BARRETT INTERNATIONAL SHARES
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ANNUAL REPORT
MARCH 31, 1999
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BARRETT INTERNATIONAL SHARES ARE A CLASS OF THE SCUDDER INTERNATIONAL FUND
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Board of 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
KEITH R. FOX Director; President, Exeter Capital Management Corporation
WILLIAM H. LUERS Director; Chairman and President of the U.N. Association of the U.S.A.
KATHRYN L. QUIRK Director; Vice President and Assistant Secretary
JOAN SPERO Director; President, Doris Duke Charitable Foundation
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Honorary Director
THOMAS J. DEVINE Honorary Director; Consultant
WILLIAM H. GLEYSTEEN, JR. Honorary Director; Consultant; Guest Scholar, Brookings Institute
WILSON NOLEN Honorary Director; Consultant
ROBERT G. STONE, JR. Honorary Director; 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
PHILIP S. FORTUNA* 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
SHERIDAN REILLY* Vice President
SHAHRAM TAJBAKHSH* Vice President
JOHN R. HEBBLE* Treasurer
RICHARD W. DESMOND* Assistant Secretary
CAROLINE PEARSON* Assistant Secretary
*Scudder Kemper Investments, Inc.
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Dear Shareholders:
We are pleased to provide you with the March 31, 1999 annual report for
the Barrett International Shares, a class of shares of Scudder International
Fund (the "Fund").
Significant changes have taken place in the international markets
during the past twelve months. In Europe, the launch of the new currency has
been just one of several catalysts fueling positive changes in the corporate
culture. In Asia, the economic crisis has forced many corporations to begin the
long overdue process of restructuring, and has prompted some of the region's
governments to initiate meaningful reforms. And throughout the entire world, the
forces of deflation and intensifying competition have compelled a myriad of
companies to re-examine the way they do business. Although the process of change
has often been a source of significant market volatility, it has also presented
astute investors with the opportunity to build positions in stocks that are
likely to benefit from the ongoing evolution of the global business environment.
During this challenging period, the Fund's management team used an
approach that balanced individual stock selection and top-down country and
industry analysis to withstand significant market volatility. By focusing on
stocks poised to benefit from the ongoing process of restructuring in Europe, as
well as companies in Japan that are just beginning to recognize the importance
of shareholder value, the Fund was able to beat its benchmark and demonstrate
resilience when the markets were falling. For more information on the Fund's
investment strategy, please turn to the Portfolio Management Discussion on page
5.
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
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Portfolio Summary
March 31, 1999
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Geographical
(Excludes 4% Cash Equivalents)
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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Europe 69%
Japan 21%
Pacific Basin 8%
Canada 1%
Latin America 1%
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100%
--------------------------------------
Fund management increased the portfolio's weighting in Japan and the Pacific
Basin while reducing its holdings in Europe.
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Sectors
(Excludes 4% Cash Equivalents)
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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Manufacturing 18%
Financial 18%
Technology 10%
Communications 10%
Energy 7%
Service Industries 7%
Consumer Staples 6%
Health 5%
Media 5%
Other 14%
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100%
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Sector weightings are largely the result of decisions we make on a
stock-by-stock basis.
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Ten Largest Equity Holdings
(18% of Portfolio)
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1. Telecom Italia SpA
Telecommunication services
2. Nokia AB
Manufacturer of telecommunication systems and
equipment
3. Reuters Group plc
International news and information organization
4. Hoechst AG
Chemical producer
5. Mannesmann AG
Manufacturer of diversified industrial
products
6. Elf Aquitaine SA
Petroleum company
7. SmithKline Beecham plc
Manufacturer of ethical drugs and healthcare
products
8. Rio Tinto plc
Mining company
9. Pearson plc
Diversified media and entertainment holding
company
10. Shell Transport & Trading plc
Petroleum company
The Fund's top holdings reflect the opportunities available in European
companies that are restructuring and cutting costs.
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
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Portfolio Management Discussion
In the following interview, Portfolio Manager Irene Cheng discusses the Fund's
strategy and the market environment during the twelve-month period ended March
31, 1999.
Q: The past twelve months have been an extremely interesting time in the
overseas markets. In your view, what have been the key drivers of market
performance in this period?
A: The investment landscape has changed considerably in recent months. Once the
emerging markets crises dissipated, European stocks rebounded sharply as
investors refocused their attention on the potential benefits of the new
currency, the euro. Anticipation of a new wave of merger and restructuring
activity, increased economic integration, and greater efficiency combined to
fuel expectations for stronger growth in the region. By early 1999, however,
equity valuations fully reflected these developments.
As a result, the markets were vulnerable when new concerns arose in mid-January.
Investors became nervous when the outlook for economic growth and corporate
profits deteriorated, which in turn led to weakness in the euro. Growth
estimates were revised downward, with most countries' GDP forecasts falling
under 2.0%. At the same time, the German market came under pressure due in part
to the policies of the country's left-wing finance minister, Oskar Lafontaine.
While the markets rallied following his resignation, the combination of
political and economic difficulties led to negative investor sentiment in the
first quarter.
Q: How did these developments affect your weighting in European stocks?
A: We elected to take profits on a stock-by-stock basis in companies whose
valuations had begun to look less attractive. For instance, we pared our
position in German utilities, which faced uncertainty regarding taxes and
regulation. In addition, trimmed our position in telecom stocks, which began to
appear fully valued following a strong run-up in 1998. As bottom-up
stockpickers, one of our areas of focus was consolidation activity, which
continues to provide opportunities despite a sluggish economy. General Electric
Co. plc, a defense company and a holding in the portfolio, announced the sale of
its Marconi division to British Aerospace. In the leisure goods arena, LVMH,
another portfolio holding, acquired a position in Gucci and later bid for the
entire company. Telecom Italia, one of our telecommunications stocks, has
received offers from Olivetti
5
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and Deutsche Telekom. We expect to see further merger and acquisition activity
as the year progresses.
Q: After performing poorly for most of the reporting period, Japanese stocks
came to life in the first quarter of 1999. To what do you attribute this change
of direction?
A: Investors are beginning to realize that Japan has finally begun to take
meaningful steps toward resolving its financial crisis. We are seeing positive
indications that both the public and private sectors have made a commitment to
change. The government implemented a reform package designed to help the banking
system, and has attached important conditions for the banks to meet in order to
receive public funds. For instance, they are requiring improved levels of
profitability, aggressive restructuring, and full bad debt disclosure. In
addition, the authorities have lowered interest rates to an effective level of
0%, and provided a massive fiscal stimulus package. Over time, we expect that
these initiatives will lead to a positive investment backdrop in Japan by
helping to alleviate the country's credit crunch.
Stocks have also benefited from private sector reforms; most notably, the shift
from a business model that focused on lifetime employment to one that emphasizes
profitability. Although we will need to see more evidence before we are
convinced that these changes will be permanent, we believe that the transition
has already created numerous opportunities to invest in individual companies
that are poised to turn around. If Japanese firms are able to unlock value on a
scale similar to that of their counterparts in the U.S. and Europe in the past
ten years, the impact on profits could be substantial.
Q: Have you increased the Fund's weighting in Japan in response to these
changes?
A: Yes. We only had 9% of assets in Japan as of September 30, but by the end of
the first quarter of 1999 we had increased the Fund's weighting to 21%. As of
March 31, one-third of this position was invested in industrial restructuring
candidates that have demonstrated a growing emphasis on profitability, and an
additional one-third was held in financial stocks. The final one-third was in
domestic growth and global technology stocks.
Q: How did the Fund perform in this environment?
A: For the twelve-month period ended March 31, 1999, the Barrett International
Shares of Scudder International Fund returned 6.60% versus 5.17% for the Fund's
unmanaged benchmark,
6
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the MSCI EAFE + Canada Index. We attribute the Fund's outperformance to superior
individual stock selection, particularly in Europe. Our position in the
telecommunications sector, where we began adding aggressively in the first and
second quarters of last year, made a significant contribution to Fund returns.
In addition, our defensive portfolio positioning in the second half of 1998
helped to provide a cushion during the correction of August and September.
Q: Please review your investment process.
A: We combine three analytical disciplines to select the optimal combination of
stocks for the portfolio. First, we utilize pure bottom-up stock selection --
what we like to call "tire kicking" -- to evaluate companies based on their
financial statements, valuations, and market positions. Second, we use top-down
country analysis to alert us when changes in the macroeconomic environment may
have important implications for our individual holdings. Finally, we use a
thematic approach to uncover industries that may benefit from secular changes in
the business environment. The combination of these disciplines tells us what to
buy, and when to do so. For instance, we used fundamental analysis to select the
stocks that we felt to be the best buy candidates in the Japanese market, but
did not begin to increase our positions until our top-down discipline revealed
that Japan was beginning to look increasingly attractive relative to Europe.
Q: What are some individual holdings that illustrate your investment style?
A: In response to the changes taking place in Japan, we purchased shares in a
number of Japanese banks, including Bank of Tokyo Mitsubishi ("BOTM") and Sanwa
Bank. We believe that these companies are likely to emerge from the
restructuring of the financial sector with significant competitive advantages.
BOTM, which is the largest bank in the world by asset size, already possesses a
strong balance sheet, and is therefore opting out of the government's capital
injection plan. In an effort to improve profitability, management at BOTM has
embarked on a strategy that includes selling its downtown Tokyo headquarters and
reducing the size of its balance sheet. Sanwa, meanwhile, has the highest branch
penetration and efficiency ratios of any Japanese bank. In a deregulated
financial services environment, we expect both of these companies to be strong
competitors.
In Europe, we benefited from our holding in Reuters, the British financial
services provider that we bought last year when it was very much out of favor
with investors. Believing that the company was attractively valued given its
strong franchise and favorable earnings prospects, we
7
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established a large position that has performed well. We also bought shares of
Telecom Italia, which was undervalued because of regulatory concerns and a long
history of poor management. We feel that the stock has significant growth
potential because of its favorable product mix and cost-cutting initiatives. Due
in part to the takeover speculation, the stock has risen strongly in the past
year.
Q: What is your outlook for the foreign markets?
A: The remainder of the year is sure to present a host of challenges and
opportunities for investors. Although economic activity is slowing in Europe,
individual companies are restructuring and becoming more competitive. While
Japan continues to suffer from past excesses, it is evident that steps are being
taken to set things right. On a global basis, advances in technology have
contributed to deflation, but have helped many companies work smarter and
faster. As winners and losers emerge from this environment, astute investors
will recognize the impact of these changes, and benefit from them. Going
forward, we will continue to build and maintain a portfolio that strives to
capture these investment opportunities in a balanced and prudent fashion.
A Team Approach to Investing
Irene Cheng, Lead Portfolio Manager, joined the Adviser in 1993. Ms. Cheng has
over 16 years of industry experience and 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.
Carol L. Franklin, Portfolio Manager, joined the Fund's portfolio management
team in 1986 and has over 21 years of experience in finance and investing. She
joined the Adviser in 1981.
8
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Scudder International Fund/Barrett International Shares
Investment Portfolio
March 31, 1999
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Principal Market
Amount ($) Value ($)
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Repurchase Agreements 0.8%
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Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 3/31/1999 at 4.9%,
to be repurchased at $24,737,366 on 4/1/1999, collateralized by a $23,460,000 -------------
U.S. Treasury Bond, 8.25%, 5/15/2005 (Cost $24,734,000) ...................... 24,734,000 24,734,000
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Commercial Paper 3.2%
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United States
Ameritech Capital Funding Corp., 4.87%**, 5/6/1999 ............................. 50,000,000 49,764,236
Quincy Capital Corp., 4.9%**, 4/12/1999 ........................................ 50,000,000 49,925,139
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Total Commercial Paper (Cost $99,689,375) 99,689,375
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Convertible Bonds 0.1%
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Philippines
International Container Terminal Services, Inc., 1.75%, 3/13/2004 (Putable 3/13/2002) -------------
(Cost $3,114,799) ............................................................ 2,753,000 2,340,050
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Shares
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Common Stocks 95.9%
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Argentina 0.5%
YPF S.A. "D" (ADR) (Petroleum company) ......................................... 515,200 16,261,000
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Australia 1.6%
Broken Hill Proprietary Co. Ltd. (Petroleum, mineral and steel exploration and production) 2,822,575 24,074,638
WMC Ltd. (Mineral exploration and production) .................................. 4,802,500 15,288,437
Woodside Petroleum Ltd. (Oil and gas producer) ................................. 1,814,600 10,979,101
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50,342,176
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Canada 1.3%
Canadian National Railway (Railroad operator) .................................. 723,000 40,294,433
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China 0.4%
Anhui Expressway Co., Ltd. "H" (Developer and manager of toll highways in Anhui province) 18,717,000 1,811,439
Jiangsu Expressway Co., Ltd. "H" (Developer and manager of toll highways in Jiangsu Province) 14,973,000 2,936,829
Shenzhen Expressway Co. "H" (Highway developer) ................................ 15,964,000 3,110,606
Sichuan Expressway Co. "H" (Developer of toll roads, bridges and tunnels) ...... 18,436,000 1,356,026
Zhejiang Expressway Co., Ltd. "H" (Road construction and management) ........... 16,126,000 2,746,799
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11,961,699
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Denmark 0.3%
Unidanmark A/S "A" (Registered) (Financial services company) ................... 117,700 8,043,592
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The accompanying notes are an integral part of the financial statements.
9
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Market
Shares Value ($)
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Finland 2.6%
Fortum Corp.* (Provider of a full range of energy related services) ............ 942,033 4,591,643
Nokia AB "A" (Manufacturer of telecommunication systems and equipment) ......... 465,300 74,978,390
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79,570,033
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France 14.5%
AXA S.A. (Provider of insurance, finance and real estate services) ............. 169,835 22,539,848
Accor S.A. (Provider of catering, hotel and travel services) ................... 158,968 39,515,089
Air Liquide (Producer of industrial gases) ..................................... 75,212 11,217,385
Alstom* (Designer and manufacturer of infrastructure systems and components) ... 299,275 8,894,644
Banque Nationale de Paris (Bank) ............................................... 316,690 27,586,386
Christian Dior (Fashion house) ................................................. 184,105 23,657,718
Club Mediterranee SA (Operator of vacation resorts) ............................ 60,992 5,405,205
Compagnie Generale des Etablissements Michelin "B" (Tire manufacturer) ......... 275,140 12,355,211
Elf Aquitaine SA (Petroleum company) ........................................... 408,588 55,550,972
Etablissements Economiques du Casino Guichard-Perrachon S.A. (Operator of
supermarkets and convenience stores) .......................................... 427,332 23,969,457
LVMH (Louis Vuitton Moet Hennessy) (Producer of wines, spirits and luxury products) 58,959 14,623,732
Lagardere S.C.A. (Holding company with interests in publishing, defense,
audiovisual production and services, telecommunications and media) ........... 1,113,120 36,198,418
Pernod Ricard (Manufacturer of spirits, whiskey, wines, and fruit juices) ...... 146,244 9,301,435
Rhone-Poulenc S.A. "A" (Producer of medical, agricultural and consumer chemicals) 569,677 25,796,936
STMicroelectronics NV* (Designer, developer, manufacturer and marketer
of semiconductor integrated circuits) ....................................... 263,417 26,177,065
Societe BIC SA (Manufacturer of office supplies) ............................... 615,087 32,406,833
Suez Lyonnaise des Eaux (Provider of water supply and treatment services) ...... 114,458 21,202,271
Thomson CSF (Manufacturer of aerospace systems and industrial electronics products) 504,390 15,426,888
Total S.A. "B" (Producer of oil and natural gas) ............................... 48,709 6,006,483
Union des Assurances Federales (Insurance group) ............................... 136,948 16,428,734
Vivendi (Industrial services) .................................................. 81,783 20,143,400
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454,404,110
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Germany 12.1%
Allianz AG (Multi-line insurance company) ...................................... 72,883 22,212,670
BASF AG (International chemical producer) ...................................... 788,252 28,879,535
Deutsche Telekom AG (Telecommunication services) ............................... 910,954 37,165,401
Heidelberger Druckmaschinen AG (Manufacturer of commercial printing presses) ... 119,282 6,381,247
Hoechst AG (Chemical producer) ................................................. 1,375,481 59,685,050
The accompanying notes are an integral part of the financial statements.
10
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Market
Shares Value ($)
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Mannesmann AG (Manufacturer of diversified industrial products) ................ 463,014 59,197,625
Metro AG (Operator of building, clothing, department, electronic and food stores) 532,912 33,387,524
SAP AG (pfd.) (Manufacturer of computer software) .............................. 65,964 21,244,605
Schering AG (Producer of pharmaceuticals and chemicals) ........................ 264,783 30,862,824
Siemens AG (Electrical engineering and electronics company) .................... 402,572 26,931,443
VEBA AG (Electric utility, distributor of oil and chemicals) ................... 569,000 29,947,919
VIAG AG (Provider of electrical power and natural gas services, aluminum
products, chemicals, ceramics and glass) ...................................... 42,829 23,648,263
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379,544,106
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Hong Kong 2.8%
Cheung Kong Holdings Ltd. (Real estate company) ................................ 3,225,000 24,553,197
Citic Pacific Ltd. (Diversified holding company) ............................... 8,983,000 18,894,496
Cosco Pacific Ltd. (Investment holding company) ................................ 7,092,000 3,317,440
GZI Transport Ltd. (Developer and manager of toll highways in Guangdong Province) 4,524,000 712,211
Hong Kong & China Gas Co., Ltd. (Gas utility) .................................. 18 25
Kerry Properties, Ltd. (Real estate company) ................................... 7,066,155 5,653,289
New World Development Co., Ltd. (Property investment and development,
construction and engineering, hotels and restaurants, telecommunications) .... 7,721,298 15,194,502
New World Infrastructure Ltd.* (Investment and operation of infrastructure projects) 6,600,000 8,601,845
Sun Hung Kai Properties Ltd. (Real estate developer and finance company) ....... 1,410,000 10,507,452
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87,434,457
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Hungary 0.1%
The First Hungary Fund Ltd. "A"* (Investment company) .......................... 3,619 3,257,100
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Italy 8.3%
Arnoldo Mondadori Editore SpA (Book publisher) ................................. 763,000 11,420,884
Assicurazioni Generali (Insurance company) ..................................... 320,600 12,854,727
Banca Commerciale Italiana SpA (Commercial bank) ............................... 3,046,000 25,018,940
Banca Nazionale del Lavoro* (Bank) ............................................. 2,896,900 10,143,877
Class Editori SpA* (Publishing house) .......................................... 871,900 7,745,758
Finmeccanica SpA* (Designer and developer of aeronautical equipment) ........... 22,814,000 23,028,928
Gruppo Editoriale L'Espresso (Publisher) ....................................... 587,000 6,597,765
Istituto Bancario San Paolo di Torino (Commercial bank) ........................ 640,900 10,424,427
Istituto Nazionale delle Assicurazione (Insurance company) ..................... 7,529,400 22,784,726
La Rinascente SpA (Department store and supermarket chain) ..................... 976,100 7,627,075
Mediaset SpA (Broadcasting and television networks) ............................ 1,803,400 16,976,011
The accompanying notes are an integral part of the financial statements.
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Market
Shares Value ($)
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Seat Pagine Gialle SpA (Publisher of telecommunication directories and provider
of advertising services) ..................................................... 5,704,900 6,689,647
Seat Pagine Gialle SpA di Risparmio ............................................ 26,957,001 21,559,005
Telecom Italia SpA (Telecommunication services) ................................ 6,702,000 71,272,984
Telecom Italia SpA di Risparmio ................................................ 636,300 3,782,248
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257,927,002
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Japan 20.1%
Asahi Glass Co., Ltd. (Manufacturer of glass products) ......................... 2,185,000 15,866,757
Bank of Tokyo-Mitsubishi, Ltd. (Provider of financial services) ................ 1,217,000 16,770,616
Canon Inc. (Producer of visual image and information equipment) ................ 460,000 11,380,562
Daiwa Securities Co., Ltd. (Provider of brokerage and other financial services) 7,274,000 39,001,858
Fuji Bank, Ltd. (Provider of commercial and institutional banking services) .... 2,576,000 15,247,623
Fujitsu Ltd. (Manufacturer of computers) ....................................... 1,668,000 26,788,280
Hitachi Ltd. (Manufacturer of general electronics) ............................. 2,098,000 15,536,148
Matsushita Electric Industrial Co., Ltd. (Manufacturer of consumer electronic products) 1,575,000 30,720,679
Mitsubishi Estate Co., Ltd. (Real estate company) .............................. 1,846,000 18,782,656
Mitsui Fudosan Co., Ltd. (Real estate company) ................................. 1,553,000 13,991,818
Murata Manufacturing Co., Ltd. (Manufacturer of ceramic applied electronic components) 473,000 25,161,699
NEC Corp. (Manufacturer of telecommunication and computer equipment) ........... 2,512,000 30,225,450
Nichiei Co., Ltd. (Finance company for small and medium-sized firms) ........... 134,010 12,005,793
Nikko Securities Co., Ltd. (Leading securities broker and dealer) .............. 8,261,000 38,364,857
Nintendo Co., Ltd. (Manufacturer of game equipment) ............................ 151,300 13,056,540
Nippon Telegraph & Telephone Corp. (Telecommunication services) ................ 3,232 31,656,844
NSK Ltd. (Manufacturer of bearings and motor vehicle machine parts) ............ 3,247,000 15,079,372
NTT Mobile Communication Network, Inc. (Provider of various telecommunication
services and equipment) ....................................................... 636 31,416,026
Sakura Bank, Ltd. (Bank) ....................................................... 5,394,000 16,350,975
Sanwa Bank, Ltd. (Bank) ........................................................ 1,409,000 15,288,060
Shin-Etsu Chemical Co., Ltd. (Producer and distributor of synthetic resins and chemicals) 635,000 16,675,251
Sony Corp. (Manufacturer of consumer electronic products) ...................... 293,300 27,041,908
Sumitomo Electric Industries, Ltd. (Manufacturer of electric wires and cables) . 889,000 10,539,188
Sumitomo Trust & Banking Co., Ltd. (Trust bank) ................................ 3,751,000 15,677,995
TDK Corp. (Manufacturer of magnetic tapes and floppy discs) .................... 292,000 23,645,022
Teijin Ltd. (Manufacturer of polyester products) ............................... 3,881,000 15,664,257
Tokyo Electron Ltd. (Manufacturer of semiconductor production equipment) ....... 480,000 24,845,056
Toshiba Corp. (Manufacturer of electric machinery) ............................. 5,559,000 37,973,748
The accompanying notes are an integral part of the financial statements.
12
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Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------------
Yamanouchi Pharmaceutical Co., Ltd. (Manufacturer of ethical drugs) ............ 710,000 22,481,635
-------------
627,236,673
-------------
Korea 0.4%
Samsung Electronics Co., Ltd. (Manufacturer of consumer and industrial
electronic equipment) ...................................................... 182,900 14,160,962
-------------
Netherlands 4.6%
AEGON Insurance Group NV (Insurance company) ................................... 248,470 22,704,555
Akzo-Nobel NV (Producer and marketer of healthcare products, coatings,
chemicals and fibers) ....................................................... 499,500 18,516,335
Elsevier NV (International publisher of scientific, professional, business,
and consumer information books) ............................................. 1,685,000 25,130,690
Equant NV* (Provider of international data network services) ................... 350,810 26,691,319
Heineken Holding NV "A" (Producer and distributor of beers, spirits,
wines and soft drinks) ...................................................... 803,355 30,604,976
Koninklijke Ahold NV (International food retailer) ............................. 441,240 16,928,896
United Pan-Europe Communications NV* (Provider of television
and telecommunication services) ............................................. 100,163 3,929,519
-------------
144,506,290
-------------
Philippines 0.0%
International Container Terminal Services, Inc.* (Containerized cargo handling firm) 10,537,050 707,002
-------------
Spain 0.6%
Argentaria Caja Postal y Banco Hipotecario de Espana, SA (Bank) ................ 821,176 19,755,445
-------------
Switzerland 4.7%
Nestle SA (Registered) (Food manufacturer) ..................................... 17,186 31,300,182
Novartis AG (Registered) (Pharmaceutical company) .............................. 20,883 33,959,892
Roche Holdings AG (PC) (Producer of drugs and medicines) ....................... 1,712 20,929,662
Swisscom AG* (Operator of telecommunication networks and network application services) 97,256 38,073,736
UBS AG (Registered) (Provider of banking and asset management services) ........ 66,561 20,963,030
-------------
145,226,502
-------------
Taiwan 2.6%
Asustek Computer Inc.* (Manufacturer of computer mainboards, audio, video and network cards) 632,000 5,338,965
China Development Industrial Bank Inc.* (Venture capital firm and investment bank) 4,514,000 7,626,610
Compal Electronics Inc.* (Manufacturer and marketer of notebook computers and color monitors) 3,912,022 10,268,394
Far Eastern Textile Ltd. (Manufacturer of natural and synthetic textile products) 17,817,000 17,524,037
Hon Hai Precision Industry* (Manufacturer of electronic connectors, cable assemblies and
memory chips) 1,861,000 9,938,060
Siliconware Precision Industries Co.* (Manufacturer of integrated circuit plates) 7,444,000 15,159,753
Taiwan Semiconductor Manufacturing Co.* (Manufacturer of integrated circuits
and other semiconductor devices) ............................................. 4,781,000 15,001,478
-------------
80,857,297
-------------
The accompanying notes are an integral part of the financial statements.
13
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Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------------
United Kingdom 18.4%
BOC Group plc (Producer of industrial gases) (b) ............................... 2,626,692 36,555,636
BP Amoco plc (Producer of oil and petrochemicals) (b) .......................... 2,007,452 33,933,587
Carlton Communications plc (Television post production products and services) .. 2,354,778 23,228,924
Enterprise Oil plc (Explorer and producer of oil and gas) ...................... 1,550,619 8,918,625
General Electric Co., plc (Manufacturer of power, communications and defense
equipment) (b) ............................................................. 3,706,346 33,300,369
Glaxo Wellcome plc (Pharmaceutical company) .................................... 888,148 29,782,404
Imperial Chemical Industries plc (International chemical producer) ............. 1,640,102 14,696,088
LASMO plc (Explorer and producer of oil) (b) ................................... 5,150,872 10,478,261
Marks & Spencer, plc (Retailer of consumer goods and foods) (b) ................ 2,226,587 14,657,534
Monument Oil and Gas plc (Explorer and producer of oil and gas) ................ 7,559,921 5,187,333
Orange plc* (Operator of digital mobile telephone networks) .................... 2,842,834 39,747,270
Pearson plc (Diversified media and entertainment holding company) .............. 1,907,289 43,664,717
Reed International plc (Publisher of scientific, professional and business
to business materials) ..................................................... 2,706,485 24,076,599
Reuters Group plc (International news and information organization) (b) ........ 4,387,671 64,321,745
Rio Tinto plc (Mining company) ................................................. 3,301,080 45,568,012
Royal & Sun Alliance Insurance Group plc (Multi-line insurance holding company) 1,617,424 15,276,282
Select Appointments Holdings plc* (Provider of recruitment services) ........... 1,098,634 14,757,550
Shell Transport & Trading plc (Petroleum company) .............................. 6,001,208 40,378,688
SmithKline Beecham plc (Manufacturer of ethical drugs and healthcare products) . 3,386,115 48,901,250
Vodafone Group plc (Provider of telecommunication services) .................... 1,572,478 29,195,797
-------------
576,626,671
- --------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $2,413,194,091) 2,998,116,550
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,540,732,265) (a) 3,124,879,975
- --------------------------------------------------------------------------------------------------------------------------------
</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 $2,549,155,776. At March 31,
1999, net unrealized appreciation for all securities based on tax cost was
$575,724,199. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $676,829,254 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$101,105,055.
(b) At March 31, 1999, these securities, in part or in whole, have been
segregated to cover forward currency contracts.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Scudder International Fund/Barrett International Shares
Statement of Assets and Liabilities
March 31, 1999
<TABLE>
<CAPTION>
Assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $2,540,732,265) .......... $3,124,879,975
Cash 1,369
Foreign currency holdings, at market (identified cost $1,321,101) 1,320,639
Receivable for investments sold .................................. 28,403,052
Receivable for Fund shares sold .................................. 3,680,193
Dividends and interest receivable ................................ 9,041,381
Foreign taxes recoverable ........................................ 4,067,692
Other assets ..................................................... 37,167
----------------
Total assets ..................................................... 3,171,431,468
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................ 36,503,817
Payable for Fund shares redeemed ................................. 18,235,157
Unrealized depreciation on forward currency exchange contracts ... 395,932
Accrued management fee ........................................... 2,051,746
Other payables and accrued expenses .............................. 1,471,257
----------------
Total liabilities ................................................ 58,657,909
-------------------------------------------------------------------------------------------
Net assets, at market value $3,112,773,559
-------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .............................. 2,638,610
Unrealized appreciation (depreciation) on:
Investments ................................................... 584,147,710
Foreign currency related transactions ......................... (426,437)
Accumulated net realized gain (loss) ............................. 206,243,900
Paid-in capital .................................................. 2,320,169,776
-------------------------------------------------------------------------------------------
Net assets, at market value $3,112,773,559
-------------------------------------------------------------------------------------------
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------
International Shares
Net asset value, offering and redemption price per share
($3,089,668,777 / 61,709,689 shares of capital stock ----------------
outstanding, $.01 par value, 100,000,000 shares authorized) ...... $50.07
----------------
Barrett International Shares
Net asset value, offering and redemption price per share
($23,104,782 / 460,840 shares of capital stock outstanding, ----------------
$.01 par value, 100,000,000 shares authorized) .................... $50.14
----------------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Scudder International Fund/Barrett International Shares
Statement of Operations
For the year ended March 31, 1999
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $6,411,078) .......... $ 52,285,237
Interest ......................................................... 9,490,808
----------------
61,776,045
----------------
Expenses:
Management fee ................................................... 23,819,941
Services to shareholders ......................................... 7,389,758
Custodian and accounting fees .................................... 2,319,746
Directors' fees and expenses ..................................... 63,387
Reports to shareholders .......................................... 430,297
Auditing ......................................................... 159,558
Legal ............................................................ 69,182
Registration fees ................................................ 98,771
Other ............................................................ 228,884
----------------
34,579,524
-------------------------------------------------------------------------------------------
Net investment income 27,196,521
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ...................................................... 505,050,696
Foreign currency related transactions (including CPMF tax of $45,856) (9,203,032)
----------------
495,847,664
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ...................................................... (310,921,292)
Foreign currency related transactions ............................ (242,949)
----------------
(311,164,241)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 184,683,423
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 211,879,944
-------------------------------------------------------------------------------------------
</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>
Years Ended March 31,
Increase (Decrease) in Net Assets 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 27,196,521 $ 23,071,776
Net realized gain (loss) from investment transactions .. 495,847,664 283,592,889
Net unrealized appreciation (depreciation) on
investment transactions during the period ........... (311,164,241) 229,773,170
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ............................................. 211,879,944 536,437,835
---------------- ----------------
Distributions to shareholders from:
Net investment income -- International Shares .......... -- (12,911,722)
---------------- ----------------
Net realized gains -- International Shares ............. (303,892,941) (274,137,681)
---------------- ----------------
Net realized gains -- Barrett International Shares ..... (2,373,251) --
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .............................. 2,263,481,804 1,071,204,110
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 290,405,369 269,844,500
Cost of shares redeemed ................................ (2,231,646,711) (1,288,548,383)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ........................................... 322,240,462 52,500,227
---------------- ----------------
Increase (decrease) in net assets ...................... 227,854,214 301,888,659
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 $2,638,610 and ---------------- ----------------
$6,551,066, respectively) ...........................$3,112,773,559 $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>
Years Ended March 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................... $ 52.06 $ 48.07 $ 45.71 $ 39.72 $ 42.96
----------------------------------------------------------
Income from investment operations:
Net investment income .......................................... .47(c) .43 .30 .38 .21
Net realized and unrealized gain (loss) on investment transactions 3.10 9.16 4.53 7.19 (1.03)
----------------------------------------------------------
Total from investment operations ............................... 3.57 9.59 4.83 7.57 (.82)
----------------------------------------------------------
Less distributions:
From net investment income ..................................... -- (.25) (1.28) (.40) --
From net realized gains on investment transactions ............. (5.56) (5.35) (1.19) (1.18) (2.42)
----------------------------------------------------------
Total distributions ............................................ (5.56) (5.60) (2.47) (1.58) (2.42)
----------------------------------------------------------
----------------------------------------------------------
Net asset value, end of period ................................. $ 50.07 $ 52.06 $ 48.07 $ 45.71 $ 39.72
----------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ........................................... 7.18 21.57 10.74 19.25 (2.02)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ......................... 3,090 2,885 2,583 2,515 2,192
Ratio of operating expenses to average net assets (%) .......... 1.17 1.18 1.15 1.14 1.19
Ratio of net investment income to average net assets (%) ....... .92 .83 .64 .86 .48
Portfolio turnover rate (%) .................................... 79.9 55.7 35.8 45.2 46.3
</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) Net investment income per share includes non-recurring dividend income
amounting to $.09 per share.
18
<PAGE>
Scudder International Fund/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 March
31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
------------------
Net asset value, beginning of period .............................................................. $52.40
------------------
Income from investment operations:
Net investment income ............................................................................. .52(b)
Net realized and unrealized gain (loss) on investment transactions ................................ 2.78
------------------
Total from investment operations .................................................................. 3.30
------------------
Less distributions from net realized gains on investment transactions ............................. (5.56)
------------------
Net asset value, end of period .................................................................... $50.14
------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) .............................................................................. 6.60**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................................ 23
Ratio of operating expenses to average daily net assets (%) ....................................... 1.08*
Ratio of net investment income to average daily net assets (%) .................................... 1.02*
Portfolio turnover rate (%) ....................................................................... 79.9
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Net investment income per share includes non-recurring dividend income
amounting to $.09 per share.
* 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 appreciation 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 purchased with original maturities greater than 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 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 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.
Taxes. The Fund's policy is to comply with the requirements of the Internal
Revenue Code of 1986, 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.
The Fund is subject to a .20% Contribuicao Provisoria sobre Movimentacoes
Financieras (CPMF) tax which is applied to foreign exchange transactions
representing capital inflows or outflows to the Brazilian market.
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
21
<PAGE>
redemption of Fund shares ("tax equalization") may be utilized by the Fund, to
the extent permissible, as part of the Fund's dividends paid deduction on its
federal income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
primarily relate to investments in forward contracts, passive foreign investment
companies, 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>
Year ended Year ended
March 31, 1999 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 ..................................... 44,060,365 2,235,959,213 21,147,508 1,071,204,110
Shares issued to shareholders in reinvestment ... 5,925,727 288,615,427 5,897,787 269,844,500
of distributions
Shares redeemed ................................. (43,688,877) (2,231,145,939) (25,366,964) (1,288,548,383)
--------------- ---------------- --------------- ----------------
Net increase (decrease) ......................... 6,297,215 293,428,701 1,678,331 52,500,227
--------------- ---------------- --------------- ----------------
Shares outstanding at end of period ............. 61,709,689 $2,276,339,114 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 ...................................... 32,214 1,676,680
Shares issued to shareholders in reinvestment
of distributions 36,722 1,789,941
Shares redeemed .................................. (9,908) (500,772)
--------------- ----------------
Net increase (decrease) .......................... 460,840 24,020,821
--------------- ----------------
Shares outstanding at end of period .............. 460,840 $ 24,020,821
--------------- ----------------
</TABLE>
*For the period April 3, 1998 (commencement of sale of Barrett International
Shares) to March 31, 1999.
22
<PAGE>
C. Purchases and Sales of Securities
During the year ended March 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $2,234,157,696 and
$2,228,313,830, respectively.
D. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), 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 Agreement. The management fee
payable under the Agreement is 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. For the year
ended March 31, 1999, the fees pursuant to this agreement amounted to
$23,819,941, of which $2,051,746 is unpaid at March 31, 1999. This was
equivalent to an annual effective rate of .81% of the Fund's average daily net
assets.
Effective September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner
of the Adviser, entered into an agreement with B.A.T Industries plc ("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. In December 1998, the Board of
Directors and the shareholders of the Fund 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.
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 year ended March 31, 1999, the amount charged by SSC to the
International and Barrett International classes for services to shareholders is
$3,098,197 and $4,857, respectively, of which $254,188 is unpaid at March 31,
1999.
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 year ended March 31, 1999, the Special Servicing
Agreement expense charged to the International Shares of the Fund amounted to
$817,498.
23
<PAGE>
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
year ended March 31, 1999, the amount charged to the International Shares of the
Fund by STC aggregated $2,067,603, of which $368,765 is unpaid at March 31,
1999.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
March 31, 1999, the amount charged to the Fund by SFAC aggregated $893,682, of
which $150,939 is unpaid at March 31, 1999.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the year
ended March 31, 1999, Directors' fees and expenses aggregated $63,387.
E. Commitments
As of March 31, 1999, the Fund had entered into the following forward foreign
currency exchange contracts resulted in net unrealized depreciation of $395,932.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
---------------------------------- --------------------------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 9,845,626,279 U.S. Dollars 84,511,814 9/7/99 (395,932)
---------------
(395,932)
===============
</TABLE>
F. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $850
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 pro rata 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.
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 March 31, 1999, 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 March 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
May 20, 1999
25
<PAGE>
Tax Information (Unaudited)
The Fund paid distributions of $5.56 per share from net long-term capital gains
during its year ended March 31, 1999. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $506,000,000 as capital gain dividends for its
fiscal year ended March 31, 1999.
The Fund paid foreign taxes of $6,500,000 and earned $19,000,000 of foreign
source income during the year ended March 31, 1999. Pursuant to section 853 of
the Internal Revenue Code, the Fund designates $0.105 per share as foreign taxes
paid and $0.306 per share as income earned from foreign sources for the year
ended March 31, 1999.
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.
26
<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
BARRETT INTERNATIONAL
SHARES
Custodian -----------------------------------
Brown Brothers Harriman & Company
40 Water Street
Boston, MA 02109
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
160 Federal Street
Boston, Massachusetts 02110 ANNUAL REPORT
MARCH 31, 1999
----------------- BARRETT INTERNATIONAL SHARES
ARE A CLASS OF THE
This report is for the information of SCUDDER INTERNATIONAL FUND
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.
