Scudder
Latin America
Fund
Annual Report
October 31, 1998
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>
Scudder Latin America Fund
- --------------------------------------------------------------------------------
Date of Inception: 12/8/92 Total Net Assets as of Ticker Symbol: SLAFX
10/31/98: $503.6 million
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o Although Scudder Latin America Fund posted a -20.23% total return for the
twelve- month period ended October 31, 1998, the Fund was ranked first out of
forty Latin American funds tracked by Lipper Analytical Services for the same
period.^1
o Latin American stocks dropped sharply as crises in Asia and Russia prompted
investors to sell financial assets in the developing countries.
o The Fund emphasized stocks whose strong cash flows, healthy balance sheets,
and ability to obtain financing have positioned them to withstand market
volatility and economic uncertainty.
o The management team reduced the Fund's weighting in commodity-based companies
in favor of more defensive non-cyclical stocks.
Table of Contents
3 Letter from the Fund's Chairman 18 Financial Highlights
4 Performance Update 19 Notes to Financial Statements
5 Portfolio Summary 23 Report of Independent Accountants
6 Portfolio Management Discussion 24 Tax Information
11 Glossary of Investment Terms 24 Officers and Directors
12 Investment Portfolio 25 Investment Products and Services
15 Financial Statements 26 Scudder Solutions
^1 Source: Lipper Analytical Services. In the International Equity Fund
category, Scudder Latin America Fund was ranked 5th and 1st for the three-
and five-year periods ended October 31, 1998, out of 28 and 10 funds,
respectively.
2 - Scudder Latin America Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
The past twelve months have been a tumultuous period for both the economies
and the stock markets of Latin America. As the crises in the developing
countries deepened, investors liquidated financial assets in the region in favor
of "safe havens" in the mature markets. Although such downturns are difficult to
deal with when they are taking place, they can also provide extraordinary
opportunities for investors willing to endure volatility. We believe that in a
challenging climate such as this, prudent asset allocation and a long-term
outlook are essential elements of a successful investment plan.
In the midst of this turmoil, the Fund's management team continued to
invest in financially sound, growing companies that are positioned to prosper in
any environment. Over time, the long-term approach of using fundamental research
to find the strongest companies available will help the Fund successfully
navigate through the inevitable short-term market fluctuations.
For those of you who are interested in new Scudder products, we recently
introduced the Scudder Tax Managed Growth Fund, which invests in medium and
large-sized U.S. companies, and Scudder Tax Managed Small Company Fund, which
invests in stocks of small U.S. companies. Using a combination of quantitative
and fundamental research, the funds focus on companies with strong earnings
growth, reasonable valuations, and favorable risk profiles. Both funds strive to
maximize after tax returns by systematically taking into account the tax
implications of portfolio transactions and seeking to offset capital gains by
realizing losses when appropriate.
Thank you for your continued investment in Scudder Latin America Fund. If
you have any questions about your investment, please call Scudder Investor
Information at 1-800-225-2470, or visit our Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Latin America Fund
3 - Scudder Latin America Fund
<PAGE>
Performance Update as of October 31, 1998
- ----------------------
Fund Index Comparisons
- ----------------------
Total Return
- ---------------------------------------------------
Period Ended Growth of Average
10/31/98 $10,000 Cumulative Annual
- ---------------------------------------------------
Scudder Latin America Fund
- ---------------------------------------------------
1 Year $ 7,977 -20.23% -20.23%
5 Year $ 11,620 16.20% 3.05%
Life of Fund* $ 17,827 78.27% 10.30%
- ---------------------------------------------------
IFC Latin America Investable Total Return Index
- ---------------------------------------------------
1 Year $ 6,966 -30.34% -30.34%
5 Year $ 8,972 -10.28% -2.14%
Life of Fund* $ 11,700 17.00% 2.73%
- ---------------------------------------------------
* The Fund commenced operation on December 8, 1992.
Index comparisons begin December 31, 1992.
- ------------------------------
Growth of a $10,000 Investment
- ------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
IFC Latin America Investable
Total Return Index Scudder Latin America Fund
12/92* 10000 10000
'93 13041 14728
'94 18352 19651
'95 11480 13567
'96 13691 17407
'97 16796 21455
'98 11700 17114
Yearly periods ended October 31
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
- ---------------------------------
Yearly periods ended October 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1993* 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 18.41 $ 24.44 $ 16.22 $ 20.63 $ 25.12 $ 19.02
- -----------------------------------------------------------------------------------------------
Income Dividends $ -- $ .06 $ -- $ .15 $ .26 $ .25
- -----------------------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ .06 $ .73 $ -- $ -- $ 1.14
- -----------------------------------------------------------------------------------------------
Fund Total Return (%) 53.42** 33.43 -30.96 28.31 23.25 -20.23
- -----------------------------------------------------------------------------------------------
Index Total Return (%) 28.72 48.17 -37.44 19.26 22.68 -30.34
- -----------------------------------------------------------------------------------------------
</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 five year and life of Fund periods 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, 1998
- ------------------------------
Geographical
(Excludes 7% Cash Equivalents)
- ------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Mexico 48%
Brazil 33%
Argentina 14%
Chile 2%
Peru 1%
Other 2%
--------------------------------------
100%
--------------------------------------
Our increased weighting in Mexico reflects an emphasis on
consumer-related companies that are well-positioned to
withstand economic uncertainty.
- ------------------------------
Sectors
(Excludes 7% Cash Equivalents)
- ------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Consumer Staples 33%
Communications 23%
Financial 15%
Energy 9%
Manufacturing 7%
Utilities 6%
Consumer Discretionary 6%
Other 1%
--------------------------------------
100%
--------------------------------------
Sector weightings illustrate a shift into non-cyclical
industries.
- ---------------------------
Ten Largest Equity Holdings
(55% of Portfolio)
- ---------------------------
1. Telefonos de Mexico S.A. de C.V.
Telecommunication services in
Brazil
2. Kimberly Clark de Mexico S.A. de
C.V.
Producer of consumer paper
products in Mexico
3. Banco Itau S.A.
Bank in Brazil
4. CIFRA S.A. de C.V.
Retailer in Mexico
5. Panamerican Beverages, Inc.
Regional soft drink bottler
6. YPF S.A.
Petroleum company in Argentina
7. Banco Bradesco S.A.
Bank in Brazil
8. Companhia Cervejaria Brahma
Beer producer and distributor in
Brazil
9. Telecomunicacoes de Sao Paulo S.A.
Telecommunication services in Brazil
10. Petroleo Brasileiro S.A.
Petroleum company in Brazil
Portfolio changes were undertaken in response to our
concerns about individual companies' exposure to problems in
the external economic environment.
For more complete details about the Fund's investment portfolio, see page 12. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Latin America Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Latin America Fund posted a negative total return of 20.23% for the
fiscal year ended October 31, 1998. This compared with a negative total return
of 30.34% for the unmanaged benchmark, the International Finance Corporation's
Latin America Investable Total Return Index. Details of the country components
of the IFC Index for the fiscal year are provided in the adjacent table.
Investors React to Debt Crisis
Latin American stock markets were under selling pressure for most of the year,
suffering severe damage during the global financial crisis. A common theme to
the poor performance of emerging markets around the globe was the abuse of
leverage. This can take many forms: the rapid expansion of assets whose earning
power is inadequate to pay for the debt incurred to pay for the assets; the
uncritical, and at times politically inspired, extension of credit to borrowers
with no capacity to repay; and the reliance on short-term debt to force-feed a
growth rate beyond what can be supported with internally generated cash flow
alone.
Financial excesses of this nature are not exclusively problems of the
emerging markets. A debt or cash flow problem in an emerging market, however,
will tend to differ from a similar problem in an industrialized country since
the emerging market borrower will typically owe money in a currency that is not
his own. The scarcity of foreign exchange reserves available to repay debt
elevates what otherwise would be a localized credit problem into a
multi-national restructuring process. This process may be a drawn out affair, as
was the case with the Latin American debt crisis in the 1980s; or it can be
concluded quite quickly, as was Mexico's debt crisis in 1995.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
- --------------------------------------------------------------------------------
BAR CHART TITLE:
Investment Returns in Latin American
Stock Markets
Twelve months ended October 31, 1998.
Returns are in U.S. Dollars
Argentina -13.12%
Brazil -31.23%
Chile -36.17%
Colombia -61.02%
Mexico -25.74%
Peru -38.88%
Venezuela -63.52%
IFC Latin America Investable
Index -30.34%
Source: IFC Emerging Markets Database
Past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
The Asian debt crisis had its initial impact on Latin American markets just as
the Fund's 1997 fiscal year was ending. As Asian markets stabilized over the
course of 1998 and several countries in that region moved forward with their
restructuring activities, the Latin American crisis deepened. In the weeks
following the Russian debt default and the crisis in the hedge fund industry,
markets went into a free fall. Brazil was very much a central player in this
drama due to the country's economic importance in the region and the Cardoso
administration's failure to stay the course with the tough austerity program it
6 - Scudder Latin America Fund
<PAGE>
had introduced last year in order to contain the aftershocks of the Asian
crisis. Markets lost confidence in the currency and in other financial
instruments of countries whose policies were not compatible with the objectives
of foreign investors.
The frequency with which major Latin American countries have had to deal with
foreign exchange crises underscores the structural nature of the problem.
Inadequate rates of domestic savings have for years been supplemented with
foreign savings in the form of short-term debt in order to finance economic
growth and development. Short-term foreign debt, however, typically exceeds hard
currency reserves for Latin American nations, fueling a foreign exchange crisis
anytime there is a loss of confidence among foreign lenders.
Strong Government Response
As the Fund's fiscal year ended, investor attitudes toward Latin America
turned somewhat positive. We believe this was due to the speed with which Latin
American governments addressed investor concerns. The Brazilian government,
energized by Cardoso's reelection, introduced a new fiscal stabilization program
that is likely to be accepted by its Congress. The goal of this new program is
to reduce the government's fiscal deficit to a level that will stabilize federal
debt relative to the gross domestic product. This, in turn, should allow
deficits to be financed by domestic savings in a non-inflationary manner and at
progressively lower interest rates. Failure of the Brazilian political system to
reach a consensus on fiscal reform could have highly negative consequences for
that country's economic performance.
THE PRINTED DOCUMENT CONTAINS A TABLE HERE
- --------------------------------------------------------------------------------
Economic Growth Forecasts (GDP)
Country 1997 1998* 1999*
------------------------------------------------
Argentina 8.60% 4-5% 3-4%
Brazil 3.00% 0-1% (1)-(2)%
Chile 7.10% 4-5% 2-3%
Colombia 3.10% 2-3% 2-3%
Mexico 7.00% 4-5% 3-4%
Peru 7.30% 2-3% 3-4%
Venezuela 5.10% 0-1% (2)-(3)%
* Estimated. Estimates may prove inaccurate, and, even if accurate, may not
correlate with market activity. Source: Scudder Latin America Group.
- --------------------------------------------------------------------------------
Additional positive sentiment was generated when the International Monetary Fund
(IMF) committed to providing Brazil with an assistance package exceeding $41
billion. This package removes the immediate risk of the country's inability to
service its foreign debt, but it does not solve the problem -- not unique to
Brazil -- of low domestic savings rates, inadequate inflows of foreign
investment, and an imbalance between the maturity of foreign debt and the
economy's ability to generate hard currency reserves. Still, the risk of a run
on Brazil's foreign exchange reserve appears to have been contained, reducing
the odds of a significant devaluation. The price of austerity, for Brazil, will
7 - Scudder Latin America Fund
<PAGE>
be the likely contraction of economic activity in the near term. Our forecast of
the economic growth rates for the major Latin American countries is shown on
page 7.
It is highly significant that a growing number of Latin American governments are
committing to fiscal balance, low rates of inflation, pension fund and social
security reform, trade liberalization, privatization, and the dismantling of
authoritarian political structures. Reforms of this nature are essential if
Latin America is to extricate itself from its foreign debt burden. Domestic
savings must command a larger share of the development financing equation,
inflows of equity from abroad must replace foreign borrowing, and governments
must adopt disciplined programs to wean their economies away from foreign debt.
Savings and investment do not thrive in a hostile environment, and the reform
process that has been underway in Latin America for almost a decade clearly
seeks to achieve a stable, low-inflation economic background to encourage both
local and foreign companies to invest their equity. This is fundamentally the
same reform process that has rewarded stock market investors in the past, and
should continue to do so in the future.
Focus on Companies With Strong Balance Sheets
Since volatility is not likely to recede quickly from the Latin American
markets, a long-term commitment helps investors cope with the periodic crises
that the Fund has experienced since its inception. The Fund's outperformance of
its benchmark in the year ended October 31, 1998 underscores our view that
portfolios are best structured to overcome stock market volatility when they
emphasize companies with low balance sheet leverage, a healthy rate of internal
cash flow generation, and the ability to finance their growth even during
periods of economic turmoil.
Most of the changes in the Fund's portfolio during the past twelve months were
undertaken in response to our concerns about corporate exposure to various
problems such as high levels of debt, commodity price deflation, growing import
competition, and a slowdown in economic activity. We sold our investments in two
Argentine oil companies -- Astra CAPSA and Perez Companc S.A. -- and sharply
reduced the portfolio's holding of YPF S.A., Argentina's largest oil and gas
company. Apart from the oil and gas investments, most of the Fund's holdings in
cyclical industries and sectors sensitive to commodity prices were Brazilian
companies. As a result of the sale or reduction in holdings in the Brazilian
pulp and paper, mining, petrochemical, iron and steel, and the consumer durables
industries, the portfolio's Brazilian weighting declined to 33% of equities at
the end of October, from 42% on October 31, 1997. Given our forecast of an
economic decline in Brazil during 1999, we are not likely to emphasize cyclical
sectors in the near future.
Many of the Mexican consumer-related companies have the financial and
operational characteristics that provide a degree of immunity to an uncertain
economic environment, and we emphasized this sector throughout the twelve-month
period,
8 - Scudder Latin America Fund
<PAGE>
THE PRINTED DOCUMENT CONTAINS A TABLE HERE
- --------------------------------------------------------------------------------
Country Weightings
October 31, 1998
- -------------------------------------------------------
Country Scudder Latin IFC Index
America Fund* Weighting
- -------------------------------------------------------
Argentina 14.0% 14.6%
Brazil 33.0% 27.9%
Chile 2.0% 13.4%
Colombia 1.0% 2.2%
Mexico 48.0% 34.2%
Panama 1.0% 0.0%
Peru 1.0% 3.0%
Venezuela (less than)1.0% 1.8%
* Excludes Fund's assets in cash equivalents
- --------------------------------------------------------------------------------
increasing our weighting in Mexico from 33% to 48%. Data for country
weightings are shown in the above table.
Sector weightings for the portfolio illustrate the shift in emphasis away from
cyclicals toward non-cyclicals. Consumer staples, which include the important
food and beverage industries, accounted for 33% of the Fund's equities as of
October 31, 1998, and investments in the communications sector made up 23% of
equity holdings. The financial sector, dominated by two large Brazilian banks
with significant interests in the insurance business, ranked third with 15% of
equities.
9 - Scudder Latin America Fund
<PAGE>
Investment in Quality Companies
We believe that we are entering the new fiscal year with a quality portfolio of
companies. The Fund does not have significant exposure to import competition,
economic slowdowns, or debt rollover difficulties. While the defensive
characteristics are high in this regard, so too are the growth dynamics of these
companies. They serve a youthful and relatively poor population with high
quality, low priced consumables. They address the outsized infrastructure
investment requirements for a modern telecommunications network and reliable
electric power grid. And finally, they are companies that generate high cash
returns on their investment, and have demonstrated a record of reinvesting cash
back into the business at a competitive return.
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
Scudder Latin America Fund:
A Team Approach to Investing
Scudder Latin America Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an
important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for the
Fund's portfolio. They are supported by the Adviser's large staff of
economists, research analysts, traders, and other investment specialists
who work in our offices across the United States and abroad. We believe
our team approach benefits Fund investors by bringing together many
disciplines and leveraging our 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 the Adviser'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 H. Rogers, Portfolio Manager, also joined the
Fund's team in 1996 and is primarily responsible for research on Latin
American corporations. Mr. Rogers joined the Adviser in 1994 and has over
10 years of investment experience.
10 - Scudder Latin America Fund
<PAGE>
Glossary of Investment Terms
CURRENCY DEVALUATION A significant decline of a currency's value relative
to other currencies, such as the U.S. dollar. This
may be prompted by trading or central bank
intervention (or the lack of intervention) in the
currency markets. For U.S. investors who are
investing overseas, a devaluation of a foreign
currency can have the effect of reducing the total
return of their investment.
CYCLICAL Stocks Companies whose earnings fluctuate with the
business cycle. Cyclical industries include steel,
cement, paper, machinery, and autos.
FISCAL Deficit The difference between a country's tax
revenues and expenditures. Governments generally
issue debt to finance this shortfall in the form
of bonds. A low rate of savings in a debtor nation
means that investment from foreign sources will be
required.
INTERNATIONAL MONETARY An organization focused on the lowering of trade
FUND (IMF) barriers and the stabilization of currency exchange
rates. While helping developing nations to pay
their debts, the IMF usually imposes tough
guidelines aimed at lowering inflation, cutting
imports, and raising exports.
LEVERAGE Debt in relation to a firm's capital structure. The
more long-term debt there is, the greater the
financial leverage. While a higher degree of
leverage can increase a firm's return on equity, it
also requires that earnings be sufficient to cover
interest and principal payments on the debt
incurred. Leverage therefore has the potential to
boost returns, but it may also increase the risk of
a firm defaulting on its debt payments.
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 Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
11 - Scudder Latin America Fund
<PAGE>
Investment Portfolio as of October 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount (U.S.$) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 6.6%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/30/1998 at 5.4%, to be
repurchased at $32,964,828 on 11/2/1998, collateralized by a $29,042,000 U.S. Treasury -----------
Note, 6.5%, 5/15/2005 (Cost $32,950,000) .............................................. 32,950,000 32,950,000
-----------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 93.4%
- ------------------------------------------------------------------------------------------------------------------------------
Argentina 12.8%
BI S.A. "A" (Venture capital company) (b) ............................................... 3,000,000 3,045,129
Nobleza Piccardo S.A. (Tobacco company) ................................................. 1,004,177 3,515,780
Quilmes Industrial S.A. (Leading beer distributor) ...................................... 922,443 7,840,766
Quilmes Industrial S.A. (ADR) ........................................................... 443,000 4,070,063
Telecom Argentina S.A. "B" (ADR) (Telecommunication services) ........................... 400,000 12,900,000
Telefonica de Argentina S.A. "B" (ADR) (Telecommunication services) ..................... 300,000 9,918,750
YPF S.A. "D" (ADR) (Petroleum company) .................................................. 780,000 22,571,250
-----------
63,861,738
-----------
Brazil 30.4%
Aracruz Celulose S.A. "B" (ADR) (Producer of eucalyptus kraft pulp) ..................... 210,200 1,760,421
Banco Bradesco S.A. (pfd.) (Commercial bank) ............................................ 3,901,277,111 22,238,817
Banco Itau S.A. (pfd.) (Bank) ........................................................... 58,409,600 28,399,826
Centrais Geradoras do Sul do Brasil SA "B" (pfd.)* (Electricity generator) .............. 1,304,900,000 1,476,750
Companhia Cervejaria Brahma (pfd.) (Leading beer producer and distributor) .............. 47,011,569 22,069,309
Companhia Energetica de Minas Gerais (pfd.) (Electric power utility) .................... 930,086,798 18,088,703
Companhia Paranaense de Energia (voting) (Electric utility) ............................. 700,600,400 4,293,226
Companhia Paulista de Forca e Luz* (Electric power utility) ............................. 33,000,000 2,766,368
Companhia Paulista de Forca e Luz* ...................................................... 21,500,000 1,595,243
Companhia Paulista de Forca e Luz Pro-rata shares* ...................................... 45,606 3,538
Companhia Souza Cruz Industria e Comercio (voting) (Holding company: cigarettes and
tobacco, fiber cellulose) ............................................................. 220,000 1,493,839
Companhia Suzano de Papel e Celulose S.A. (pfd.) (Paper products) ....................... 879,340 309,601
Companhia Vale do Rio Doce (pfd.)* (Diverse mining and industrial complex) (b) .......... 1,170,800 0
Industrias Klabin de Papel e Celulose S.A. (pfd.) (Producer of paper and paper
products) ............................................................................. 2,168,000 399,832
Lojas Americanas S.A. (voting)* (Discount department store chain) (b) ................... 439,708,380 2,690,813
Petroleo Brasileiro S.A. (pfd.) (Petroleum company) ..................................... 150,000,000 18,861,598
Tele Norte Leste Participacoes (pfd.)* (Provider of local telecommunication services) ... 10,000,000 125,744
Tele Norte Leste Participacoes S.A.* .................................................... 5,000,000 28,083
</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>
Telecomunicacoes de Sao Paulo S.A. (pfd.) (Telecommunication services) .................. 130,000,000 21,795,624
Telecomunicacoes do Parana S/A (pfd.) (Telecommunication services) ...................... 21,479,986 3,601,305
-----------
151,998,640
-----------
Chile 1.5%
Compania de Telefonos de Chile, S.A. "A" (ADR) (New) (Telecommunication services) ....... 315,541 6,922,181
Santa Isabel S.A. (ADR) (Supermarket chain) ............................................. 150,200 873,038
-----------
7,795,219
-----------
Colombia 1.2%
Bavaria S.A. (Beer producer and distributor) ............................................ 1,019,236 3,406,770
Colombiana de Tabaco S.A. (Tobacco producer) ............................................ 887,271 905,379
Compania Nacional de Chocolates S.A. (Chocolate and coffee producer) .................... 426,643 925,119
Industrias Alimenticias Noel S.A. (Food products company) (b) ........................... 725,039 878,555
-----------
6,115,823
-----------
Mexico 44.5%
CIFRA S.A. de C.V. "C" (Discount retailer) .............................................. 20,001,000 25,921,359
Fomento Economico Mexicano, SA de C.V. (ADR) (Producer of beer, soft drinks and
mineral water) ........................................................................ 400,000 10,425,000
Grupo Continental, S.A. (Producer and distributor of soft drinks, sugar, mineral
water) ................................................................................ 6,797,750 16,611,043
Grupo Embotelladora Unidas S.A. de CV "B"* (Soft drink producer and marketer) ........... 1,919,134 2,430,245
Grupo Financiero Inbursa, S.A. de C.V. "B" (Brokerage, insurance, banking and leasing
services) ............................................................................. 5,492,000 9,627,843
Grupo Industrial Bimbo, S.A. de C.V. "A" (Producer of bread and other baked goods) ...... 7,996,000 13,447,962
Grupo Industrial Maseca S.A. de C.V. (ADR) (Food producer) .............................. 1,249,600 15,463,800
Grupo Industrial Saltillo, S.A. de C.V. "B" (Manufacturer of steel products and auto
parts) ................................................................................ 490,000 1,105,263
Grupo Modelo S.A. "C" (Leading brewery) ................................................. 5,534,000 11,661,476
Kimberly Clark de Mexico S.A. de C.V. "A" (Producer of consumer paper products) ......... 11,503,000 33,343,678
Panamerican Beverages Inc. "A" (Soft drink bottler) ..................................... 1,230,600 24,919,650
Pepsi-Gemex S.A. (ADR) (Soft drink bottler) ............................................. 300,000 1,950,000
Pepsi-Gemex S.A. "B" (b) ................................................................ 6,544,500 2,348,113
Telefonos de Mexico S.A. de C.V. "L" (ADR) (Telecommunication services) ................. 1,010,000 53,340,625
-----------
222,596,057
-----------
Panama 1.1%
Banco Latinoamericano de Exportaciones S.A. "E" (ADR) (Bank) ............................ 255,700 5,545,494
-----------
Peru 1.3%
Embotellador Latinoamericana S.A.* (Soft drink bottler and distributor) ................. 6,125,260 1,097,896
Industrias Pacocha S.A. "T"* (Household products and food producer) (b) ................. 4,639,237 763,505
Union de Cerveceria Backus & Johnston S.A. "T" (Beer producer) .......................... 12,683,186 4,505,352
-----------
6,366,753
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Latin America Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Venezuela 0.6%
Mavesa S.A. (ADR) (Food processor) ...................................................... 802,875 3,211,500
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $524,422,774) 467,491,224
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $557,372,774) (a) 500,441,224
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $560,675,005. At October 31,
1998, net unrealized depreciation for all securities based on tax cost was
$60,233,781. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $32,473,984 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$92,707,765.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $9,726,115 (1.93% 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, 1998 aggregated $25,412,579. These
securities may also have certain restrictions as to resale.
The accompanying notes are an integral part of the financial statements.
14 - Scudder Latin America Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1998
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $557,372,774) ................... $ 500,441,224
Foreign currency holdings, at market (identified cost $1,645,359) ....... 1,645,359
Receivable for investments sold ......................................... 1,436,680
Receivable for Fund shares sold ......................................... 3,617,447
Dividends and interest receivable ....................................... 2,249,440
Other assets ............................................................ 4,509
----------------
Total assets ............................................................ 509,394,659
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ....................................... 2,582,777
Payable for Fund shares redeemed ........................................ 1,922,579
Accrued management fee .................................................. 506,892
Other payables and accrued expenses ..................................... 763,417
----------------
Total liabilities ....................................................... 5,775,665
-------------------------------------------------------------------------------------------
Net assets, at market value $ 503,618,994
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ..................................... 6,245,279
Unrealized appreciation (depreciation) on:
Investments .......................................................... (56,931,550)
Foreign currency related transactions ................................ (38,972)
Accumulated net realized gain (loss) .................................... 12,911,155
Paid-in capital ......................................................... 541,433,082
-------------------------------------------------------------------------------------------
Net assets, at market value $ 503,618,994
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($503,618,994 / 26,476,730 shares of capital stock outstanding, ----------------
$.01 par value, 100,000,000 shares authorized) ....................... $19.02
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Latin America Fund
<PAGE>
Statement of Operations
year ended October 31, 1998
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $2,132,079) ................. $ 22,721,968
Interest ................................................................ 2,123,533
----------------
24,845,501
----------------
Expenses:
Management fee .......................................................... 9,375,566
Services to shareholders ................................................ 2,544,161
Custodian and accounting fees ........................................... 1,612,285
Directors' fees and expenses ............................................ 65,877
Reports to shareholders ................................................. 202,439
Auditing ................................................................ 95,554
Legal ................................................................... 24,964
Registration fees ....................................................... 7,365
Amortization of organization expenses ................................... 1,544
Other ................................................................... 76,639
----------------
14,006,394
-------------------------------------------------------------------------------------------
Net investment income 10,839,107
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................................. 15,980,844
Foreign currency related transactions (including CPMF tax of $591,530) .. (1,644,540)
----------------
14,336,304
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ............................................................. (162,723,607)
Foreign currency related transactions ................................... 22,260
----------------
(162,701,347)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (148,365,043)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(137,525,936)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Latin America Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ................................. $ 10,839,107 $ 8,993,327
Net realized gain (loss) from investment
transactions ....................................... 14,336,304 108,195,714
Net unrealized appreciation (depreciation) on
investment transactions during the period .......... (162,701,347) 26,908,312
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ......................................... (137,525,936) 144,097,353
---------------- ----------------
Distributions to shareholders from:
Net investment income ................................. (8,553,580) (7,655,243)
---------------- ----------------
Net realized gains .................................... (39,004,290) --
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ............................. 312,261,907 737,548,712
Net asset value of shares issued to shareholders in
reinvestment of distributions ...................... 45,271,596 7,123,139
Cost of shares redeemed ............................... (551,385,752) (620,473,602)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ....................................... (193,852,249) 124,198,249
---------------- ----------------
Increase (decrease) in net assets ..................... (378,936,055) 260,640,359
Net assets at beginning of period ..................... 882,555,049 621,914,690
Net assets at end of period (including undistributed
net investment income of $6,245,279 and $5,604,292, ---------------- ----------------
respectively) ...................................... $503,618,994 $882,555,049
---------------- ----------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ............. 35,131,733 30,148,974
---------------- ----------------
Shares sold ........................................... 13,655,806 27,610,297
Shares issued to shareholders in reinvestment of
distributions ...................................... 1,743,227 334,106
Shares redeemed ....................................... (24,054,036) (22,961,644)
---------------- ----------------
Net increase (decrease) in Fund shares ................ (8,655,003) 4,982,759
---------------- ----------------
Shares outstanding at end of period ................... 26,476,730 35,131,733
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - 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>
Years Ended October 31,
1998(a) 1997(a) 1996(a) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------- ------- ------- ------- -------
Net asset value, beginning of period ........................... $ 25.12 $ 20.63 $ 16.22 $ 24.44 $ 18.41
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss) ................................... .34 .26 .25 .09 (.03)
Net realized and unrealized gain (loss) on investment
transactions ................................................. (5.05) 4.49 4.30 (7.62) 6.10
------- ------- ------- ------- -------
Total from investment operations ............................... (4.71) 4.75 4.55 (7.53) 6.07
------- ------- ------- ------- -------
Less distributions:
From net investment income ..................................... (.25) (.26) (.15) -- --
In excess of net investment income ............................. -- -- -- -- (.06)
From net realized gains on investment transactions ............. (1.14) -- -- (.73) (.06)
------- ------- ------- ------- -------
Total distributions ............................................ (1.39) (.26) (.15) (.73) (.12)
------- ------- ------- ------- -------
Redemption fees (b) ............................................ -- -- .01 .04 .08
------- ------- ------- ------- -------
Net asset value, end of period ................................. $ 19.02 $ 25.12 $ 20.63 $ 16.22 $ 24.44
------- ------- ------- ------- -------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............................................... (20.23) 23.25 28.31(c) 30.96(c)(d) 33.43(c)(d)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ......................... 504 883 622 519 809
Ratio of operating expenses, net, to average daily net
assets (%) ................................................... 1.87 1.89 1.96 2.08 2.01
Ratio of operating expenses, before expense reductions, to
average daily net assets (%) ................................. 1.87 1.89 1.96 2.11 2.05
Ratio of net investment income (loss) to average daily net
assets (%) ................................................... 1.45 .98 1.32 .52 (.20)
Portfolio turnover rate (%) .................................... 43.6 41.8 22.4 39.5 22.4
</TABLE>
(a) Based on monthly average of shares outstanding during the period.
(b) 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.
(c) Total return does not reflect the effect to the shareholder of the 2%
redemption fee on shares held less than one year.
(d) Total returns would have been lower had certain expenses not been reduced.
18 - 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 Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on Nasdaq. If there are no such sales, the value is the most
recent bid quotation. Securities which are not quoted on Nasdaq 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 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 instruments with an original
maturity greater than sixty days are valued by pricing agents approved by the
officers of the Fund, which quotations reflect broker/dealer-supplied valuations
and electronic data processing techniques. If the pricing agents are unable to
provide such quotations, the most recent bid quotation supplied by a bona fide
market maker shall be used. 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 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.
19 - Scudder Latin America Fund
<PAGE>
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-dividend and payment dates on
dividends, interest and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
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.
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) from 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.
20 - Scudder Latin America Fund
<PAGE>
Organization Costs. Costs incurred by the Fund in connection with its
organization and initial registration of shares were deferred and amortized on a
straight-line basis over a five-year period.
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, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $307,550,613 and
$512,548,712, respectively.
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Directors and by the Fund's Shareholders. The
Management Agreement, which was effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, the Fund has agreed to pay
to the Adviser a fee equal to an annualized rate of 1.25% of the first $1
billion of the Fund's average daily net assets and 1.15% of such assets in
excess of $1 billion, computed and accrued daily and payable monthly. 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
Management Agreement. For the year ended October 31, 1998, the fee pursuant to
these agreements aggregated $9,375,566, which was equivalent to an annual
effective rate of 1.25% of the Fund's average daily net assets.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. The Board of Directors of the
Fund has approved a new investment management agreement with Scudder Kemper,
which is substantially identical to the former Management Agreement, except for
the dates of execution and termination. The Board of Directors of the Fund will
seek shareholder approval of the new investment management agreement through a
proxy solicitation that is currently scheduled to conclude in mid-December.
21 - Scudder Latin America Fund
<PAGE>
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, 1998, the amount charged to the Fund by SSC aggregated
$1,980,749, of which $143,654 is unpaid at October 31, 1998.
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,
1998, the amount charged to the Fund by STC aggregated $35,890, of which $3,238
is unpaid at October 31, 1998.
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, 1998, the amount charged to the Fund by SFAC aggregated $383,584, of
which $47,157 is unpaid at October 31, 1998.
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 invested in the Underlying Funds. For the year ended October 31,
1998, the Special Servicing Agreement expense charged to the Fund amounted to
$11,475.
The Fund pays each of its Directors not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the year ended October 31, 1998, Directors' fees and expenses aggregated
$65,877.
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.
22 - 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:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Latin America Fund (the
"Fund") at October 31, 1998, the results of its operations for the year then
ended and 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 five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 4, 1998
23 - Scudder Latin America Fund
<PAGE>
Tax Information
The Fund paid distributions of $1.14 per share from net long-term capital
gains during its fiscal year ended October 31, 1998, of which 100% represents
20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$16,900,000 as capital gain dividends for its fiscal year ended October 31,
1998.
The Fund paid foreign taxes of $2,132,000 and earned $11,113,000 of foreign
source income during the fiscal year ended October 31, 1998. Pursuant to
Section 853 of the Internal Revenue Code, the Fund designates $.08 per share
as foreign taxes paid and $.42 per share as income earned from foreign
sources for the fiscal year ended October 31, 1998.
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 account, please call 1-800-SCUDDER.
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
Joan Spero
Director; President, Doris Duke
Charitable Foundation
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Nicholas Bratt*
President
Elizabeth J. Allan*
Vice President
Irene T. Cheng*
Vice President
Joyce E. Cornell*
Vice President
Susan E. Dahl*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Theresa Gusman*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Sheridan P. Reilly*
Vice President
John R. Hebble*
Treasurer
Richard W. Desmond*
Assistant Secretary
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - 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--
Prime Reserve Shares*
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 Corporate Bond 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
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Education IRA
UGMA/UTMA
Closed-End Funds#
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The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
25 - Scudder Latin America Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
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<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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:
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Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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:
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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 previously designated.
Distributions Direct
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
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26 - Scudder Latin America Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
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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 8,000 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
800 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 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
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Additional Information on How to Contact Scudder:
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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
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27 - Scudder Latin America Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
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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