SCUDDER
INVESTMENTS(SM)
[LOGO]
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EQUITY/GLOBAL
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Scudder International Fund
Fund #068
Semiannual Report
February 29, 2000
A fund seeking long-term growth of capital primarily from foreign equity
securities.
A no-load fund with no commissions to buy, sell, or exchange shares.
This report applies to the International Shares of the fund.
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Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
15 Glossary of Investment Terms
16 Investment Portfolio
23 Financial Statements
26 Financial Highlights
29 Notes to Financial Statements
36 Report of Independent Accountants
37 Officers and Directors
38 Investment Products and Services
40 Scudder Solutions
2
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Scudder International Fund
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ticker symbol SCINX fund number 068
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Date of o Over the last six months, the overseas stock markets
Inception: have been led by the strong performance of the
6/18/53 technology, telecommunications, and media sectors,
while "old economy" stocks have lagged.
Total Net
Assets of o The fund's International Shares 31.06% return over the
International period was fueled by good stockpicking and an
Shares as of overweighted position in technology and communications
2/29/00: companies.
$5 billion
o Scudder International Fund has finished in the top
quartile of its peer group over the one-, three-,
five-, and ten-year periods.^1 In addition, it has been
awarded a four-star overall rating by
Morningstar(TM).^2
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends and
capital gains. For the period ended February 29, 2000, Scudder
International Fund's Lipper ranking was 160 out of 636 funds for the
one-year period, 57 out of 419 funds for the three-year period, 32 out of
247 for the five-year period, and 7 out of 44 for the ten-year period.
^2 Morningstar proprietary rankings reflect historical risk-adjusted
performance as of February 29, 2000. The ratings are subject to change
every month. Morningstar ratings are calculated from the funds' 3-, 5-, and
10-year average annual returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments, and a risk factor that reflects fund
performance below 90-day T-bill returns. Past performance is no guarantee
of future results. Scudder International Fund received 4 stars for the 3-,
5-, and 10-year periods. The top 10% of funds in a broad asset class
receive 5 stars, the next 22.5% receive 4 stars, and the next 35% receive 3
stars. Scudder International Fund was rated among 1120, 663, and 129
international funds for the 3-, 5-, and 10-year periods, respectively, in
its broad asset class. Not all Scudder funds receive 4- and 5- star
ratings. Ratings are subject to change.
3
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Letter from the Fund's President
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Dear Shareholders,
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 Scudder International Fund 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 are companies are
embracing the "new economy," and which companies are likely to be left
4
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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 10.
Thank you for your continued investment in Scudder International Fund. 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,
Scudder International Fund
5
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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
Scudder International Fund -- MSCI EAFE & Canada Index*
International Shares
'90 10000 10000
'91 10560 9788
'92 10708 9107
'93 10730 8709
'94 14491 12031
'95 13130 11496
'96 15778 13461
'97 17713 14023
'98 20836 16192
'99 22250 16883
'00 35066 21391
Yearly periods ended February
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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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Scudder International Fund -- International Shares
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1 year $ 15,760 57.60% 57.60%
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5 year $ 26,707 167.07% 21.71%
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10 year $ 35,066 250.66% 13.37%
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MSCI EAFE & Canada Index*
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1 year $ 12,671 26.71% 26.71%
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5 year $ 18,608 86.08% 13.21%
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10 year $ 21,391 113.91% 7.89%
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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.
6
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Returns and Per Share Information
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Yearly periods ended February
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Scudder International Fund MSCI EAFE & Canada Index*
- -- International Shares
1991 5.61 -2.21
1992 1.40 -6.95
1993 0.20 -4.38
1994 35.05 38.15
1995 -9.39 -4.45
1996 20.17 17.09
1997 12.26 4.18
1998 17.63 15.46
1999 6.79 4.27
2000 57.60 26.71
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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 5.61 1.40 .20 35.05 -9.39 20.17 12.26 17.63 6.79 57.60
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Index Total
Return (%) -2.21 -6.95 -4.38 38.15 -4.45 17.09 4.18 15.46 4.27 26.71
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Net Asset
Value ($) 35.66 35.75 34.10 45.18 38.63 44.80 47.76 50.05 47.96 69.53
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Income
Dividends ($) .74 -- .83 .69 -- .40 1.28 .25 -- .13
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Capital Gains
Distributions($) 1.98 .40 .86 .09 2.42 1.18 1.19 5.35 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 Fund offers three share classes: International Shares, Barrett
International Shares, and Class R Shares. The total return information
provided is for the Fund's 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.
Europe 63%
Japan 26%
Pacific Basin 10%
Canada 1%
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100%
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The fund's holdings in Europe have increased from 60% of net assets on August
31, 1999.
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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.
Technology 21%
Communications 16%
Manufacturing 14%
Financial 13%
Service Industries 11%
Consumer Staples 4%
Energy 4%
Consumer Discretionary 3%
Metals & Materials 3%
Other 11%
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100%
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Holdings in the technology and communications sectors contributed significantly
to the fund's strong performance.
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Ten Largest Equity Holdings
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(23% of Portfolio)
1. Vodafone AirTouch PLC
Provider of telecommunication services
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
The fund's top ten holdings reflect its focus on well-managed, fast-growing
companies.
For more complete details about the Fund's investment portfolio, see page 16. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
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Portfolio Management Discussion
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February 29, 2000
In the following interview, portfolio manager Irene Cheng discusses Scudder
International Fund's 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 fund's International Shares
returned 31.06%, 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
fund's International Shares had produced a total return of 57.60%, bringing its
five-year average annual return to 21.71%. The fund received a four-star overall
ranking from Morningstar(TM) as of February 29, and was ranked in the top
quartile of international funds as of the same date, according to Lipper
Analytical Services. Over the three-, five-, and ten-year periods, the fund has
finished in the top 14%, 13%, and 16% of its category, respectively. We
attribute
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the fund's excellent long-term 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. The fund has also benefited from avoiding companies that are being
squeezed by the impact of new 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
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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.
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
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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 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
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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, 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
(over/under) terms of 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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<TABLE>
<CAPTION>
Investment Portfolio as of February 29, 2000
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Principal
Amount ($) Value ($)
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Repurchase Agreements 2.6%
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<S> <C> <C>
Donaldson, Lufkin & Jenrette, 5.75%,
to be repurchased at $136,790,845 on 3/1/2000
(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 $297,456) ............................................... 501,947 784,922
Shares
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Common Stocks 96.5%
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Australia 1.2%
Broken Hill Proprietary Co., Ltd. (Petroleum, mineral and
steel exploration and production) ............................. 3,130,575 31,158,304
WMC Ltd. (Mineral exploration and production) ................... 5,659,900 21,423,965
Woodside Petroleum, Ltd.* (Producer of oil and gas) ............. 1,814,600 10,437,669
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63,019,938
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Canada 0.7%
Canadian National Railway Co. (Railroad operator) ............... 1,446,000 33,738,007
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Finland 1.7%
Nokia Oyj (Manufacturer of telecommunications networks
and equipment) ................................................ 450,600 90,144,822
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The accompanying notes are an integral part of the financial statements.
16
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Shares Value ($)
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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
The accompanying notes are an integral part of the financial statements.
17
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Shares Value ($)
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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
The accompanying notes are an integral part of the financial statements.
18
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Shares Value ($)
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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
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Shares Value ($)
- ---------------------------------------------------------------------------------------
Yamanouchi Pharmaceutical Co., Ltd. ...................
(Manufacturer of ethical drugs) ....................... 864,000 41,198,910
---------------
1,322,419,541
---------------
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
---------------
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Shares Value ($)
- -------------------------------------------------------------------------------------
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.
21
<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.
22
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of February 29, 2000
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
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
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations for the six months ended February 29, 2000
- --------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------
Six Months Five Months
Ended Ended Year Ended
Increase (Decrease) in February 29, August 31, March 31,
Net Assets 2000 1999 1999
- ------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C>
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.
25
<PAGE>
<TABLE>
<CAPTION>
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
- ------------------------------------------------------------------------------------
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
26
<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
- --------------------------------------------------------------------------------
2000(b) 1999(c) 1999(d)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
(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
27
<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
- --------------------------------------------------------------------------------
2000(b) 1999(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*
- --------------------------------------------------------------------------------
(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
28
<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
29
<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.
30
<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
31
<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
Total Fees Waived February 29,
Administrative Services Fee Aggregated by KDI 2000
- -------------------------------------------------------------------------------
------------ ----------- --------------
Class R $ 12,635 $ -- $ 12,635
------------ ----------- --------------
32
<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
33
<PAGE>
six months ended February 29, 2000, Directors' fees and expenses aggregated
$20,137.
<TABLE>
<CAPTION>
D. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
Six Months Ended Five Months Ended
February 29, 2000 August 31, 1999
-------------------------------- --------------------------------
Shares sold Shares Dollars Shares Dollars
- ------------------------------------------------------------------------------------
<S> <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.
34
<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.
35
<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
36
<PAGE>
Officers and Directors
- --------------------------------------------------------------------------------
Nicholas Bratt*
o President
Sheryle J. Bolton
o Director; Chief Executive Officer, Joyce E. Cornell*
Scientific Learning Corporation o Vice President
William T. Burgin Susan E. Dahl*
o Director; General Partner, o Vice President
Bessemer Venture Partners
Philip S. Fortuna*
Keith R. Fox o Vice President
o Director; General Partner,
The Exeter Group of Funds Carol L. Franklin*
o Vice President
William H. Luers
o Director; Chairman and President, Edmund B. Games, Jr.*
U.N. Association of America o Vice President
Kathryn L. Quirk* Joan R. Gregory*
o Director; Vice President and o Vice President
Assistant Secretary
Theresa Gusman*
Joan E. Spero o Vice President
o Director; President, Doris Duke
Charitable Foundation Ann M. McCreary*
o Vice President
Paul Bancroft III
o Honorary Director; Venture Robert C. Peck*
Capitalist and Consultant o Vice President
William H. Gleysteen, Jr. Sheridan Reilly*
o Honorary Director; Consultant; o Vice President
Guest Scholar, Brookings Institution
Shahram Tajbakhsh*
Wilson Nolen o Vice President
o Honorary Director; Consultant
Tien Yu Sieh*
Robert G. Stone, Jr. o Vice President
o Honorary Director; Chairman
Emeritus and Director, Kirby John Millette*
Corporation o Vice President and Secretary
Elizabeth J. Allan* John R. Hebble*
o Vice President o Treasurer
Irene T. Cheng* Caroline Pearson*
o Vice President o Assistant Secretary
*Scudder Kemper Investments, Inc.
37
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund***
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund***
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Health Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
+++ Funds within categories are listed in order from expected least
risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder's
insurance agencies, 1-800-225-2470.
+++ +++ +++ A no-load variable annuity contract issued by Glenbrook Life and
Annuity Company and underwritten by Allstate Financial Services,
Inc., sold by Scudder's insurance agencies, 1-800-225-2470.
# These funds, advised by Scudder Kemper Investments, Inc., are
traded on the New York Stock Exchange and, in some cases, on
various other stock exchanges.
39
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in
securities regardless of price fluctuations and does not
assure a profit or protect against loss in declining
markets. Investors should consider their ability to
continue such a plan through periods of low price
levels.
Around-the- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
40
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
41
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
