounted in stock valuations. Hence we have
been taking some profits in chemical and pharmaceutical holdings such as
Hoechst, Bayer, BASF, Smithkline Beecham and Zeneca. In their stead we have
added to the Fund's already meaningful exposure to banks and insurance, with new
names, including Allianz and Dresdner Bank in Germany, or AGF in France.
Our Japanese strategy over the past year has been to focus on the high quality
companies, that either are already strongly competitive in a global context or
are blue chips within their domestic framework. Going forward, we are intrigued
by the renewed imperative for the economic deregulation and structural reforms
so needed to put the Japanese economy back on sounder footing. We are starting
to invest in this process of change, focusing on those companies that we believe
will be "winners" in the upheaval which is likely to follow.
In the emerging markets, we have taken a cautious near-term stance while the
situation in Asia remains uncertain. As the smaller markets of Asia
progressively deteriorated over the summer months, our portfolio response was to
hold on to our small existing positions in Asia but to take some of our large
profits out of Hong Kong and Latin America. A renewal in our enthusiasm for Asia
must await further evidence of more commitment to free market credentials. We
remain optimistic concerning the long-term path that Brazil seems to have
8 - Scudder International Fund
<PAGE>
chosen, and will revisit that market once valuations become more attractive or
the threat of Asian "contagion" is mitigated.
In summary, we believe the Fund is well-positioned to benefit from the long-term
trends of economic deregulation, industry consolidation, and corporate
restructuring that are creating profitable companies around the world. Scudder
International Fund continues to be appropriate for investors seeking exposure to
the many opportunities for potential capital appreciation to be found in
overseas equities markets.
Sincerely,
Your Portfolio Management Team
/s/Irene T. Cheng /s/Nicholas Bratt
Irene T. Cheng Nicholas Bratt
/s/Carol L. Franklin /s/Joan R. Gregory
Carol L. Franklin Joan R. Gregory
/s/Marc Joseph /s/Sheridan Reilly
Marc Joseph Sheridan Reilly
9 - Scudder International Fund
<PAGE>
Glossary of Investment Terms
CURRENCY EXCHANGE RATE The price at which one country's currency can
be exchanged into another currency. When a
country's currency rises relative to other
currencies, this decreases the buying power
of foreign purchasers of that country's goods
and services and tends to hurt the earnings
of companies that export; by contrast, a weak
currency promotes exports. From the
perspective of a U.S. investor in overseas
securities, a weakening U.S. dollar adds to
total returns, as assets denominated in
foreign currencies then translate into more
in dollar terms; a strengthening dollar
relative to foreign currencies reduces
returns to U.S. investors.
DIVIDEND YIELD With stocks, a company's payment out of
earnings to shareholders divided by its share
price. For example, a stock that sells for
$10 and pays annual dividends totaling $1 has
a yield of 10%; if the stock price goes up to
$20, the yield would fall to 5%.
EMU (European Monetary Union) A proposed integration of European economies
involving among other changes a move to a
single currency for member nations. To
qualify for EMU membership, nations will be
required to meet certain guidelines
concerning total governmental debt and annual
budget deficits, designed to promote a strong
common currency.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected
impact of management, products, sales, and
earnings on their balance sheets and income
statements. Distinct from technical analysis,
which evaluates the attractiveness of a stock
based on historical price and trading volume
movements, rather than the financial results
of the underlying company.
GROWTH STOCK Stock of a company that has displayed above
average earnings growth and is expected to
continue to increase profits rapidly going
forward. Stocks of such companies usually
trade at higher multiples to earnings (see
price/earnings ratio) and experience more
price volatility than the market as a whole.
Distinct from value stock.
LIQUIDITY A stock that is liquid has enough shares
outstanding and a substantial enough market
capitalization to allow large purchases and
sales to occur without causing a significant
move in its market price as a result.
10 - Scudder International Fund
<PAGE>
MARKET CAPITALIZATION The value of a company's outstanding shares
of common stock, determined by the number of
shares outstanding multiplied by the share
price (shares x price = market
capitalization). The universe of publicly
traded companies is frequently divided into
large-, mid-, and small-capitalization.
"Large-cap" stocks tend to be more liquid.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation,
that indicates what investors are paying for
a company's earning power at the current
stock price. May be based on a company's
projected earnings for the coming 12 months.
A higher "earnings multiple" indicates higher
expected earnings growth, along with greater
risk of earnings disappointments.
VALUE STOCK A company whose stock price does not fully
reflect its intrinsic value, as indicated by
price/earnings ratio, price/book value ratio,
dividend yield, or some other valuation
measure, relative to its industry or the
market overall. Value stocks tend to display
less price volatility and may carry higher
dividend yields. Distinct from growth stock.
WEIGHTING (OVER/UNDER) Refers to the allocation of assets -- usually
in terms of sectors, industries, or countries
-- within a portfolio relative to the
portfolio's benchmark index or investment
universe.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
11 - Scudder International Fund
<PAGE>
Investment Portfolio as of September 30, 1997
<TABLE>
<CAPTION>
Principal Market
Amount (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 0.4%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 9/30/97 at 6.02%,
to be repurchased at $12,614,109 on 10/1/97, collateralized by a $9,204,000 -----------
U.S. Treasury Note, 12.375%, 5/15/04 (Cost $12,612,000) ............................. 12,612,000 12,612,000
-----------
Commercial Paper 3.8%
- ------------------------------------------------------------------------------------------------------------------------------
Bell Atlantic Financial Services Discount Note, 10/29/97 .............................. 28,900,000 28,775,923
Ciesco L.P. Discount Note, 10/07/97 ................................................... 13,000,000 12,988,062
General Electric Capital Corp. Discount Note, 10/07/97 ................................ 30,000,000 29,972,450
UBS Finance Inc. Discount Note, 10/06/97 .............................................. 37,000,000 36,971,736
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $108,708,171) 108,708,171
- ------------------------------------------------------------------------------------------------------------------------------
Short Term Notes 0.5%
- ------------------------------------------------------------------------------------------------------------------------------
-----------
Fifth Third Bank, 5.53%, 10/06/97 (Cost $14,999,998) .................................. 15,000,000 14,999,920
-----------
Convertible Bonds 0.6%
- ------------------------------------------------------------------------------------------------------------------------------
Japan 0.4%
Softbank Corp., 0.5%, 3/29/02 .................................................... JPY 1,500,000,000 10,933,035
-----------
Philippines 0.2%
International Container Terminal, Inc., 1.75%, 3/13/04 ................................ 7,515,000 6,613,200
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $22,731,653) 17,546,235
- ------------------------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.7%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 1.0%
YPF S.A. "D" (ADR) (Petroleum company) ............................................... 785,000 28,946,875
-----------
Australia 0.6%
Woodside Petroleum Ltd. (Major oil and gas producer) .................................. 1,814,600 17,339,638
-----------
Brazil 1.2%
Companhia Vale do Rio Doce (pfd.) (Diverse mining and industrial complex) ............. 710,000 17,303,637
Usinas Siderurgicas de Minas Gerais S/A (pfd.) (Steel manufacturer) ................... 1,527,033 16,684,391
-----------
33,988,028
-----------
Canada 1.2%
Canadian National Railway (Major railroad operator) ................................... 670,000 34,825,653
-----------
China 0.4%
Anhui Expressway Co. "H", Ltd. (Developer and manager of toll highways in Anhui
province) ........................................................................... 13,422,000 2,862,019
Jiangsu Expressway Co. "H", Ltd.* (Builder and manager of the Shanghai-Nanjing
expressway) ......................................................................... 12,591,000 3,783,158
Shenzhen Expressway Co. "H"* (Highway developer) ...................................... 8,068,000 2,137,426
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder International Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Zhejiang Expressway Co."H", Ltd.* (Road construction and management) .................. 14,637,000 4,019,595
-----------
12,802,198
-----------
Finland 1.7%
Nokia AB Oy "A" (Leading manufacturer of telecommunications equipment and
cellular telephones) ................................................................ 515,000 48,570,673
-----------
France 12.6%
AXA SA (Insurance group providing insurance, finance and real estate services) ........ 302,857 20,314,669
Accor SA (Catering, hotels, travel services) .......................................... 139,122 25,697,769
Alcatel Alsthom (Manufacturer of transportation, telecommunication and energy
equipment) .......................................................................... 262,494 34,904,823
Assurances Generales de France (Health, life, fire, accident and special risk
insurance) .......................................................................... 698,970 27,683,147
Carrefour (Hypermarket operator and food retailer) .................................... 55,800 34,767,439
Christian Dior (Leading fashion house) ................................................ 87,468 11,807,848
Compagnie Generale des Eaux (Water utility) ........................................... 120,000 14,116,457
Compagnie Generale des Eaux Warrants* (Expire 5/2/01) ................................. 120,000 64,717
Pinault-Printemps, SA (Distributor of consumer goods) ................................. 35,135 16,479,431
Renault SA (Manufacturer of automobiles, buses, industrial and agricultural
vehicles) ........................................................................... 79,468 24,991,538
Rhone-Poulenc SA "A" (Medical, agricultural and consumer chemicals) ................... 693,916 27,599,929
Schneider SA (Manufacturer of electronic components and automated manufacturing
systems) ............................................................................ 528,223 33,339,431
Societe Lyonnaise des Eaux SA (Water utility) ......................................... 272,544 30,407,707
Societe Nationale Elf Aquitaine (Petroleum company) ................................... 331,441 44,240,545
Total SA "B" (International oil and gas exploration, development and production) ...... 151,416 17,327,288
Usinor Sacilor (Producer of flat steel and stainless steel) ........................... 7,620 153,980
-----------
363,896,718
-----------
Germany 16.0%
Allianz AG (Multi-line insurance company) ............................................. 120,117 28,979,811
BASF AG (Leading international chemical producer) ..................................... 583,588 21,071,855
Bayer AG (Leading chemical producer) .................................................. 538,666 21,446,647
Bayerische Vereinsbank AG (Commercial bank) ........................................... 718,222 41,785,688
Commerzbank AG (Worldwide multi-service bank) ......................................... 808,400 29,143,485
Daimler-Benz AG (Automobile and truck manufacturer) ................................... 371,417 30,647,499
Dresdner Bank AG (Universal bank) ..................................................... 631,567 29,023,595
Hoechst AG (Chemical producer) ........................................................ 501,117 22,234,683
Mannesmann AG (Bearer) (Diversified construction and technology company) .............. 83,762 39,914,884
Munich Reinsurance AG (Registered) (Insurance company) ................................ 88,210 29,703,698
RWE AG (pfd.) (Producer and marketer of petroleum and chemical products) .............. 846,100 34,405,210
SAP AG (pfd.) (Computer software manufacturer) ........................................ 113,000 30,185,348
Schering AG (Pharmaceutical and chemical producer) .................................... 243,000 25,504,032
</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>
Siemens AG (Leading electrical engineering and electronics company) ................... 341,744 23,083,362
Thyssen AG (Manufacturer of capital goods and steel products) ......................... 89,352 20,834,219
VEBA AG (Electric utility, distributor of oil and chemicals) .......................... 621,500 36,316,746
-----------
464,280,762
-----------
Hong Kong 3.4%
Cheung Kong Holdings Ltd. (Real estate company) ....................................... 709,000 7,994,346
First Pacific Co., Ltd. (International management and investment company) ............. 8,687,681 8,701,154
Great Eagle Holdings Ltd. (Property development) ...................................... 3,576,000 9,843,474
HSBC Holdings Ltd. (Bank) ............................................................. 759,932 25,435,857
Hutchison Whampoa Ltd. (Container terminal and real estate company) ................... 1,499,584 14,728,403
Kerry Properties, Ltd. (Real estate company) .......................................... 6,622,000 15,660,713
New World Development Co., Ltd. (Property investment and development,
construction and engineering, hotels and restaurants, telecommunications) ........... 417,000 2,527,436
Television Broadcasts Ltd. (Television broadcasting) .................................. 4,157,000 14,719,798
-----------
99,611,181
-----------
Hungary 0.1%
First Hungary Fund (Investment company) (b) ........................................... 3,619 3,184,720
-----------
Indonesia 0.3%
Asia Pacific Resources International Holdings Ltd.* (Manufacturer of rayon fiber
for Asian textile markets, owner of world's leading paper pulp mill) ................ 126,600 625,087
Astra International Inc. (Foreign registered) (Distributor of automobiles,
motorcycles and related spare parts) .................................................. 1,538,000 1,390,745
Indah Kiat Pulp & Paper (Foreign registered) (Producer of pulp and paper) ............. 9,878,997 3,828,487
Pabrik Kertas Tjiwi Kimia (Operator of pulp and paper factory) ........................ 5,800,240 3,217,458
-----------
9,061,777
-----------
Italy 1.2%
Telecom Italia Mobile SPA (Cellular telecommunication services) ....................... 8,650,000 34,317,942
-----------
Japan 18.5%
Advantest Corp. (Producer of measuring instruments and semiconductor testing
devices) ............................................................................ 351,000 34,595,602
Bridgestone Corp. (Leading automobile tire manufacturer) .............................. 916,000 22,001,905
Canon Inc. (Leading producer of visual image and information equipment) ............... 1,488,000 43,505,529
DDI Corp. (Long distance telephone and cellular operator) ............................. 2,119 10,635,806
Daiwa Securities Co., Ltd. (Brokerage and other financial services) ................... 3,225,000 19,766,431
Fujitsu Ltd. (Leading manufacturer of computers) ...................................... 1,500,000 18,760,094
Jusco Co., Ltd. (Major supermarket operator) .......................................... 508,000 11,570,796
Keyence Corp. (Specialized manufacturer of sensors) ................................... 189,000 26,455,460
</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>
Matsushita Electric Industrial Co., Ltd. (Leading manufacturer of consumer
electronic products) ................................................................ 1,086,000 19,608,896
Matsushita Electric Works, Inc. (Leading maker of building materials and
lighting equipment) ................................................................. 1,400,000 14,610,511
Minebea Co., Ltd. (Manufacturer of bearings, electronic equipment, machinery
parts) .............................................................................. 1,169,000 12,974,365
Nichiei Co., Ltd. (Finance company for small and medium-sized firms) .................. 255,500 24,336,356
Nintendo Co., Ltd. (Game equipment manufacturer) ...................................... 294,000 27,516,462
Nippon Telegraph & Telephone Corp. (Leading telecommunications company) ............... 2,006 18,442,539
Nomura Securities Co., Ltd. (Financial advisor, securities broker and
underwriter) ........................................................................ 1,453,000 18,894,355
Orix Corp. (Major leasing company) .................................................... 289,200 21,989,117
Pioneer Electronics Corp. (Leading manufacturer of audio equipment) ................... 593,000 12,622,769
Ricoh Co., Ltd. (Leading maker of copiers and information equipment) .................. 2,130,000 31,931,917
SMC Corp. (Leading maker of pneumatic equipment) ...................................... 285,900 27,231,954
Secom Co., Ltd. (Electronic security system operator) ................................. 357,000 24,098,646
Shohkoh Fund & Co., Ltd. (Finance company for small and medium-sized firms) ........... 58,200 16,244,999
Sony Corp. (Consumer electronic products manufacturer) ................................ 366,400 34,596,099
Sumitomo Metal Industries, Ltd. (Leading integrated crude steel producer) ............. 7,650,000 15,903,839
Tokyo Electron Ltd. (Leading semiconductor production equipment manufacturer) ......... 434,000 26,492,566
-----------
534,787,013
-----------
Korea 0.3%
Pohang Iron & Steel Co., Ltd. (Leading steel producer) (b) ............................ 7,030 557,006
Pohang Iron & Steel Co., Ltd. (ADR) ................................................... 292,900 7,542,175
-----------
8,099,181
-----------
Malaysia 1.2%
Arab Malaysian Finance Berhad (Foreign registered) (Licensed finance company) ......... 5,184,000 4,554,026
Arab-Malaysian Corp. (Investment holding company with interests in financial
services, infrastructure and property) ............................................. 3,512,000 4,763,135
Malayan Banking Berhad (Leading banking and financial services group) ................. 1,350,000 6,782,770
Malaysian Resources Corp. (Property development and investment) ....................... 5,575,000 4,863,142
Multi-Purpose Holdings Berhad (Investment holding company) ............................ 6,444,000 4,806,806
United Engineers (Malaysia) Berhad (Leading comprehensive contractor) ................. 2,528,700 8,106,182
-----------
33,876,061
-----------
Netherlands 5.2%
AEGON Insurance Group NV (Insurance company) .......................................... 537,500 43,051,857
Akzo-Nobel NV (Chemical producer) ..................................................... 120,000 20,507,512
Elsevier NV (International publisher of scientific, professional, business,
and consumer information books) ..................................................... 1,676,000 24,338,676
Heineken Holdings NV "A" (Brewery) .................................................... 160,000 24,561,580
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder International Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Philips Electronics NV (Leading manufacturer of electrical equipment) ................. 447,000 37,824,632
-----------
150,284,257
-----------
Philippines 0.6%
C & P Homes, Inc. (Home construction company) ......................................... 30,477,000 2,915,191
Manila Electric Co. "B" (Electric utility) ............................................ 2,957,500 10,201,232
SM Prime Holdings Corp. (Leader in commercial center operations) ...................... 30,000,000 5,565,217
-----------
18,681,640
-----------
Portugal 0.4%
Portugal Telecom SA (Telecommunication services) ...................................... 239,300 10,379,774
-----------
Spain 1.1%
Acerinox, S.A. (Stainless steel producer) ............................................. 171,100 32,266,798
-----------
Sweden 4.7%
AGA AB "B" (Free) (Producer and distributor of industrial and medical gases) .......... 899,000 14,455,091
L.M. Ericsson Telephone Co. "B" (ADR) (Leading manufacturer of cellular
telephone equipment) ................................................................ 945,600 45,329,700
S.K.F. AB "B" (Free) (Manufacturer of roller bearings) ................................ 750,000 21,845,140
Skandia Foersaekrings AB (Free) (Financial conglomerate) .............................. 1,193,500 53,324,086
-----------
134,954,017
-----------
Switzerland 8.6%
ABB AG (Bearer) (Manufacturer of electrical equipment and rail transit systems) ....... 19,639 28,921,786
Ciba Specialty Chemical* (Registered) (Manufacturer of chemical products for
plastics, coatings, fibers and fabrics) ............................................. 258,901 25,009,000
Clariant AG (Registered) (Manufacturer of color chemicals) ............................ 48,447 38,970,773
Credit Suisse Group (Registered} (Provider of bank services, management services
and life insurance) ................................................................. 250,000 33,774,493
Holderbank Financiere Glaris AG (Bearer) (Cement producer) ............................ 15,560 14,763,011
Nestle SA (Registered) (Food manufacturer) ............................................ 15,982 22,261,624
Novartis AG (Bearer) (Pharmaceutical company) ......................................... 18,773 28,911,323
Novartis AG (Registered) .............................................................. 6,360 9,750,980
Roche Holdings AG (PC) (Producer of drugs and medicines) .............................. 3,405 30,199,037
Union Bank of Switzerland (Bearer) (Switzerland's largest universal bank) ............. 12,892 15,059,132
-----------
247,621,159
-----------
Taiwan 0.2%
China Development Corp. (Leading venture capital firm and investment bank) ............ 1,293,750 4,589,851
Far Eastern Department Store (Department store chain) ................................. 1,529,277 1,951,017
-----------
6,540,868
-----------
United Kingdom 14.2%
BOC Group PLC (Producer of industrial gases) .......................................... 1,812,526 32,418,799
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder International Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
British Petroleum PLC (Major integrated world oil company) ............................ 3,059,332 46,130,897
Carlton Communications PLC (Television post production products and services) ......... 3,487,500 28,863,869
General Electric Co., PLC (Manufacturer of power, communications and defense
equipment and other various electrical components) .................................. 4,450,000 27,988,414
Glaxo Wellcome PLC (Pharmaceutical company) ........................................... 1,111,682 25,000,735
Imperial Chemical Industries PLC (Leading international chemical producer) ............ 1,523,100 24,742,106
Pearson PLC (Diversified media and entertainment holding company) ..................... 1,619,000 20,473,079
Pilkington PLC (Manufacturer of glass for building and transport markets) ............. 6,173,700 15,581,653
PowerGen PLC (Electric utility) ....................................................... 2,605,123 32,097,800
RTZ Corp., PLC (Mining and finance company) ........................................... 1,688,460 26,957,502
Reuters Holdings PLC (International news agency) ...................................... 2,219,600 26,309,690
SmithKline Beecham PLC "A" (Pharmaceutical company) ................................... 3,913,424 38,182,640
WPP Group PLC (Advertising agency) .................................................... 6,695,300 30,233,035
Zeneca Group PLC (Holding company: manufacturing and marketing of pharmaceutical
and agrochemical products and specialty chemicals) .................................. 1,143,700 37,350,019
-----------
412,330,238
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,986,370,924) 2,740,647,171
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,145,422,746) (a) 2,894,513,497
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $2,152,133,715. At September
30, 1997, net unrealized appreciation for all securities based on tax cost
was $742,379,782. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $834,725,415 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $92,345,633.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $3,741,726 (.13% 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 September 30, 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
The accompanying notes are an integral part of the financial statements.
17 - Scudder International Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1997
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $2,145,422,746) ............. $2,894,513,497
Cash ................................................................ 103,449
Foreign currency holdings, at market (identified cost
$20,790,816) ..................................................... 20,568,868
Receivable on investments sold ...................................... 14,985,461
Receivable on Fund shares sold ...................................... 2,428,246
Dividends and interest receivable ................................... 6,163,703
Foreign taxes recoverable ........................................... 2,422,637
Other assets ........................................................ 48,107
----------------
Total assets ........................................................ 2,941,233,968
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................... 13,049,586
Payable for Fund shares redeemed .................................... 42,163,613
Accrued management fee .............................................. 1,921,778
Other payables and accrued expenses ................................. 1,521,270
----------------
Total liabilities ................................................... 58,656,247
--------------------------------------------------------------------------------------------
Net assets, at market value $2,882,577,721
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................. 18,006,772
Unrealized appreciation (depreciation) on:
Investments ...................................................... 749,090,751
Foreign currency related transactions ............................ (322,059)
Accumulated net realized gain ....................................... 253,207,880
Paid-in capital ..................................................... 1,862,594,377
--------------------------------------------------------------------------------------------
Net assets, at market value $2,882,577,721
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($2,882,577,721 / 52,696,417 shares of capital stock ----------------
outstanding, $.01 par value, 200,000,000 shares authorized) ......... $54.70
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder International Fund
<PAGE>
Statement of Operations
six months ended September 30, 1997
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $3,746,258) ............. $ 30,646,340
Interest (net of foreign taxes withheld of $3,704) .................. 4,691,423
-----------------
35,337,763
-----------------
Expenses:
Management fee ...................................................... 11,440,275
Services to shareholders ............................................ 3,138,916
Custodian and accounting fees ....................................... 1,528,698
Directors' fees and expenses ........................................ 38,344
Reports to shareholders ............................................. 210,811
Auditing ............................................................ 73,608
Legal ............................................................... 24,921
Registration fees ................................................... 33,252
Interest expense .................................................... 2,307
Other ............................................................... 105,021
-----------------
16,596,153
---------------------------------------------------------------------------------------------
Net investment income 18,741,610
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................................... 255,453,545
Foreign currency related transactions ............................... (1,956,974)
-----------------
253,496,571
-----------------
Net unrealized appreciation (depreciation) during the period
on:
Investments ......................................................... 88,645,306
Foreign currency related transactions ............................... (198,018)
-----------------
88,447,288
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 341,943,859
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $360,685,469
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder International Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 18,741,610 $ 16,304,485
Net realized gain (loss) from investment transactions ..... 253,496,571 104,826,570
Net unrealized appreciation (depreciation) on investment
transactions during the period ......................... 88,447,288 140,573,351
----------------- ----------------
Net increase (decrease) in net assets resulting from
operations ............................................. 360,685,469 261,704,406
----------------- ----------------
Distributions to shareholders from:
Net investment income ..................................... (2,152,185) (68,670,750)
----------------- ----------------
Net realized gains ........................................ (538,051) (64,600,067)
----------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................. 442,969,282 563,459,224
Net asset value of shares issued to shareholders in
reinvestment of distributions .......................... 2,276,512 117,795,156
Cost of shares redeemed ................................... (503,693,992) (741,611,600)
----------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. (58,448,198) (60,357,220)
----------------- ----------------
Increase (decrease) in net assets ......................... 299,547,035 68,076,369
Net assets at beginning of period ......................... 2,583,030,686 2,514,954,317
Net assets at end of period (including undistributed
net investment income of $18,006,772 and ----------------- ----------------
$1,417,347, respectively) .............................. $2,882,577,721 $2,583,030,686
----------------- ----------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................. 53,734,143 55,022,967
----------------- ----------------
Shares sold ............................................... 8,468,095 11,978,853
Shares issued to shareholders in reinvestment of
distributions .......................................... 41,626 2,508,054
Shares redeemed ........................................... (9,547,447) (15,775,731)
----------------- ----------------
Net increase (decrease) in Fund shares .................... (1,037,726) (1,288,824)
----------------- ----------------
Shares outstanding at end of period ....................... 52,696,417 53,734,143
----------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - 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>
Six Months
Ended
September 30, Years Ended March 31,
1997 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of --------------------------------------------------------------------------------------------
period .................... $48.07 $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 ........ .35 .30 .38 .21 .31 .38 .44 .80 .49 .40 .45
Net realized and unrealized
gain (loss) on investment
transactions .............. 6.33 4.53 7.19 (1.03) 7.74 2.64 (.37) (.39) 5.30 4.15 (.86)
Total from investment --------------------------------------------------------------------------------------------
operations ................ 6.68 4.83 7.57 (.82) 8.05 3.02 .07 .41 5.79 4.55 (.41)
--------------------------------------------------------------------------------------------
Less distributions:
From net investment income ... (.04) (1.28) (.40) -- (.63) (.83) -- (.74) (.43) (.13) (.82)
In excess of net investment
income .................... -- -- -- -- (.06) -- -- -- -- -- --
From net realized gains on
investment transactions ... (.01) (1.19) (1.18) (2.42) (.09) (.86) (.40) (1.98) (3.15) (3.06) (9.39)
--------------------------------------------------------------------------------------------
Total distributions .......... (.05) (2.47) (1.58) (2.42) (.78) (1.69) (.40) (2.72) (3.58) (3.19) (10.21)
--------------------------------------------------------------------------------------------
Net asset value, end of --------------------------------------------------------------------------------------------
period .................... $54.70 $48.07 $45.71 $39.72 $42.96 $35.69 $34.36 $34.69 $37.00 $34.79 $33.43
--------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............. 13.90** 10.74 19.25 (2.02) 22.69 9.12 .18 1.46 17.08 14.34 (.47)
Ratios and Supplemental Data
Net assets, end of period
($ millions) .............. 2,883 2,583 2,515 2,192 2,198 1,180 933 929 783 550 559
Ratio of operating expenses
to average net assets (%).. 1.17* 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 (%) (c) ............ .66** .64 .86 .48 .75 1.13 1.25 2.22 1.33 1.20 1.16
Portfolio turnover rate (%) .. 65.4* 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) ....................... $.0028 $.0002 -- -- -- -- -- -- -- -- --
</TABLE>
(a) 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 periods ending on or after March 31, 1997.
(c) The ratio for the six months ended September 30, 1997 has not been
annualized since the Fund believes it would not be appropriate because the
Fund's dividend income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
21 - 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 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 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.
22 - Scudder International 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.
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.
23 - Scudder Interational Fund
<PAGE>
B. Purchases and Sales of Securities
For the six months ended September 30, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $871,896,371 and
$857,858,756, respectively.
C. Related Parties
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser
a fee equal to an annual rate of 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 $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. 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. For the six months ended September 30, 1997, the fee
pursuant to the Agreement amounted to $11,440,275 which was equivalent to an
annual effective rate of 0.81% 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 in 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. Included
in services to shareholders is $1,739,718 charged to the Fund by SSC for the six
months ended September 30, 1997, of which $285,251 was unpaid at September 30,
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 six months ended September
30, 1997, the amount charged to the Fund by STC aggregated $711,980, of which
$124,146 was unpaid at September 30, 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 six months
ended September 30, 1997, the amount charged to the Fund by SFAC aggregated
$426,320, of which $71,470 was unpaid at September 30, 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
24 - Scudder International Fund
<PAGE>
invested in the Underlying Funds. At September 30, 1997, the Special Servicing
Agreement expense charged to the Fund amounted to $298,728.
The Fund pays each Director not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the six months
ended September 30, 1997, Directors' fees and expenses aggregated $38,344.
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.
E. Other Information
The Board of Directors has approved a merger with the Barrett International
Shares, a class of shares of a series of Scudder Institutional Fund, Inc., with
net assets of approximately $21 million to be completed in 1998. A new class of
shares will be issued to effect the merger.
25 - 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 September 30,
1997, and the related statement of operations for the six months then ended, the
statements of changes in net assets for the six months then ended and for the
year ended March 31, 1997, and the financial highlights for the six months ended
September 30, 1997, and for each of the ten years in the period ended March 31,
1997. 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
September 30, 1997 by correspondence with the custodian. 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 September 30, 1997, the results of its
operations for the six months then ended, the changes in its net assets for the
six months then ended and for the year ended March 31, 1997, and the financial
highlights for the six months ended September 30, 1997, and for each of the ten
years in the period ended March 31, 1997, in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
November 5, 1997
26 - Scudder International Fund
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This Page
intentionally
left blank.
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
David S. Lee*
Director, Vice President and
Assistant Treasurer
William H. Luers
Director; President, The
Metropolitan Museum of Art
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;
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
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
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 Internationial 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 International 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 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
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 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
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