Barrett International Shares
Fund #401
Semiannual Report
February 29, 2000
A fund seeking long-term growth of capital
primarily from foreign equity securities.
Barrett International Shares are a class of
the Scudder International Fund.
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<TABLE>
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<S> <C>
Board of Directors
Sheryle J. Bolton Director; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin Director; General Partner, Bessemer Venture Partners
Keith R. Fox Director; General Partner, The Exeter Group of Funds
William H. Luers Director; Chairman and President, U.N. Association of
America
Kathryn L. Quirk* Director; Vice President and Assistant Secretary
Joan E. Spero Director; President, Doris Duke Charitable Foundation
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Honorary Directors
Paul Bancroft III Honorary Director; Venture Capitalist and Consultant
William H. Gleysteen, Jr. Honorary Director; Consultant; Guest Scholar, Brookings
Institution
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
Joan R. Gregory* Vice President
Theresa Gusman* Vice President
Ann M. McCreary* Vice President
Robert C. Peck* Vice President
Sheridan Reilly* Vice President
Shahram Tajbakhsh* Vice President
Tien Yu Sieh* Vice President
John Millette* Vice President and Secretary
John R. Hebble* Treasurer
Richard W. Desmond* Assistant Secretary
Caroline Pearson* Assistant Secretary
</TABLE>
*Scudder Kemper Investments, Inc.
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Dear Shareholders,
We are pleased to provide you with the February 29, 2000 semiannual report for
the Barrett International Shares, a class of shares of Scudder International
Fund (the "Fund").
In the momentum-driven market environment of recent months, it has been easy for
investors to set aside their long-term objectives in favor of stocks that offer
the most compelling "stories." Although many of the best recent performers have
been stocks with no earnings, it is important to remember that earnings growth
is the fundamental driver of stock prices over the long term. Companies with
suspect earnings may perform well in the short run, but ultimately they tend to
lose value if they do not generate earnings. Conversely, companies that produce
strong, steady earnings usually evolve into star performers.
For this reason, the management team of Barrett International Shares seeks to
invest in companies that possess a definable catalyst for stronger earnings
growth. This catalyst can come in the form of an economic recovery taking place
in a particular region, positive changes sweeping through a specific industry,
or important restructuring initiatives taking place at an individual company. To
find companies undergoing these important changes, management spends a great
deal of time "on the ground," meeting with company managements and developing a
sense of how individual firms are positioned within their respective markets.
The fund employs a large team of research analysts that are always on the road,
digging for useful information and striving to determine which companies are
embracing the "new
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economy," and which companies are likely to be left behind. The end result is
that if a company is making meaningful, positive changes in the way it does
business, we will be among the first to know about it.
Over time, this focus on companies undergoing positive fundamental changes can
help mitigate the effects of market volatility, and can position a portfolio for
strong performance in both up and down markets. This approach has worked very
well for the fund. In addition to being awarded a four-star overall rating from
Morningstar(TM), the fund has been ranked in the top quartile of its peer group
over the one-, three-, five-, and ten-year periods. For more information on how
the fund has built this strong performance record, please turn to the Portfolio
Management Discussion beginning on page 9.
Thank you for your continued investment in Barrett International Shares. For
current information on the fund or your account, visit our Internet Web site at
www.scudder.com. There you'll find a wealth of information, including the most
recent fund performance, the most recent news on Scudder products and services,
and the opportunity to perform account transactions. You can also speak with the
one of our representatives by calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Nicholas Bratt
Nicholas Bratt
President,
Barrett International Shares
4
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Performance Update
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February 29, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Barrett
International MSCI EAFE &
Shares Canada Index*
4/98** 10000 10000
8/98 9168 8781
11/98 9854 9894
2/99 10071 10018
5/99 10554 10333
8/99 12121 11077
11/99 14041 12036
2/00 15907 12693
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 2/29/2000 $10,000 Cumulative Annual
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Barrett International Shares
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1 year $ 15,794 57.94% 57.94%
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Life of Class** $ 16,128 61.28% 28.44%
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MSCI EAFE & Canada Index*
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1 year $ 12,671 26.71% 26.71%
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Life of Class** $ 12,692 26.93% 13.87%
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* The Morgan Stanley Capital International (MSCI) Europe, Australia, the
Far East (EAFE) & Canada Index is an unmanaged capitalization-weighted
measure of stock markets in Europe, Australia, the Far East and Canada.
Index returns assume dividends reinvested net of withholding tax and,
unlike Fund returns, do not reflect any fees or expenses.
** The Class commenced operations on April 3, 1998. Index comparisons
begin April 30, 1998.
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE BARRETT INTERNATIONAL SHARES TOTAL RETURN (%) AND
MSCI EAFE & CANADA INDEX* TOTAL RETURN (%)
Yearly periods ended February
1999** 2000
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Fund Total
Return (%) .71 57.94
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Index Total
Return (%) .18 26.71
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Net Asset
Value ($) 48.02 69.73
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Income
Dividends
($) -- .19
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Capital
Gains
Distributions
($) 5.56 4.82
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* The Morgan Stanley Capital International (MSCI) Europe, Australia, the
Far East (EAFE) & Canada Index is an unmanaged capitalization-weighted
measure of stock markets in Europe, Australia, the Far East and Canada.
Index returns assume dividends reinvested net of withholding tax and,
unlike Fund returns, do not reflect any fees or expenses.
** The Class commenced operations on April 3, 1998. Index comparisons
begin April 30, 1998.
Effective August 2, 1999, the Fund offers three share classes:
International Shares, Barrett International Shares, and Class R Shares.
The total return information provided is for the Fund's Barrett
International Shares Class.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased.
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Portfolio Summary
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February 29, 2000
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Geographical
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(Excludes 3% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
The fund's holdings in
Europe 63% Europe have increased
Japan 26% from 60% of net assets
Pacific Basin 10% on August 31, 1999.
Canada 1%
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100%
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Sectors
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(Excludes 3% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Holdings in the
Technology 21% technology and
Communications 16% communications sectors
Manufacturing 14% contributed
Financial 13% significantly to the
Service Industries 11% fund's strong
Consumer Staples 4% performance.
Energy 4%
Consumer Discretionary 3%
Metals & Materials 3%
Other 11%
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100%
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Ten Largest Equity Holdings
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(23% of Portfolio) The fund's top ten
holdings reflect its
1. Vodafone AirTouch PLC focus on well-managed,
Provider of telecommunication services fast-growing companies.
2. Seat Pagine Gialle SpA
Publisher of telecommunication directories
3. Reuters Group PLC
International news and information agency
4. Vivendi SA
Provider of industrial services
5. Siemens AG
Electrical engineering and electronics company
6. Epcos AG
Producer of electronic componets and integrated
circuits
7. Total FINA SA
Explorer, developer and producer of oil and gas
8. NTT Mobile Communications Network, Inc.
Provider of various telecommunication services and
equipment
9. Nokia Oyj
Manufacturer of telecommunication networks and
equipment
10. STMicroelectronics NV
Manufacturer of semiconductor integrated circuits
For more complete details about the Fund's investment portfolio, see page 15. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
8
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Portfolio Management Discussion
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February 29, 2000
In the following interview, portfolio manager Irene Cheng discusses Barrett
International Shares' strategy and the market environment during the six-month
period ended February 29, 2000.
Q: How have the international markets performed in recent months?
A: The market environment overseas was very similar to that of the United
States. Looking at the broader indices, it would appear that a roaring bull
market was in progress: France's CAC-40 rose 34.90%, Germany's Index climbed
45.04%, and Japan's Nikkei-225 gained 14.47%. Many emerging markets indices
performed even better. However, the bulk of the gains were concentrated in the
group that has been termed "TMT," which stands for technology, media, and
telecommunications. Over the six months, tech stocks in the MSCI EAFE Index rose
105%, telecoms gained almost 75%, media was up 68%, and electrical equipment
also rose. Outside of these industry groups, not one other sector showed a
positive return for the six-month period, and many -- such as retailers
(-20.7%), food producers (-19.7%), and building materials (-17.8%) -- dropped
significantly. Fortunately, the fund is well positioned for this sharply
bifurcated market environment through its large position in TMT stocks.
Q: How did these positive developments affect the fund?
A: Over the six months ended February 29, the Barrett International Shares
returned 31.23%, compared to a return of 14.58% for its unmanaged benchmark, the
MSCI EAFE + Canada Index. Over the one-year period ended on the same date, the
Barrett International Shares had produced a total return of 57.94%. We attribute
the fund's excellent performance to the strong individual stock selection. The
portfolio has been positioned to benefit on one side from the vigorous growth
taking place in areas such as telecom and technology, and on the other side from
the renewed pricing power of large industrial commodity companies. We have also
benefited from avoiding companies that are being squeezed by the impact of new
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technological advances, or are facing significantly higher input prices as a
result of the jump in commodities prices.
Q: How is the fund positioned within the TMT sectors?
A: The fund benefited from its overweight position in TMT stocks -- which make
up over 40% of the portfolio -- as well as our excellent stockpicking within the
group. We gained a lift from our holdings in the cellular operator Vodafone, as
well as equipment makers Nokia and Ericsson. The fund also benefited from early
entry into the emerging Italian Internet sector. As publishing houses such as
Seat Pagine Gialle and L'Espresso have leveraged their brand names to develop
successful Internet initiatives, their shares have jumped. In Japan, we achieved
strong gains in tech holdings such as Fujitsu, Murata, Sony, and NTT DoCoMo, the
leading cellular operator and Internet access provider.
While we believe that the valuations of a number of individual stocks in the TMT
group have become stretched, we continue to see strong long-term earnings
potential for many companies in these sectors. Individuals and corporations in
Europe and Japan have generally been slower to adopt the Internet than we have
here in the United States. This divergence has created a wealth of compelling
growth opportunities in companies that provide the infrastructure for the `Net,
as well as traditional media companies that are moving to Internet-based
business models. We believe that the convergence of content producers, equipment
makers, and providers of network operations is generating powerful,
self-reinforcing demand for each group's products and services. As companies in
these sectors feed off one another, growth and wealth creation should continue
to gain momentum. Going forward, we will continue to position the portfolio to
take advantage of this dynamic process, while trimming holdings whose valuations
have reached what we believe are excessive levels.
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Q: In previous reports, you have made positive comments regarding the outlook
for Japan. Are you still positive on the outlook for that country?
A: Yes. Japanese stocks rallied in 1999 on the expectation for reform in both
the public and private sectors, but the inability of the economy to stage a
recovery has caused confidence to wane in recent months. Growth remains anemic,
as evidenced by the 1.4% drop in fourth-quarter gross domestic product. Although
some indicators -- such as industrial production -- are showing that the economy
is improving, consumer spending has not shown signs of picking up steam. The
government has been able to stimulate the economy through fiscal policy, but
this cannot continue indefinitely due to the country's growing debt load. While
these factors have caused the intense optimism that surrounded Japanese equities
in the first half of 1999 to subside, we believe that Japan's stock market will
be a source of tremendous investment opportunities over the long-term. We
continue to hold 25% of the fund's net assets in that country, with a focus on
companies that have exposure to fast-growing market segments in Japan and
abroad. The fund also continues to hold companies that stand to boost their
earnings through meaningful restructuring initiatives, such as Nomura and Nikko
Securities in the financial sector, and NEC and Toshiba among the large
industrials.
Q: What are your views on Europe?
A: We are seeing a wealth of changes taking place in Europe on both the economic
and the corporate levels. Economic activity is accelerating throughout Europe,
as demonstrated by a rise in export growth, a decline in unemployment, the
increasing flexibility of the labor markets, and the highest levels of business
and consumer confidence in many years. We expect European growth to exceed 3.0%
in 2000 -- up from 2.2% in 1999 -- as growth spreads from Ireland, Spain, and
the Benelux countries to the rest of the continent. While the specter of higher
interest rates has been a cause for concern among
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market participants for some time, we do not expect the rise in interest rates
to be large enough to severely dampen growth.
Europe's business environment is also becoming more dynamic. Merger and
acquisition activity has skyrocketed, with the most dramatic example being the
merger of Vodafone and Mannesmann. Adding to the positive environment is the
fact that European governments are interfering less with the free markets. In
Germany, for instance, the expected elimination of a tax on the sale of holdings
among corporations is expected to unleash a flood of activity as companies
redeploy their capital into new, more efficient investments. Investors are
clearly encouraged by the fact that both unions and governments are increasingly
unable to hold back the growing power of shareholders. Also adding to the
positive environment is the fact that capital is now reaching smaller companies
as the market for small cap stocks surges. This dynamic sparked a sharp increase
in entrepreneurial activity and helped Europe make important strides in closing
the technology gap with the United States. In combination, these factors have
created tremendous investment opportunities in Europe, and should continue to do
so going forward.
Q: What is your outlook for overseas equities over the remainder of 2000?
A: We hold a positive view on the long-term prospects of the overseas markets.
Restructuring and consolidation continue at a furious pace, governments are
instituting free market reforms, and the Internet is changing the way people
everywhere are conducting business. The catalysts for higher corporate earnings
remain in place, which translates into an upward bias for stock prices over
time. Nevertheless, we wish to caution investors that near-term risks continue
to exist. A continued rise in interest rates appears likely in the United
States, and any volatility in the U.S. market is likely to migrate overseas.
This is particularly true among international technology stocks,
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which are heavily influenced by the Nasdaq average. We therefore encourage
investors to be prepared for volatility, but to remain focused on the fact that
no matter what the markets are doing on a day-to-day basis, our long-term
outlook for international equities remains highly favorable.
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Glossary of Investment Terms
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Growth Stock Stock of a company that has displayed above-average earnings
growth and is expected to continue to increase profits
faster than the overall market. Stocks of such companies
usually trade at higher valuations and experience more price
volatility than the market as a whole. They are distinct
from value stocks.
Restructuring The general term for major corporate changes aimed at
greater efficiency and adaptation to changing markets.
Cost-cutting initiatives, debt retirement, management
realignments, and the sale of non-core businesses are all
developments frequently associated with corporate
restructuring.
Value Stock A company whose stock price does not fully reflect its
intrinsic value, as indicated by price/earnings ratio,
price/book value ratio, dividend yield, or some other
valuation measure, relative to its industry or the market
overall. Value stocks tend to display less price volatility
and may carry higher dividend yields than growth stocks.
They are distinct from growth stocks.
Weighting Refers to the allocation of assets -- usually in terms of
(over/under) sectors, industries, or countries -- within a portfolio
relative to the portfolio's benchmark index or investment
universe.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
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Investment Portfolio as of February 29, 2000
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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Repurchase Agreements 2.6%
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Donaldson, Lufkin & Jenrette, 5.75%,
to be repurchased at $136,790,845 on 3/1/2000
<S> <C> <C>
(Cost $136,769,000)** ....................................... 136,769,000 136,769,000
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Short-Term Investments 0.6%
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GTE Corp., 5.8%***, 3/31/2000 (Cost $29,855,000) ............... 30,000,000 29,855,000
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Participating Loan Notes 0.3%
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Luxembourg
Eurotunnel Finance Ltd., Step-up Coupon, 1.0% to
12/31/2005, 1% plus 26.45% of net available
cash flow to 4/30/2040 (Cost $13,351,889) ................... 10,250(b) 13,868,553
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Convertible Bonds 0.0%
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United Kingdom
British Aerospace PLC, 7.45%, 11/29/2003
(Cost $297,456) ............................................. 501,947 784,922
Shares
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Common Stocks 96.5%
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Australia 1.2%
Broken Hill Proprietary Co., Ltd. (Petroleum,
mineral and steel exploration and production) ............... 3,130,575 31,158,304
WMC Ltd. (Mineral exploration and production) .................. 5,659,900 21,423,965
Woodside Petroleum, Ltd.* (Producer of oil and gas) ............ 1,814,600 10,437,669
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63,019,938
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Canada 0.7%
Canadian National Railway Co. (Railroad operator) .............. 1,446,000 33,738,007
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Finland 1.7%
Nokia Oyj (Manufacturer of telecommunications
networks and equipment) ..................................... 450,600 90,144,822
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
Shares Value ($)
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<S> <C> <C>
France 14.0%
AXA SA (Insurance group providing insurance, finance
and real estate services) .......................... 269,177 33,949,057
Alcatel SA (Manufacturer of transportation,
telecommunication and energy equipment) ............ 66,278 15,578,019
Aventis SA (Pharmaceutical company) ................... 967,536 49,558,968
Carrefour Supermarche SA (Supermarket operator and
food retailer) ..................................... 164,220 24,996,883
Christian Dior SA (Fashion house) ..................... 184,105 37,809,747
Club Mediterranee SA (Operator of vacation resorts) ... 45,160 5,211,197
Dassault Systemes SA (Computer aided design,
manufacturing/engineering software) ................ 443,883 48,904,928
Etablissements Economiques du Casino
Guichard-Perrachon SA (Operator of supermarkets
and convenience stores) ............................ 443,837 25,929,794
Eurotunnel SA* (Channel Tunnel consortium) ............ 24,160,242 29,887,563
LVMH (Louis Vuitton Moet Hennessy) (Producer of wines,
spirits and luxury products) ....................... 53,271 19,846,983
Lafarge SA (Producer of cement, concrete and
aggregates) ........................................ 348,237 26,082,897
Lafarge SA, Rights .................................... 348,237 10,097
Pinault-Printemps-Redoute SA (Operator of
department stores) ................................. 197,494 39,910,502
Rhodia SA (Drug manufacturer and chemicals specialist) 2,152,261 36,816,920
Schneider Electric SA (Manufacturer of electronic
components and automated manufacturing systems) .... 345,867 22,395,625
Societe BIC SA (Manufacturer of office supplies) ...... 727,297 31,876,332
Suez Lyonnaise des Eaux SA (Water and electric utility) 303,360 50,134,153
Total FINA SA "B" (Explorer, developer and producer
of oil and gas) .................................... 737,869 98,053,075
Union des Assurances Federales SA (Insurance group) ... 152,221 15,520,521
Usinor Sacilor SA (Producer of flat steel and stainless
steel) ............................................. 1,231,190 18,026,731
Vivendi SA (Provider of industrial services) .......... 874,156 103,068,992
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733,568,984
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Germany 13.7%
Allianz AG (Multi-line insurance company) ............. 112,373 39,335,953
BASF AG (International chemical producer) ............. 895,339 40,971,960
Bayer AG* (Chemical producer) ......................... 1,058,852 44,258,901
Celanese AG (Manufacturer and distributor of
industrial chemicals) .............................. 94,356 1,878,521
Commerzbank AG (Provider of banking services) ......... 510,000 18,236,906
Deutsche Telekom AG (Telecommunication services) ...... 593,932 49,881,069
Dresdner Bank AG* (Provider of banking services) ...... 650,418 31,304,095
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
Shares Value ($)
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<S> <C> <C>
Epcos AG* (Producer of electronic components and
integrated circuits) ............................... 704,026 100,019,640
Heidelberger Druckmaschinen AG (Manufacturer of
commercial printing presses) ....................... 119,282 6,513,323
HypoVereinsbank (Bank) ................................ 478,642 26,182,221
MobilCom AG (Provider of mobil telecommunication
services) .......................................... 110,099 14,870,119
Muenchener Rueckversicherungs-Gesellschaft AG
(Registered) (Insurance company) ................... 161,989 45,525,967
SAP AG (pfd.) (Manufacturer of computer software) ..... 95,696 80,231,059
Siemens AG* (Electrical engineering and electronics
company) ........................................... 563,942 101,101,502
Thyssen Krupp AG* (Manufacturer of building and
industrial steel materials) ........................ 1,779,455 43,079,831
VEBA AG (Electric utility, distributor of oil and
chemicals) ......................................... 685,570 30,743,198
VIAG AG (Provider of electrical power and natural gas
services, aluminum products, chemicals, ceramics and
glass) ............................................. 2,381,514 42,464,769
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716,599,034
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Hong Kong 0.8%
China Telecommunications Ltd. (Provider of cellular
telecommunication services) ........................ 1,892,000 17,442,437
Hutchison Whampoa, Ltd. (Diversified investment holding
company) ........................................... 1,582,000 24,798,787
New World Infrastructure Ltd. (Investment in and
operation of infrastructure projects) .............. 949,200 1,067,161
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43,308,385
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Hungary 0.1%
The First Hungary Fund Limited "A"
(Investment company) ............................... 3,619 5,157,075
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Italy 5.7%
Banca Nazionale del Lavoro SpA* (Bank) ................ 1,791,900 6,494,180
Gruppo Editoriale L'Espresso SpA* (Publisher) ......... 2,819,440 65,995,794
Mediaset SpA (Broadcasting and television networks) ... 2,866,000 69,800,089
Seat Pagine Gialle SpA (Publisher of telecommunications
directories) ....................................... 24,767,100 154,388,208
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296,678,271
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Japan 25.4%
Advantest Corp. (Producer of measuring instruments and
semiconductor testing devices) ..................... 187,400 33,905,613
Benesse Corp. (Provider of educational services) ...... 79,200 15,825,613
Canon, Inc. (Producer of visual image and information
equipment) ......................................... 658,000 27,312,080
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
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<TABLE>
<CAPTION>
Shares Value ($)
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<S> <C> <C>
DDI Corp. (Long distance telephone and cellular operator) 4,484 41,541,144
Daiwa Securities Group, Inc. (Provider of brokerage and
other financial services) ............................. 4,608,000 73,033,243
Fanuc, Ltd. (Manufacturer of numerically controlled
equipment for machine tools) .......................... 258,500 25,122,162
Fuji Bank, Ltd. (Provider of commercial banking services) 3,576,000 27,802,507
Fujisawa Pharmaceutical Co. (Manufacturer and marketer
of antibiotics) ....................................... 320,000 10,492,277
Fujitsu Support and Service Inc.* (Provider of information
services) ............................................. 58,000 37,138,965
Fujitsu, Ltd. (Manufacturer of computers) ................ 1,633,000 54,136,694
Hitachi, Ltd. (Manufacturer of general electronics) ...... 3,629,000 49,408,456
Kyocera Corp. (Manufacturer of ceramic packaging) ........ 309,000 52,257,766
Matsushita Electric Industrial Co., Ltd. (Manufacturer of
consumer electronic products) ......................... 2,050,000 59,582,198
Murata Manufacturing Co., Ltd. (Manufacturer of ceramic
applied electronic computers) ......................... 327,000 62,132,970
NEC Corp. (Manufacturer of telecommunication and
computer equipment) ................................... 2,797,000 62,367,257
NSK Ltd. (Manufacturer of bearings and motor vehicle
machine parts) ........................................ 3,247,000 22,413,442
NTT DoCoMo Inc. (Provider of various
telecommunication services and equipment) ............. 2,385 95,963,215
Nikko Securities Co., Ltd. (Securities broker and dealer) 3,943,000 50,746,876
Nintendo Co., Ltd. (Manufacturer of game equipment) ...... 230,100 50,137,139
Nippon Telegraph & Telephone Corp. (Provider of
telecommunication services) ........................... 2,525 34,859,219
Nissan Motor Co., Ltd. (Manufacturer of motor vehicles) .. 8,747,000 32,970,073
Nomura Securities Co., Ltd. (Financial advisor, securities
broker and underwriter) ............................... 2,751,000 77,457,765
SMC Corp. (Manufacturer of directional control devices) .. 65,200 12,080,654
Sakura Bank, Ltd. (Provider of banking services) ......... 6,243,000 35,552,779
Softbank Corp. (Provider of electronic commerce, software
and peripheral hardware equipment) .................... 36,100 52,461,399
Sony Corp. (ADR) (Manufacturer of consumer electronics) .. 66,700 20,902,113
Sony Corp. (Manufacturer of consumer electronics) ........ 153,500 45,311,081
THK Co., Ltd. (Manufacturer of linear motion systems for
industrial machinery) ................................. 424,600 18,703,996
Tokyo Electron Ltd. (Manufacturer of semiconductor
production equipment) ................................. 357,000 54,311,989
Toshiba Corp.* (Manufacturer of electric machinery) ...... 5,559,000 45,289,946
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
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<TABLE>
<CAPTION>
Shares Value ($)
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<S> <C> <C>
Yamanouchi Pharmaceutical Co., Ltd.
(Manufacturer of ethical drugs) .................... 864,000 41,198,910
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1,322,419,541
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Korea 3.3%
SK Telecom Co., Ltd.* (Provider of mobile
telecommunication services) ........................ 23,030 85,514,607
Samsung Electronics Co. (Manufacturer of electronics) . 382,050 86,468,365
-------------
171,982,972
-------------
Netherlands 7.1%
AEGON Insurance Group NV (Insurance company) .......... 248,470 17,193,577
ASM Lithography Holding NV (Developer of
photolithography projection systems) ............... 227,850 29,122,186
Akzo Nobel NV (Producer and marketer of health care
products, coatings, chemicals and fibers) .......... 499,500 19,314,492
Equant NV (Provider of international data
network services) .................................. 554,459 62,909,581
Fortis Bank (NL) NV (Provider of banking and
insurance services) ................................ 603,210 15,203,913
Gucci Group NV (New York Shares) (Designer and
producer of personal luxury accessories and apparel) 401,280 35,086,920
Koninklijke KPN NV (Provider of telecommunication
services) .......................................... 404,260 51,591,533
Laurus NV (International food retailer) ............... 846,440 10,389,129
STMicroelectronics NV (Manufacturer of semiconductor
integrated circuits) ............................... 442,319 88,060,687
United Pan-Europe Communications NV (Provider of
television and telecommunication services) ......... 210,766 41,686,128
-------------
370,558,146
-------------
Spain 1.2%
Telefonica Publicidad e Informacion, SA (Publisher of
telephone directories) ............................. 96,531 6,623,757
Telefonica SA* (Provider of telecommunication services) 1,874,769 54,084,318
-------------
60,708,075
-------------
Sweden 1.5%
LM Ericsson Telephone Co. "B"* (Manufacturer of
telecommunications equipment) ...................... 798,900 76,713,566
-------------
Switzerland 1.2%
Nestle SA (Registered) (Food manufacturer) ............ 17,186 29,112,500
Roche Holdings AG (Producer of drugs and medicines) ... 3,049 33,012,779
-------------
62,125,279
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Taiwan 4.4%
Asustek Computer Inc. (Manufacturer of computer
motherboards) ............................................ 3,344,000 41,718,306
Far Eastern Textile Ltd. (Manufacturer of natural and
synthetic textile products) .............................. 16,115,270 35,170,133
GigaMedia Ltd.* (Provides broadband Internet access
services and content) .................................... 344,327 24,124,410
Hon Hai Precision Industry Co., Ltd. (Manufacturer
of electronic connectors and cable assemblies) ........... 2,043,400 19,036,235
Taiwan Semiconductor Manufacturing Co. (Manufacturer
of integrated circuits) .................................. 7,259,630 47,530,477
United Microelectronics Corp., Ltd. (Manufacturer of
integrated circuits) ..................................... 16,818,000 61,629,479
-------------
229,209,040
-------------
United Kingdom 14.5%
ARM Holdings plc (Designer of RISC microprocessors
and related technology) .................................. 244,168 18,431,427
BOC Group plc (Producer of industrial gases) ................ 2,118,054 42,957,127
BP Amoco plc (Integrated world oil company) ................. 3,243,901 25,055,878
Billiton plc* (Resource group that explores, produces and
markets aluminum and other metal products) ............... 4,087,844 16,852,642
British Aerospace plc (Producer of military aircraft) ....... 5,994,329 29,517,544
Cable and Wireless plc (International telecommunication
services in the United Kingdom and Hong Kong) ............ 1,446,367 29,974,056
Glaxo Wellcome plc (Pharmaceutical company) ................. 755,907 18,136,744
LASMO plc (Oil production and exploration) .................. 30 45
Prudential Corp. plc* (Provider of a broad range of
financial services) ...................................... 3,127,095 46,134,002
Rentokil Initial plc (Environmental services company) ....... 6,542,018 21,261,052
Reuters Group plc (International news and information
agency) .................................................. 5,838,661 131,419,950
Rio Tinto plc (Mining company) .............................. 3,916,538 57,842,510
Royal & Sun Alliance Insurance Group plc
(Insurance company) ...................................... 6,296,100 34,235,663
Shell Transport & Trading plc (Petroleum company) ........... 7,283,756 50,277,075
SmithKline Beecham plc (Manufacturer of ethical drugs
and health care products) ................................ 1,701,355 19,134,103
Standard Chartered plc (International banking group) ........ 2,502,667 35,380,118
Vodafone AirTouch plc (Provider of telecommunication
services) ................................................ 32,343,557 181,107,816
-------------
757,717,752
-------------
- --------------------------------------------------------------------------------------------
Total Common Stocks (Cost $3,430,509,774) 5,033,648,887
- --------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $3,610,783,119) (a) 5,214,926,362
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
* Non-income producing.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
*** Annualized yield at time of purchase, not a coupon rate.
(a) The cost for federal income tax purposes was $3,611,462,000. At
February 29, 2000, net unrealized appreciation for all securities based
on tax cost was $1,603,464,362. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess
of value over tax cost of $1,759,466,276 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $156,001,914.
(b) Represents number of contracts. Each contract equals a nominal value of
EUR 2,931.
Currency Abbreviation
---------------------------
EUR euro
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Financial Statements
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of February 29, 2000
- -------------------------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $3,610,783,119) ..................... $ 5,214,926,362
Cash .......................................................................... 1,659
Foreign currency, at value (cost $8,487,571) .................................. 8,452,714
Receivable for investments sold ............................................... 57,837,051
Dividends receivable .......................................................... 1,068,494
Interest receivable ........................................................... 36,755
Receivable for Fund shares sold ............................................... 60,266,782
Foreign taxes recoverable ..................................................... 3,214,125
Other assets .................................................................. 16,614
---------------
Total assets .................................................................. 5,345,820,556
Liabilities
- -------------------------------------------------------------------------------------------------
Payable for investments purchased ............................................. 15,299,871
Payable for Fund shares redeemed .............................................. 5,811,684
Accrued management fee ........................................................ 3,351,213
Other accrued expenses and payables ........................................... 2,737,198
---------------
Total liabilities ............................................................. 27,199,966
- -------------------------------------------------------------------------------------------------
Net assets, at value $ 5,318,620,590
- -------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income .................. (4,015,070)
Net unrealized appreciation (depreciation) on:
Investments ................................................................. 1,604,143,243
Foreign currency related transactions ....................................... (261,737)
Accumulated net realized gain (loss) .......................................... 494,207,318
Paid-in capital ............................................................... 3,224,546,836
- -------------------------------------------------------------------------------------------------
Net assets, at value $ 5,318,620,590
- -------------------------------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------------------------
International Shares
Net asset value, offering and redemption price per share ($5,264,613,691 /
75,712,831, shares of capital stock outstanding, $.01 par value, 100,000,000 ---------------
shares authorized) ......................................................... $ 69.53
---------------
Barrett International Shares
Net asset value, offering and redemption price per share ($31,646,339 / 453,873
shares of capital stock outstanding, $.01 par value, 100,000,000 shares ---------------
authorized) ................................................................ $ 69.73
---------------
Class R Shares
Net asset value, offering and redemption price per share ($22,360,560 / 322,077
shares of capital stock outstanding, $.01 par value, 100,000,000 shares ---------------
authorized) ................................................................ $ 69.43
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations for the six months ended February 29, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $1,310,442) ........ $ 12,837,135
Interest ....................................................... 4,500,497
---------------
Total Income ................................................... 17,337,632
---------------
Expenses:
Management fee ................................................. 17,146,467
Services to shareholders ....................................... 5,834,486
Custodian and accounting fees .................................. 1,364,797
Adminstrative services fees .................................... 12,635
Directors' fees and expenses ................................... 20,137
Reports to shareholders ........................................ 197,069
Auditing ....................................................... 63,238
Legal .......................................................... 32,152
Registration fees .............................................. 174,288
Other .......................................................... 11,742
---------------
24,857,011
Net investment income (loss) ................................... (7,519,379)
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 540,149,205
Foreign currency related transactions .......................... (5,724,647)
---------------
534,424,558
---------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... 663,993,719
Foreign currency related transactions .......................... 5,085,413
---------------
669,079,132
- ----------------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,203,503,690
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 1,195,984,311
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Five Months Year Ended
Ended February Ended March 31,
Increase (Decrease) in Net Assets 29, 2000 August 31, 1999 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) .... $ (7,519,379) $ 13,184,289 $ 27,196,521
Net realized gain (loss) from
investment transactions ...... 534,424,558 121,162,610 495,847,664
Net unrealized appreciation
(depreciation) on investment
transactions during the period 669,079,132 351,081,101 (311,164,241)
---------------- ------------------ ---------------
Net increase (decrease) in net
assets resulting from
operations ................... 1,195,984,311 485,428,000 211,879,944
---------------- ------------------ ---------------
Distributions to shareholders:
From net investment income--
International Shares ......... (9,038,794) -- --
---------------- ------------------ ---------------
Barrett International Shares . (83,500) -- --
---------------- ------------------ ---------------
From net realized gains--
International Shares ......... (150,588,603) (164,421,947) (303,892,941)
---------------- ------------------ ---------------
Barrett International Shares . (953,658) (1,218,599) (2,373,251)
---------------- ------------------ ---------------
Class R Shares ............... (398,644) -- --
---------------- ------------------ ---------------
Fund share transactions:
Proceeds from shares sold ....... 2,288,114,832 1,241,030,773 2,263,481,804
Reinvestment of distributions ... 150,115,905 157,322,243 290,405,369
Cost of shares redeemed ......... (1,792,390,040) (1,193,055,248) (2,231,646,711)
---------------- ------------------ ---------------
Net increase (decrease) in net
assets from Fund share
transactions ................. 645,840,697 205,297,768 322,240,462
---------------- ------------------ ---------------
Increase (decrease) in net assets 1,680,761,809 525,085,222 227,854,214
Net assets at beginning of period 3,637,858,781 3,112,773,559 2,884,919,345
Net assets at end of period
(including accumulated
distributions in excess of net
investment income of
$4,015,070 and undistributed
net investment income of
$12,626,603 and $2,638,610, ---------------- ------------------ ---------------
respectively) ................ $ 5,318,620,590 $ 3,637,858,781 $ 3,112,773,559
---------------- ------------------ ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
International Shares
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
2000(b) 1999(c) 1999(d) 1998(d) 1997(d) 1996(d) 1995(d)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $54.82 $50.07 $52.06 $48.07 $45.71 $39.72 $42.96
------------------------------------------------------------
- ------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------
Net investment income
(loss) (a) (.11) .20(f) .47(e) .43 .30 .38 .21
- ------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on investment
transactions 17.12 7.20 3.10 9.16 4.53 7.19 (1.03)
------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total from investment
operations 17.01 7.40 3.57 9.59 4.83 7.57 (.82)
- ------------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------------
Net investment income (.13) -- -- (.25) (1.28) (.40) --
- ------------------------------------------------------------------------------------
Net realized gains on
investment
transactions (2.17) (2.65) (5.56) (5.35) (1.19) (1.18) (2.42)
------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total distributions (2.30) (2.65) (5.56) (5.60) (2.47) (1.58) (2.42)
- ------------------------------------------------------------------------------------
Net asset value, end
of period $69.53 $54.82 $50.07 $52.06 $48.07 $45.71 $39.72
------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return (%) 31.06** 15.19** 7.18 21.57 10.74 19.25 (2.02)
- ------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- ------------------------------------------------------------------------------------
Net assets, end of
period ($ millions) 5,265 3,610 3,090 2,885 2,583 2,515 2,192
- ------------------------------------------------------------------------------------
Ratio of expenses (%) 1.12* 1.21* 1.17 1.18 1.15 1.14 1.19
- ------------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) (.17)(g)** .93* .92 .83 .64 .86 .48
- ------------------------------------------------------------------------------------
Portfolio turnover rate
(%) 91* 82* 80 56 36 45 46
- ------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended February 29, 2000.
(c) For the five months ended August 31, 1999. On July 7, 1999, the
Directors changed the fiscal year end of the Fund from March 31 to
August 31.
(d) Years ended March 31.
(e) Net investment income per share includes non-recurring dividend income
amounting to $.09 per share.
(f) Net investment income per share includes non-recurring dividend income
amounting to $.02 per share.
(g) The ratio for the six months ended February 29, 2000 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
25
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived
from the financial statements.
Barrett International Shares
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
2000(b) 1999(c) 1999(d)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $54.94 $50.14 $52.40
----------------------------
- ------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------
Net investment income (loss) (a) (.05) .25(f) .52(e)
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 17.20 7.20 2.78
----------------------------
- ------------------------------------------------------------------------------------
Total from investment operations 17.15 7.45 3.30
- ------------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------------
Net investment income (.19) -- --
- ------------------------------------------------------------------------------------
Net realized gains on investment transactions (2.17) (2.65) (5.56)
----------------------------
- ------------------------------------------------------------------------------------
Total distributions (2.36) (2.65) (5.56)
- ------------------------------------------------------------------------------------
Net asset value, end of period $69.73 $54.94 $50.14
----------------------------
- ------------------------------------------------------------------------------------
Total Return (%) 31.23** 15.27** 6.60**
- ------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- ------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 31 25 23
- ------------------------------------------------------------------------------------
Ratio of expenses (%) .95* 1.03* 1.08*
- ------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.08)(g)** 1.11* 1.02*
- ------------------------------------------------------------------------------------
Portfolio turnover rate (%) 91* 82* 80
- ------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended February 29, 2000
(c) For the five months ended August 31, 1999. On July 7, 1999, the
Directors changed the fiscal year end of the Fund from March 31 to
August 31.
(d) For the period April 3, 1998 (commencement of sale of Barrett
International Shares) to March 31, 1999.
(e) Net investment income per share includes non-recurring dividend income
amounting to $.09 per share.
(f) Net investment income per share includes non-recurring dividend income
amounting to $.02 per share.
(g) The ratio for the six months ended February 29, 2000 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
26
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class R Shares
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
2000(b) 1999(c)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $54.78 $53.33
---------------------
- ------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------
Net investment income (loss) (a) (.24) (.02)
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 17.06 1.47
---------------------
- ------------------------------------------------------------------------------------
Total from investment operations 16.82 1.45
- ------------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------------
Net realized gains on investment transactions (2.17) --
- ------------------------------------------------------------------------------------
Net asset value, end of period $69.43 $54.78
---------------------
- ------------------------------------------------------------------------------------
Total Return (%) 30.71** 2.72**
- ------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- ------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 22 2.8
- ------------------------------------------------------------------------------------
Ratio of expenses (%) 1.46* 1.63*
- ------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.39)(d)** (.09)**
- ------------------------------------------------------------------------------------
Portfolio turnover rate (%) 91* 82*
- ------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended February 29, 2000.
(c) For the period August 2, 1999 (commencement of Class R shares) to
August 31, 1999.
(d) The ratio for the six months ended February 29, 2000 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
27
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder International Fund (the "Fund") is a diversified series of Scudder
International Fund, Inc. (the "Corporation") which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company organized as a Maryland Corporation.
On June 7, 1999 the Directors changed the fiscal year end of the Fund from March
31 to August 31.
The Fund offers three classes of shares: International Shares, Barrett
International Shares, and Class R Shares. Class R Shares are available for
purchase by participants of certain employer-sponsored retirement plans.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares except that
each class bears certain expenses unique to that class such as distribution
services, shareholder services, administrative services, and certain other class
specific expenses. Differences in class expenses may result in payment of
different per share dividends by class. All shares of the Fund have equal rights
with respect to voting subject to class specific arrangements.
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. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. 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 ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. 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, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If
28
<PAGE>
there are no such bid and asked quotations, the most recent bid quotation shall
be used.
Portfolio debt securities purchased with an original maturity 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.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
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 against changes in the exchange rates
relating to foreign currency denominated assets.
29
<PAGE>
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain (loss) is recorded daily. Sales and
purchases of 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 a forward contract to buy
and a 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. Accordingly, 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, if
any, are made annually. 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 at least
annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in 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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
30
<PAGE>
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
B. Purchases and Sales of Securities
During the six months ended February 29, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $2,249,182,319 and
$1,980,817,125, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. (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 six
months ended February 29, 2000, the fees pursuant to this agreement amounted to
$17,146,467, which was equivalent to an annualized effective rate of 0.78% of
the Fund's average daily net assets.
Administrative Services Fees. Kemper Distributors, Inc. ("KDI"), an affiliate of
the Adviser, provides information and administrative services to Class R
Shareholders at an annual rate of up to 0.25% of average daily net assets for
the class. KDI in turn has various agreements with financial services firms that
provide these services and pays these firms based on assets of shareholder
accounts the firms service. For the six months ended February 29, 2000, the
Administrative Services Fee was as follows:
Unpaid at
Fees Waived by February 29,
Administrative Services Fee Total Aggregated KDI 2000
- -------------------------------------------------------------------------------
Class R $ 12,635 $ -- $ 12,635
- -------------------------------------------------------------------------------
31
<PAGE>
Shareholder Services Fees. Kemper Service Company ("KSC"), an affiliate of the
Adviser, is the transfer, dividend-paying and shareholder service agent for the
Fund's Class R Shares. During the first twelve months of operations for Class R
shares, a shareholder services fee will be charged at an annual rate of 0.35%.
The amount charged to Class R Shares for the six months ended February 29, 2000
aggregated $11,089. Scudder Service Corporation ("SSC"), a subsidiary of the
Adviser, is the transfer, dividend paying and shareholder service agent for the
other classes of the Fund. For the six months ended February 29, 2000, the
amount charged by SSC to the International Shares and Barrett International
Shares for services to shareholders aggregated $1,618,997 and $5,101,
respectively, of which $1,974 and $6 is unpaid at February 29, 2000.
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 February 29, 2000, the Special
Servicing Agreement expense charged to the International Shares of the Fund
amounted to $436,823.
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 February 29, 2000, the amount charged to the International
Shares of the Fund by STC aggregated $1,682,412.
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 February 29, 2000, the amount charged to the Fund by SFAC aggregated
$593,504.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the
32
<PAGE>
six months ended February 29, 2000, Directors' fees and expenses aggregated
$20,137.
D. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Six Months Ended Five Months Ended
February 29, 2000 August 31, 1999
-------------------------------- --------------------------------
Shares sold Shares Dollars Shares Dollars
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International
Shares ....... 36,010,725 $2,267,506,557 23,688,225 $1,237,843,269
Barrett
International
Shares ....... 10,586 647,557 6,462 343,000
Class R Shares* . 306,849 19,960,718 51,931 2,844,504
-------------- ---------------
$2,288,114,832 $1,241,030,773
-------------- ---------------
Shares issued to shareholders in reinvestment of distributions
- ------------------------------------------------------------------------------------
International
Shares ....... 2,146,025 $ 148,889,771 3,072,099 $ 156,369,846
Barrett
International
Shares ....... 11,915 828,720 18,682 952,397
Class R Shares* . 5,738 397,414 -- --
-------------- ---------------
$ 150,115,905 $ 157,322,243
-------------- ---------------
Shares redeemed
- ------------------------------------------------------------------------------------
International
Shares ....... (28,290,824) $(1,787,955,859) (22,623,108) $(1,191,569,309)
Barrett
International
Shares ....... (26,644) (1,572,311) (27,968) (1,464,486)
Class R Shares* . (42,049) (2,861,870) (392) (21,453)
---------------- -----------------
$(1,792,390,040) $(1,193,055,248)
---------------- -----------------
Net increase (decrease)
- ------------------------------------------------------------------------------------
International
Shares ....... 9,865,926 $ 628,440,469 4,137,216 $ 202,643,806
Barrett
International
Shares ....... (4,143) (96,034) (2,824) (169,089)
Class R Shares* . 270,538 17,496,262 51,539 2,823,051
-------------- ---------------
$ 645,840,697 $ 205,297,768
-------------- ---------------
</TABLE>
* 1999 -- For the period August 2, 1999 (commencement of sale of Class R
shares) to August 31, 1999.
33
<PAGE>
Year Ended
March 31, 1999
----------------------------------
Shares sold Shares Dollars
- -------------------------------------------------------------------------
International Shares ............... 44,060,365 $ 2,240,750,152
Barrett International Shares* ...... 434,026(a) 22,731,652(a)
Class R Shares ..................... -- --
---------------
$ 2,263,481,804
---------------
Shares issued to shareholders in reinvestment of distributions
- -------------------------------------------------------------------------
International Shares ............... 5,925,727 $ 288,615,428
Barrett International Shares* ...... 36,722 1,789,941
Class R Shares ..................... -- --
---------------
$ 290,405,369
---------------
Shares redeemed
- -------------------------------------------------------------------------
International Shares ............... (43,688,877) $(2,231,145,939)
Barrett International Shares* ...... (9,908) (500,772)
Class R Shares ..................... -- --
---------------
$(2,231,646,711)
---------------
Net increase (decrease)
- -------------------------------------------------------------------------
International Shares ............... 6,297,215 $ 298,219,641
Barrett International Shares* ...... 460,840 24,020,821
Class R Shares ..................... -- --
---------------
$ 322,240,462
---------------
(a) Includes $21,054,972 and 401,812 shares from shares issued in tax free
reorganization.
* For the period April 3, 1998 (commencement of sale of Barrett
International Shares) to March 31, 1999.
E. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $1 billion
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 based upon net assets, 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.
34
<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 February 29, 2000, the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated therein, in
conformity with accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States 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 February 29, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
April 19, 2000
35
<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
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
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.