BARRETT INTERNATIONAL SHARES
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
SEPTEMBER 30, 1998
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BARRETT INTERNATIONAL SHARES ARE A CLASS OF THE SCUDDER INTERNATIONAL FUND
<PAGE>
<TABLE>
<CAPTION>
Board of Directors
<S> <C>
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; Private Equity Investor
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 President, Doris Duke Charitable Foundation
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Honorary Director
ROBERT G. STONE, JR. Chairman Emeritus and Director, Kirby Corporation
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Officers
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
JERARD K. HARTMAN Vice President
THOMAS W. JOSEPH Vice President
SHERIDAN REILLY Vice President
THOMAS F. MCDONOUGH Vice President and Secretary
JOHN R. HEBBLE Treasurer
RICHARD W. DESMOND Assistant Secretary
CAROLINE PEARSON Assistant Secretary
</TABLE>
2
<PAGE>
Dear Shareholder:
We are pleased to provide you with the September 30, 1998 semiannual report
for the Barrett International Shares, a class of shares of the Scudder
International Fund (the "Fund").
The overseas investment environment was extremely volatile over the Fund's
most recent semiannual period. The third quarter of 1998, especially, was a
difficult period across virtually all international equity markets. The problems
that began in Asia last summer, and more recently manifested themselves in the
Russian default and the collapse in Latin American equities, finally spread to
the developed markets. There was a heightened awareness of risk, and a general
flight to the safest and most liquid investments, such as U.S. Treasury bonds.
The management discussion beginning on page 5 outlines the investment strategy
of the Fund going forward in light of the current market conditions.
Thank you for your investment in the Barrett International Shares. Should
you have any questions regarding your investment, please call us at
1-800-854-8525.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President
3
<PAGE>
Portfolio Summary
September 30, 1998
Geographical
(Excludes 10% Cash Equivalents)
- -----------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Europe 85%
Japan 9%
Pacific Basin 4%
Canada 1%
Latin America 1%
--------------------------------------
100%
--------------------------------------
The Fund reduced its holdings in Japan and was heavily overweighted in Europe.
Sectors
(Excludes 10% Cash Equivalents)
- -----------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the table below.
Manufacturing 21%
Financial 17%
Energy 8%
Media 8%
Communications 7%
Health 7%
Consumer Staples 7%
Service Industries 5%
Technology 4%
Other 16%
--------------------------------------
100%
--------------------------------------
The Fund's defensive strategy meant increased exposure to local providers of
goods and services within their respective countries.
Ten Largest Equity Holdings
(18% of Portfolio)
- -----------------------------------------
1. Hoechst AG
Chemical producer
2. Nokia AB
Manufacturer of telecommunication
systems and equipment
3. VIAG AG
Provider of electrical power and
natural gas services, aluminum
products, chemicals, ceramics and
glass
4. Societe Lyonnaise des Eaux S.A.
Water utility
5. Muenchener Rueckversicherungs-
Gesellschaft AG
Provider of comprehensive
reinsurance services
6. Nestle SA
Food manufacturer
7. Deutsche Telekom AG
Telecommunication services
8. Mannesmann AG
Diversified construction and
technology company
9. Orange PLC
Operator of digital mobile
telephone network
10. Allianz AG
Multi-line insurance company
All ten of the portfolio's top holdings were European companies.
For more complete details about the Fund's investment portfolio, see page 9. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
4
<PAGE>
Dear Shareholder:
On a relative basis, the Shares' performance held up quite well during the
period, although absolute returns were disappointing. For the period from April
3, 1998 through September 30, 1998, the Barrett International Shares of Scudder
International Fund experienced a total return of -9.72%. This performance
exceeded the -14.04% return of the MSCI EAFE plus Canada Index for the same
period.
Emerging Markets Initiate Downward Global Trend
The six-month period was a savage one for the global equity markets,
particularly the quarter ended September 30, suggesting a possible end to both
the global bull market and the strong dollar of recent years. International
exchanges were hit particularly hard: in U.S. dollars, Europe fell by 10%, the
Japanese market dropped nearly 17%, and emerging markets in aggregate plummeted
another 40%. Severe local market declines were mitigated in part by foreign
currency gains against the dollar.
Driving these markets broadly downward was a renewed awareness of risk and
a sharp collapse in confidence on the part of investors. Economic growth has
been called into question, as has the soundness of financial systems around the
world. Investors everywhere were fleeing from stocks, seeking instead the
relative safety and liquidity of cash and bonds.
The root of these tremors traces back to the emerging markets, particularly
those of Asia where the financial and economic malaise has worsened over the
past year. Japan could offer no respite, as it continued to waver on solving its
own problems. Then there was the shock of a Russian default on certain
government debt obligations, which in turn called into doubt the financial
stability of Brazil. Hedge funds and others with high risk investment strategies
were caught, as risk premiums skyrocketed and credit availability became scarce.
Through the global financial markets, what began as isolated local problems have
now come to present real troubles for the developed economies of Europe and the
United States. The current situation has made very clear the extent to which the
world's economies and markets are closely interconnected.
Portfolio Strategy: A Defensive Focus
Diversification offered scant help in this environment. Country selection
mattered little toward the end of the period, as all major markets fell by about
the same amount. What did make a difference for performance, however, was the
choice of sectors and stocks.
5
<PAGE>
The upheaval in the market environment was sudden, and led us to do more
repositioning than usual. Our general tactic during much of the period was to
continue adjusting the portfolio to a more defensive stance. From a sector
perspective, that meant reduced exposure to financials, and to global cyclical
businesses such as providers of infrastructure or bulk commodity producers. Any
company with meaningful exposure to Russia or Brazil was also undesirable.
Correspondingly, this meant increased exposure to providers of telecommunication
services, utilities, local retail companies, and other similarly domestic
businesses. Thematically, we also turned a more cynical eye toward restructuring
promises. Realigning assets becomes more difficult under tough capital market
conditions, and cutting costs will be more difficult should the growth
environment be slower than expected.
Sectors that performed particularly poorly during the quarter were the global
cyclicals and financials. We have been underweighted in global cyclicals since
last summer when the Asian crisis first took hold. We further sold down
positions in this area, exiting names such as Ericsson, Alcatel Alsthom and Ciba
Specialty Chemicals. Among the financials, we began the period with large
European holdings in both insurance and banking companies. We had begun to
aggressively lighten these positions as the market was peaking, and entered the
August collapse with a solid head start. Names sold include Credit Suisse,
Dresdner Bank, and HSBC Holdings. At the end of the period, only one bank ranked
among the top 20 portfolio holdings.
The defensive domestic sectors held up relatively well during the period. Canal
Plus, a domestic French media company, was a standout performer. Deutsche
Telekom performed very well among the domestic telephone companies, while French
food retailer Casino was solid and Societe Lyonnais was the pacesetter among the
utility holdings.
Outlook: Continued Volatility Expected
There is a high level of uncertainty right now as to the ultimate direction of
the global economy and capital markets. It is very possible that a major
transition point has been reached. Downgrades of expected economic activity
raise the spectre of falling price levels and outright deflation going forward.
Whether the path will be hostile or benign is unclear. What is certain, however,
is that volatility will remain with the markets for quite some time as current
problems are worked through slowly.
Our long-term portfolio strategy in this environment remains fundamentally
unchanged. We continue to emphasize the European markets, focusing particularly
on companies and industries undergoing longer term change. This
6
<PAGE>
could fall in the category of corporate restructuring, industry realignment, or
new growth opportunities. We remain optimistic that Europe will benefit from
three favorable trends: continued corporate restructuring, stronger economic
growth, and the potential presented by European Monetary Union. We will maintain
our cautious stance toward Japanese investments, and remain significantly
underweighted there, as we wait for greater evidence of political or corporate
leadership and desire for change. Our investments there are gradually focusing
more and more on the potential beneficiaries of domestic reform, and less on the
global blue chip companies. Direct investments in the emerging markets remain at
a minimum.
As we work toward achieving a better insight on the future path of global equity
markets, we maintain a high degree of flexibility in the portfolio. As part of
that effort, we have been less inclined to make large commitments to any one
theme or sector. We have also introduced more exposure to areas not well
represented in the portfolio for several years, such as the oil and metals
industries. Going forward, we expect that our fundamental research efforts will
help us develop a clearer view of the longer term investment ramifications of
the current market turmoil.
Sincerely,
Your Portfolio Management Team
/s/Irene T. Cheng /s/Nicholas Bratt
Irene T. Cheng Nicholas Bratt
/s/Deborah A. Chaplin /s/Carol L. Franklin
Deborah A. Chaplin Carol L. Franklin
/s/Joan R. Gregory /s/Sheridan Reilly
Joan R. Gregory Sheridan Reilly
7
<PAGE>
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A Team Approach to Investing
Irene Cheng, Lead Portfolio Manager, joined the Adviser in 1993 as a
portfolio manager. Ms. Cheng, who has over 14 years of industry
experience, focuses on portfolio management and equity strategy for
the Adviser's international equity accounts.
Nicholas Bratt, Portfolio Manager, directs the Adviser's overall
global equity investment strategies. Mr. Bratt joined the Adviser and
the team in 1976.
Deborah A. Chaplin, Portfolio Manager, has focused on stock selection
and investment strategy since joining the portfolio management team in
1998. Ms. Chaplin, who joined the Adviser in 1996 as a portfolio
manager, has six years of experience in investment management as both
a securities analyst and equity portfolio manager.
Carol L. Franklin, Portfolio Manager, joined the portfolio management
team in 1986. Ms. Franklin, who has over 20 years of experience in
finance and investing, joined the Adviser in 1981.
Joan Gregory, Portfolio Manager, focuses on stock selection, a role
she has played since she joined the Adviser in 1992. Ms. Gregory, who
joined the team in 1994, has been involved with investment in global
and international stocks.
Sheridan Reilly, Portfolio Manager, joined the Adviser in 1995 and is
a member of the Adviser's Global Equity Group. Mr. Reilly has over 10
years of industry experience focusing on strategies for global
portfolios, currency hedging and foreign equity markets.
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8
<PAGE>
Scudder International Fund/Barrett International Shares
Investment Portfolio
September 30, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 0.7%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 9/30/1998 at 5.4%, to be
repurchased at $17,588,637 on 10/1/1998, collateralized by a $17,177,000 U.S. -----------
Treasury Bond, 6%, 8/15/2000 (Cost $17,586,000) ....................................... 17,586,000 17,586,000
-----------
Commercial Paper 9.6%
- ------------------------------------------------------------------------------------------------------------------------------
United States 9.6%
Baxter International Inc., 5.4%, 10/9/1998** ............................................ 25,000,000 24,970,000
Baxter International Inc., 5.52%, 10/29/1998** .......................................... 25,000,000 24,892,667
Baxter International Inc., 5.52%, 10/30/1998** .......................................... 23,000,000 22,897,727
Bell Atlantic Network Funding Corp., 5.54%, 10/2/1998** ................................. 37,150,000 37,144,283
Falcon Asset Securitization Corp., 5.52%, 10/9/1998** ................................... 50,000,000 49,938,667
Falcon Asset Securitization Corp., 5.5%, 11/5/1998** .................................... 25,000,000 24,866,319
GTE Corp., 5.58%, 10/1/1998** ........................................................... 25,000,000 25,000,000
Madison Funding Corp., 5.58%, 10/29/1998** .............................................. 15,265,000 15,198,750
Sanwa Business Credit Corp., 5.74%, 10/8/1998** ......................................... 23,000,000 22,974,329
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $247,882,742) 247,882,742
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Bonds 0.3%
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Japan
IBJ Preferred Capital Co., 8.79% to 6/30/2008, variable based on LIBOR to 12/29/2049 .... 4,581,000 3,252,510
Sumitomo Bank, 9.4% to 6/30/2008, variable based on LIBOR to 12/29/2049 ................. 5,346,000 4,437,180
- ------------------------------------------------------------------------------------------------------------------------------
Total Bonds (Cost $9,927,000) 7,689,690
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Convertible Bonds 0.1%
- ------------------------------------------------------------------------------------------------------------------------------
Philippines
International Container Terminal Services, Inc., 1.75%, 3/13/2004 (Putable 3/13/2002) -----------
(Cost $3,022,001) ..................................................................... 2,753,000 1,899,570
-----------
Shares
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Common Stocks 89.3%
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Argentina 0.8%
YPF S.A. "D" (ADR) (Petroleum company) .................................................. 789,600 20,529,600
-----------
Australia 0.9%
AMP Ltd.* (Life insurance, annuities, pensions, other financial services) ............... 531,200 6,436,895
WMC Ltd. (Mineral exploration and production) ........................................... 2,378,600 7,155,725
Woodside Petroleum Ltd. (Major oil and gas producer) .................................... 1,814,600 9,483,629
-----------
23,076,249
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</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Canada 1.2%
Canadian National Railway (Railroad operator) ........................................... 696,000 31,367,793
-----------
China 0.7%
Anhui Expressway Co., Ltd. "H"* (Developer and manager of toll highways in Anhui
province) ............................................................................. 18,717,000 2,222,233
China Telecommunications* (Telecommunication services) .................................. 1,576,000 2,471,144
GZI Transport Ltd. (Developer and operator of toll highways in Guangdong Province) ...... 4,524,000 945,808
Jiangsu Expressway Co., Ltd. "H" (Builder and manager of the Shanghai-Nanjing
expressway) ........................................................................... 14,973,000 3,400,847
Shenzhen Expressway Co. "H" (Highway developer) ......................................... 15,964,000 3,893,759
Sichuan Expressway Co. (Developer of toll roads, bridges and tunnels) ................... 18,436,000 1,522,693
Zhejiang Expressway Co., Ltd. "H" (Road construction and management) .................... 16,126,000 2,892,724
-----------
17,349,208
-----------
Finland 2.0%
Nokia AB "A" (Manufacturer of telecommunication systems and equipment) .................. 638,200 50,714,555
Pohjola Insurance Co., Ltd. "B" (Insurance company) ..................................... 4,300 170,004
-----------
50,884,559
-----------
France 17.9%
AXA S.A. (Insurance group providing insurance, finance and real estate services) ........ 279,839 25,639,372
Accor S.A. (Catering, hotels, travel services) .......................................... 149,815 31,439,450
Bouygues SA (Conglomerate: public works, real estate and industrial development,
engineering services, television and motion pictures) ................................. 204,123 37,003,241
Canal Plus (Leading pay television network) ............................................. 150,506 36,584,213
Carrefour (Hypermarket operator and food retailer) ...................................... 18,289 11,599,050
Christian Dior (Leading fashion house) .................................................. 87,468 7,029,808
Credit Commercial de France (Bank) ...................................................... 220,059 14,148,924
Etablissements Economiques du Casino Guichard-Perrachon S.A. (pfd.) (Operator of
supermarkets and convenience stores) .................................................. 353,424 22,458,656
France Telecom SA (Telecommunication services) .......................................... 277,643 16,438,116
Groupe Danone (Producer of packaged foods and beverages) ................................ 77,682 20,436,425
L'Air Liquide (World's leading producer of industrial gases) ............................ 47,305 7,502,427
LVMH Moet-Hennessy Louis Vuitton SA (Producer of wines, spirits and luxury products) .... 129,806 17,735,277
Lagardere S.C.A. (Holding company with interests in publishing, defense, audiovisual
production and services, telecommunications and media) ................................ 665,203 18,996,974
Pernod Ricard (Manufacturer of spirits, whiskey, wines, and fruit juices) ............... 141,714 10,440,432
Rhone-Poulenc S.A. "A" (Medical, agricultural and consumer chemicals) ................... 569,677 23,909,931
Schneider S.A. (Manufacturer of electronic components and automated manufacturing
systems) .............................................................................. 181,939 9,488,344
Societe Lyonnaise des Eaux S.A. (Water utility) ......................................... 283,501 48,304,184
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Societe Nationale Elf Aquitaine (Petroleum company) ..................................... 314,064 38,759,483
Television Francaise (Television broadcasting) .......................................... 99,775 17,107,035
Thomson CSF (Manufacturer of aerospace systems and industrial electronics products) ..... 739,031 22,570,467
Total S.A. "B" (International oil and gas exploration, development and production) ...... 205,708 25,938,070
-----------
463,529,879
-----------
Germany 19.9%
Allianz AG (Multi-line insurance company) ............................................... 133,730 41,481,565
BASF AG (Leading international chemical producer) ....................................... 788,252 29,878,949
BHF-Bank AG (Universal banking services) ................................................ 527,515 17,057,882
Bayerische Vereinsbank AG (Commercial bank) ............................................. 498,694 36,731,257
Deutsche Telekom AG (Telecommunication services) ........................................ 1,264,853 39,310,082
Deutsche Telekom AG (ADR) ............................................................... 152,400 4,486,275
Heidelberger Druckmaschinen AG* (Manufacturer of commercial printing presses) ........... 99,402 6,964,301
Hoechst AG (Chemical producer) .......................................................... 1,268,710 52,421,324
Mannesmann AG (Diversified construction and technology company) ......................... 477,886 43,783,681
Metro AG (Operator of building, clothing and food stores and supermarkets) .............. 226,456 15,771,031
Muenchener Rueckversicherungs-Gesellschaft AG (Registered) (pfd.) (Insurance company) ... 95,718 42,243,280
Muenchener Rueckversicherungs-Gesellschaft AG (Warrants), expire 6/3/02* ................ 4,095 161,843
Muenchener Rueckversicherungs-Gesellschaft AG (New)* .................................... 4,095 1,802,344
RWE AG (pfd.) (Producer and marketer of petroleum and chemical products) ................ 379,238 17,611,250
SAP AG (pfd.) (Computer software manufacturer) .......................................... 65,964 31,323,963
Schering AG (Pharmaceutical and chemical producer) ...................................... 302,772 31,320,616
Siemens AG (Leading electrical engineering and electronics company) ..................... 354,902 19,615,830
VEBA AG (Electric utility, distributor of oil and chemicals) ............................ 632,736 32,963,880
VIAG AG (Provider of electrical power and natural gas services, aluminum products,
chemicals, ceramics and glass) ........................................................ 73,243 50,350,588
-----------
515,279,941
-----------
Hong Kong 2.2%
Cheung Kong Holdings Ltd. (Real estate company) ......................................... 3,109,000 14,444,065
Citic Pacific Ltd. (Diversified holding company) ........................................ 6,019,000 10,564,010
Cosco Pacific Ltd. (Investment holding company) ......................................... 7,092,000 2,928,763
Hutchison Whampoa, Ltd. (Container terminal and real estate company) .................... 2,363,584 12,475,556
Kerry Properties, Ltd. (Real estate company) ............................................ 7,066,155 2,416,543
New World Development Co., Ltd. (Property investment and development, construction
and engineering, hotels and restaurants, telecommunications) .......................... 5,979,298 7,986,493
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New World Infrastructure Ltd.* (Investment and operation of infrastructure projects) .... 4,600,200 4,719,646
-----------
55,535,076
-----------
Hungary 0.1%
First Hungary Fund "A"* (Investment company) ............................................ 3,619 2,804,725
-----------
Italy 7.0%
Arnoldo Mondadori Editore SpA* (Book publisher) ......................................... 763,000 8,870,696
Banca Commerciale Italiana SpA (Commercial bank) ........................................ 3,046,000 18,315,491
Banca Nazionale del Lavoro* (Universal bank) ............................................ 5,841,800 15,059,287
Banca di Roma SpA* (Commercial and savings bank) ........................................ 11,694,600 20,900,927
Credito Italiano SpA (Commercial bank) .................................................. 2,337,800 9,744,374
Finmeccanica SpA* (Real estate developer) ............................................... 19,755,800 16,409,307
Gruppo Editoriale L'Espresso (Publisher) ................................................ 1,110,800 8,748,576
Istituto Bancario San Paolo di Torino (Commercial bank) ................................. 640,900 8,056,873
Istituto Nazionale delle Assicurazione (Insurance company) .............................. 5,411,200 13,768,957
La Rinascente SpA (Department store chain) .............................................. 976,100 8,562,903
Olivetti SpA* (Manufacturer of office and computer equipment and office furninshings) ... 6,115,500 12,911,982
Telecom Italia SpA (Telecommunications, electronics and network construction) ........... 5,777,000 39,811,811
-----------
181,161,184
-----------
Japan 7.6%
Canon Inc. (Leading producer of visual image and information equipment) ................. 630,000 12,779,934
Daiwa Securities Co., Ltd. (Brokerage and other financial services) ..................... 3,321,000 7,782,644
Fujitsu Ltd. (Leading manufacturer of computers) ........................................ 1,511,000 13,057,342
Matsushita Electric Industrial Co., Ltd. (Leading manufacturer of consumer electronic
products) ............................................................................. 996,000 13,530,428
Minebea Co., Ltd. (Manufacturer of bearings, electronic equipment, machinery parts) ..... 1,316,000 10,707,257
Murata Manufacturing Co., Ltd. (Leading maker of ceramic capacitors and filters) ........ 394,000 13,301,648
Nichiei Co., Ltd. (Finance company for small and medium-sized firms) .................... 134,010 9,038,683
Nikko Securities Co., Ltd. (Leading securities broker and dealer) ....................... 3,604,000 7,733,226
Nintendo Co., Ltd. (Game equipment manufacturer) ........................................ 247,200 23,244,584
Nippon Telegraph & Telephone Corp. (Leading telecommunications company) ................. 1,570 11,440,132
Nomura Securities Co., Ltd. (Financial advisor, securities broker and underwriter) ...... 1,463,000 10,499,744
Sony Corp. (Consumer electronic products manufacturer) .................................. 173,600 12,064,914
Sumitomo Electric Industries, Ltd. (Leading manufacturer of electric wires and cables) .. 889,000 8,606,796
Taisho Pharmaceutical Co., Ltd.* (Pharmaceutical company) ............................... 314,000 6,599,634
Teijin Ltd. (Manufacturer of polyester products) ........................................ 3,881,000 10,231,856
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tokyo Electron Ltd. (Leading semiconductor production equipment manufacturer) ........... 438,000 10,681,362
Yamanouchi Pharmaceutical Co., Ltd. (Leading manufacturer of ethical drugs) ............. 710,000 15,286,708
-----------
196,586,892
-----------
Netherlands 4.8%
AEGON Insurance Group NV (Insurance company) ............................................ 395,070 31,322,793
Akzo Nobel N.V. (Producer and marketer of healthcare products, coatings, chemicals
and fibers) ........................................................................... 499,500 17,772,025
Elsevier NV (International publisher of scientific, professional, business, and
consumer information books) ........................................................... 1,685,000 25,054,432
Heineken Holding NV "A" (Producer and distributor of beers, spirits, wines, soft
drinks) ............................................................................... 1,004,375 38,082,085
Royal Dutch Petroleum Co. (Owner of 60% of Royal Dutch/Shell Group) ..................... 252,750 12,549,586
-----------
124,780,921
-----------
Philippines 0.0%
International Container Terminal Services, Inc. (Containerized cargo handling firm) ..... 10,537,050 361,270
-----------
Portugal 0.5%
Portugal Telecom SA (Telecommunication services) ........................................ 341,900 12,453,239
-----------
Sweden 1.6%
AGA AB "B" (Producer and distributor of industrial and medical gases) ................... 824,300 10,200,561
Skandia Foersaekrings AB (Financial conglomerate) ....................................... 2,382,200 30,998,839
-----------
41,199,400
-----------
Switzerland 4.2%
Clariant AG (Registered) (Manufacturer of color chemicals) .............................. 47,253 21,702,696
Nestle SA (Registered) (Food manufacturer) .............................................. 22,050 43,991,379
Novartis AG (Bearer) (Pharmaceutical company) ........................................... 18,773 30,204,892
Novartis AG (Registered) ................................................................ 6,550 10,529,158
UBS AG (Registered) (Provider of banking and management services) ....................... 15,790 3,088,453
-----------
109,516,578
-----------
United Kingdom 17.9%
BOC Group PLC (Producer of industrial gases) ............................................ 2,011,859 24,959,840
British Airways PLC (Provider of passenger and cargo airline services) .................. 1,432,813 8,766,242
British Petroleum PLC (Major integrated world oil company) .............................. 1,804,918 27,607,140
Carlton Communications PLC (Television post production products and services) ........... 2,212,684 14,740,998
Enterprise Oil PLC (Oil and gas exploration and production) ............................. 800,631 5,391,668
General Electric Co., PLC (Manufacturer of power, communications and defense
equipment and other various electrical components) .................................... 4,649,220 33,975,823
Glaxo Wellcome PLC (Pharmaceutical company) ............................................. 1,287,211 37,998,897
Imperial Chemical Industries PLC* (Leading international chemical producer) ............. 2,756,427 21,712,892
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lasmo PLC* (Oil production and exploration) ............................................. 1,454,976 4,302,556
Monument Oil and Gas PLC (Oil and gas exploration and production company) ............... 6,205,262 4,086,517
Orange PLC* (Operator of digital mobile telephone network) .............................. 4,467,005 42,133,822
Pearson PLC (Diversified media and entertainment holding company) ....................... 1,825,789 33,977,087
Pilkington PLC (Manufacturer of glass for building and transport markets) ............... 6,217,700 6,102,435
Reed International PLC (Publisher of scientific, professional and business to
business materials) ................................................................... 754,167 6,357,270
Reuters Holdings PLC (International news agency) ........................................ 4,738,583 39,782,940
Rio Tinto PLC (Mining and finance company) .............................................. 1,887,655 22,504,622
Shell Transport & Trading PLC (Part owner of Royal Dutch Shell Co.) ..................... 4,738,555 28,689,451
SmithKline Beecham PLC (Manufacturer of ethical drugs and healthcare products) .......... 2,287,809 25,156,225
WPP Group PLC (Advertising agency) ...................................................... 7,579,334 34,939,946
Zeneca Group PLC (Manufacturer of pharmaceutical and agrochemical products and
specialty chemicals) .................................................................. 1,150,700 40,676,809
-------------
463,863,180
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,959,566,230) 2,310,279,694
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,237,983,973) (a) 2,585,337,696
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate (unaudited).
(a) The cost for federal income tax purposes was $2,241,370,078. At September
30, 1998, net unrealized appreciation for all securities based on tax cost
was $343,967,618. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $556,690,289 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $212,722,671.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Scudder International Fund/Barrett International Shares
Statement of Assets and Liabilities
September 30, 1998
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $2,237,983,973) ................ $2,585,337,696
Cash ................................................................... 29,777,080
Foreign currency holdings, at market (identified cost $160,482) ........ 160,476
Receivable for investments sold ........................................ 69,641,190
Receivable for Fund shares sold ........................................ 3,134,199
Dividends and interest receivable ...................................... 4,073,776
Foreign taxes recoverable .............................................. 5,213,128
Unrealized appreciation on forward currency exchange contracts ......... 231,925
Other assets ........................................................... 180,984
-----------------
Total assets ........................................................... 2,697,750,454
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 70,990,505
Payable for Fund shares redeemed ....................................... 10,950,633
Accrued management fee ................................................. 1,830,682
Other payables and accrued expenses .................................... 1,223,917
-----------------
Total liabilities ...................................................... 84,995,737
---------------------------------------------------------------------------------------------
Net assets, at market value ............................................ $2,612,754,717
---------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................... 27,255,968
Unrealized appreciation (depreciation) on:
Investments ......................................................... 342,562,783
Foreign currency related transactions ............................... 616,625
Accumulated net realized gain .......................................... 260,636,783
Paid-in capital ........................................................ 1,981,682,558
---------------------------------------------------------------------------------------------
Net assets, at market value ............................................ $2,612,754,717
---------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
International Shares
Net asset value, offering and redemption price per share
($2,592,704,239 / 54,973,854 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares -----------------
authorized) ............................................................ $47.16
Barrett International Shares -----------------
Net asset value, offering and redemption price per share ($20,050,478
/ 424,740 shares of capital stock outstanding, $.01 par value, -----------------
100,000,000 shares authorized) ......................................... $47.21
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Scudder International Fund/Barrett International Shares
Statement of Operations
For the six months ended September 30, 1998
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $4,724,003) ................ $ 32,704,873
Interest ............................................................... 5,470,359
----------------
38,175,232
----------------
Expenses:
Management fee ......................................................... 12,123,774
Services to shareholders ............................................... 3,471,577
Custodian and accounting fees .......................................... 1,182,378
Directors' fees and expenses ........................................... 26,197
Reports to shareholders ................................................ 220,387
Auditing ............................................................... 73,701
Legal .................................................................. 23,264
Registration fees ...................................................... 39,892
Other .................................................................. 309,160
----------------
17,470,330
---------------------------------------------------------------------------------------------
Net investment income .................................................. 20,704,902
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................................ 262,733,309
Foreign currency related transactions .................................. (1,271,680)
----------------
261,461,629
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ............................................................ (547,715,279)
Foreign currency related transactions .................................. 800,113
----------------
(546,915,166)
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions ............................. (285,453,537)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ........ $(264,748,635)
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Scudder International Fund/Barrett International Shares
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) in Net Assets September 30, 1998 March 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 20,704,902 $ 23,071,776
Net realized gain (loss) from investment transactions .. 261,461,629 283,592,889
Net unrealized appreciation (depreciation) on
investment transactions during the period ........... (546,915,166) 229,773,170
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations .......................................... (264,748,635) 536,437,835
---------------- ----------------
Distributions to shareholders from:
Net investment income-- International Shares ........... -- (12,911,722)
---------------- ----------------
Net realized gains-- International Shares .............. (6,141,145) (274,137,681)
---------------- ----------------
Net realized gains-- Barrett International Shares ...... (46,993) --
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .............................. 932,734,834 1,071,204,110
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 5,855,384 269,844,500
Cost of shares redeemed ................................ (939,818,073) (1,288,548,383)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ (1,227,855) 52,500,227
---------------- ----------------
Increase (decrease) in net assets ...................... (272,164,628) 301,888,659
Net assets at beginning of period ...................... 2,884,919,345 2,583,030,686
Net assets at end of period (including undistributed
net investment income of $27,255,968 and ---------------- ----------------
$6,551,066, respectively) ........................... $2,612,754,717 $2,884,919,345
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Scudder International Fund/International Shares
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
International Shares (b)
<TABLE>
<CAPTION>
Six Months Ended
September 30, Years Ended March 31,
1998 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
Net asset value, beginning of period .......... $52.06 $ 48.07 $ 45.71 $ 39.72 $ 42.96 $ 35.69
--------------------------------------------------------------------------
Income from investment operations:
Net investment income ......................... .37 .43 .30 .38 .21 .31
Net realized and unrealized gain (loss) on
investment transactions ..................... (5.16) 9.16 4.53 7.19 (1.03) 7.74
--------------------------------------------------------------------------
Total from investment operations .............. (4.79) 9.59 4.83 7.57 (.82) 8.05
--------------------------------------------------------------------------
Less distributions:
From net investment income .................... -- (.25) (1.28) (.40) -- (.63)
In excess of net investment income ............ -- -- -- -- -- (.06)
From net realized gains on investment
transactions ................................ (.11) (5.35) (1.19) (1.18) (2.42) (.09)
--------------------------------------------------------------------------
Total distributions ........................... (.11) (5.60) (2.47) (1.58) (2.42) (.78)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net asset value, end of period ................ $47.16 $ 52.06 $ 48.07 $ 45.71 $ 39.72 $ 42.96
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) .......................... (9.21)** 21.57 10.74 19.25 (2.02) 22.69
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........ 2,593 2,885 2,583 2,515 2,192 2,198
Ratio of operating expenses to average net
assets (%) .................................. 1.16* 1.18 1.15 1.14 1.19 1.21
Ratio of net investment income to average net
assets (%) (c) .............................. .69** .83 .64 .86 .48 .75
Portfolio turnover rate (%) ................... 64.0* 55.7 35.8 45.2 46.3 39.9
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On April 3, 1998, existing shares of the Fund were designated as
International Shares.
(c) The ratio for the six months ended September 30, 1998 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
18
<PAGE>
Scudder International Fund/Barrett International Shares
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Barrett International Shares
<TABLE>
<CAPTION>
For the Period
April 3, 1998
(commencement of
sale of Barrett
International
Shares) to
September 30,
1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
-----------------
Net asset value, beginning of period ....................................................... $52.40
-----------------
Income from investment operations:
Net investment income (loss) ............................................................... .41
Net realized and unrealized gain (loss) on investment transactions ......................... (5.49)
-----------------
Total from investment operations ........................................................... (5.08)
-----------------
Less distributions from net realized gains on investment transactions ...................... (.11)
-----------------
Net asset value, end of period ............................................................. $47.21
-----------------
- ---------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ....................................................................... (9.72)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ..................................................... 20
Ratio of operating expenses, net to average daily net assets (%) ........................... 1.02*
Ratio of net investment income (loss) to average daily net assets (%) (b) .................. .77**
Portfolio turnover rate (%) ................................................................ 64.0*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) The ratio for the six months ended September 30, 1998 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
19
<PAGE>
Scudder International Fund/Barrett International Shares
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.
Effective April 3, 1998, under an "Agreement and Plan of Reorganization" (the
"Reorganization") the Fund offered an additional class of shares. As part of
this transaction, the Fund now comprises two share classes: International Shares
and Barrett International Shares. Existing shares of the International Fund were
redesignated as International Shares and existing shares of Institutional
International Equity Portfolio were redesignated as Barrett International
Shares. Under the Reorganization, the Fund acquired substantially all of the
assets and liabilities of Institutional International Equity Portfolio in the
tax-free reorganization to Scudder International Fund in exchange for 401,812
shares of common stock of the Barrett International Share Class (valued at
$21,054,972 unaudited). The net assets of Institutional International Equity
Portfolio transferred included unrealized depreciation of $4,790,940
(unaudited).
Investment income and realized and unrealized capital gains and losses, and
certain fund-level expenses, if any, are borne pro rata on the basis of relative
net assets by the holders of both classes of shares except that each class bears
expenses unique to that class. Each class of shares differs in its respective
shareholder services and certain other class-specific expenses and expense
reductions. All shares of the Fund have equal rights with respect to voting.
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 over sixty days are valued by pricing agents approved by the officers
of the Fund, whose 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
20
<PAGE>
each subsequent business day is required to be maintained at such a level that
the market value, depending on the maturity of the repurchase agreement, is
equal to at least 100.5% of the repurchase price.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and other
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
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, as amended, 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.
21
<PAGE>
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, and foreign denominated investments. As a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Other. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Six months ended Year ended
September 30, 1998 March 31, 1998
----------------------------------- ------------------------------------
Shares Dollars Shares Dollars
International Shares
<S> <C> <C> <C> <C>
Shares outstanding at beginning of period 55,412,474 $1,982,910,413 53,734,143 $1,921,042,575
-------------- -------------- -------------- --------------
Shares sold 17,158,887 910,498,182 21,147,508 1,071,204,110
Shares issued to shareholders in reinvestment
of distributions 106,885 5,819,872 5,897,787 269,844,500
Shares redeemed (17,704,391) (939,817,898) (25,366,964) (1,288,548,383)
------------- ------------- ------------- --------------
Net increase (decrease) (438,619) (23,499,844) 1,678,331 52,500,227
Shares outstanding at end of period 54,973,855 1,959,410,569 55,412,474 1,973,542,802
Barrett International Shares*
Shares outstanding at beginning of period -- $ --
-------------- --------------
Shares issued in tax-free reorganization 401,812 21,054,972
Shares sold 22,276 1,181,680
Shares issued to shareholders in reinvestment
of distributions 652 35,512
Shares redeemed -- (175)
Net increase (decrease) 424,740 22,271,989
Shares outstanding at end of period 424,740 22,271,989
*For the period April 3, 1998 (commencement of sale of Barrett International Shares) to September 30, 1998.
</TABLE>
22
<PAGE>
C. Purchases and Sales of Securities
For the six months ended September 30, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $880,529,481 and
$1,076,072,726, respectively.
D. 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 pays 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 objective, 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 six months ended September 30, 1998, the
fees pursuant to this agreement amounted to $12,123,774, of which $1,830,682 is
unpaid at September 30, 1998. This was equivalent to an annual effective rate of
.81% 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 investment 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 investment 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.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the classes of the
Fund. For the six months ended September 30, 1998, the amount charged by SSC to
the International and Barrett International classes for services to shareholders
is $1,548,160 and $3,957, respectively, of which $253,047 is unpaid at September
30, 1998.
23
<PAGE>
The International Shares of the Fund are 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 six months ended September 30, 1998, the Special
Servicing Agreement expense charged to the International Shares of the Fund
amounted to $358,843.
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 International Shares of the Fund. For the
six months ended September 30, 1998, the amount charged to the International
Shares of the Fund by STC aggregated $984,654, of which $172,183 is unpaid at
September 30, 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 six months
ended September 30, 1998, the amount charged to the Fund by SFAC aggregated
$454,354, of which $70,938 is unpaid at September 30, 1998.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer,
divided equally among the series of the Trust, plus specified amounts for
attended board and committee meetings. For the six months ended September 30,
1998, Trustees' fees and expenses aggregated $26,197.
E. Commitments
As of September 30, 1998, the Fund had entered into the following forward
foreign currency exchange contracts resulting in net unrealized appreciation of
$231,925.
<TABLE>
<CAPTION>
Contracts to Deliver In Exchange For Settlement Net Unrealized
Date Appreciation
(Depreciation)
(U.S.$)
---------------------------------- --------------------------------- -------------- --------------------
<S> <C> <C> <C> <C>
Japanese Yen 9,845,626,279 U.S. Dollars 73,918,000 3/4/99 231,925
</TABLE>
F. 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.
24
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and to the
Shareholders of Scudder International 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 International Fund (the
"Fund") at September 30, 1998, the results of its operations, the changes in its
net assets, and the financial highlights for each of the periods indicated
therein, 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
September 30, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
November 13, 1998
25
<PAGE>
BLANK PAGE
<PAGE>
BLANK PAGE
<PAGE>
BARRETT INTERNATIONAL SHARES
345 Park Avenue, New York, New York 10154
(800) 854-8525
Investment Manager
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Distributor
Scudder Investor Services, Inc.
Two International Place
Boston, Massachusetts 02110
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Fund Accounting Agent
Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Transfer Agent and
Dividend Disbursing Agent
Scudder Service Corporation
P.O. Box 9242
Boston, Massachusetts 02205
Legal Counsel
Dechert, Price & Rhoads
10 Post Office Square South
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
-----------------
This report is for the information of the shareholders. Its use in
connection with any offering of the Fund's shares is authorized only in case
of a concurrent or prior delivery of the Fund's current prospectus.
BARRETT INTERNATIONAL
SHARES
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SEMIANNUAL REPORT
SEPTEMBER 30, 1998
BARRETT INTERNATIONAL SHARES
ARE A CLASS OF THE
SCUDDER INTERNATIONAL FUND
