Barrett International Shares
Fund #401
Annual Report
August 31, 2000
A fund seeking long-term growth of capital by investing mainly in foreign equity
securities.
Barrett International Shares are a class of the Scudder International Fund.
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<TABLE>
<S> <C>
Board of Directors
Linda C. Coughlin* Director
Henry P. Becton, Jr. Director; President, WGBH Educational Foundation
Dawn-Marie Driscoll Director; President, Driscoll Associates; Executive
Fellow,
Center for Business Ethics, Bentley College
Edgar R. Fiedler Director; Senior Fellow and Economic Counsellor,
The Conference Board, Inc.
Keith R. Fox Director; General Partner, The Exeter Group of Funds
Joan E. Spero Director; President, Doris Duke Charitable Foundation
Jean Gleason Stromberg Director; Consultant
Jean C. Tempel Director; Managing Director, First Light Capital, LLC
Steven Zaleznick Director; President and Chief Executive Officer,
AARP Services, Inc.
</TABLE>
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<TABLE>
<S> <C>
Officers
Linda C. Coughlin* President
Thomas V. Bruns* Vice President
Irene T. Cheng* Vice President
Joyce E. Cornell* Vice President
Carol L. Franklin* Vice President
Edmund B. Games, Jr.* Vice President
William F. Glavin* Vice President
Joan R. Gregory* Vice President
James E. Masur* Vice President
Ann M. McCreary* Vice President
Howard S. Schneider* Vice President
Tien-Yu Sieh* Vice President
John Millette* Vice President and Secretary
Kathryn L. Quirk* Vice President and Assistant Secretary
John R. Hebble* Treasurer
Brenda Lyons* Assistant Treasurer
Caroline Pearson* Assistant Secretary
</TABLE>
*Scudder Kemper Investments, Inc.
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Dear Shareholders,
We are pleased to provide you with the August 31, 2000 annual report for the
Barrett International Shares (the "fund"), a class of shares of Scudder
International Fund.
Overseas equities have provided a bumpy ride for investors during the past
twelve months, as volatility in the U.S. has contributed to unusually large
swings in developed stock markets worldwide. This environment has been
unsettling even for experienced investors, but, as always, we encourage
shareholders to remain focused on the long-term trends that are unfolding in
the international markets. Consolidation interest remains high as companies
seek to position themselves for the increasingly competitive environment of
the global marketplace. In addition, corporations continue to focus on
restructuring as a means to gain efficiencies and boost profits. We are also
encouraged by the growing recognition by overseas governments that excessive
intervention in the free market can be a hindrance to economic growth.
Although positive underlying trends such as these do not guarantee that stock
prices will rise in the short term, we believe that they provide the
foundation for strong market performance over time.
Using a strict, research-intensive approach that seeks to capitalize on
important changes such as these, the management team of Scudder International
Fund has guided the portfolio to a strong performance over both the short and
the long term. The fund has outperformed its unmanaged benchmark over the
one-, three-, five-, and ten-year periods, and has finished in the top 20% of
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international funds over the three-, five-, and ten-year intervals, according
to Lipper Analytical Services. We believe that this strong track record is
the result of management's discipline, long-term view, and emphasis on
fundamental research.
Thank you for your continued investment in Barrett
International Shares.
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President
Barrett International Shares
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Performance Update
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August 31, 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 Shares MSCI EAFE & Canada Index*
4/98** 10000 10000
5/98 10277 9948
8/98 9168 8780
11/98 9854 9895
2/99 10071 10018
5/99 10554 10333
8/99 12121 11078
11/99 14041 12037
2/00 15907 12693
5/00 14257 12224
8/00 14220 12426
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Fund Index Comparison
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<TABLE>
<S> <C> <C> <C>
Total Return
Period ended 8/31/2000 Growth of Cumulative Average
$10,000 Annual
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Barrett International Shares
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1 year $ 11,731 17.31% 17.31%
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Life of Class** $ 14,418 44.18% 16.37%
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MSCI EAFE & Canada Index*
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1 year $ 11,217 12.17% 12.17%
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Life of Class** $ 12,426 24.26% 9.73%
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</TABLE>
* 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 FUND TOTAL
RETURN (%) AND INDEX TOTAL RETURN (%)
BAR CHART DATA:
Barrett International Shares MSCI EAFE & Canada Index*
-7.05 -12.20
32.22 26.16
17.31 12.17
1998** 1999 2000
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Fund Total -7.05 32.22 17.31
Return (%)
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Index Total -12.20 26.16 12.17
Return (%)
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Net Asset Value ($) 48.61 54.94 57.95
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Income -- -- .19
Dividends ($)
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Capital Gains .11 8.10 6.50
Distributions ($)
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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 14, 2000, the Fund offers four share
classes: Class S shares, Barrett International shares, Class R shares and
Class AARP shares. In addition, as of the date noted above, all International
shares of the Fund were redesignated as Class S 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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August 31, 2000
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Geographical
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(Excludes 2% Cash Equivalents) The fund's weighting in
Europe has increased
from 63% of net assets
on February 29, 2000.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
Europe 66%
Japan 25%
Pacific Basin 7%
Canada 2%
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100%
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Sectors
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(Excludes 2% Cash Equivalents) During the past six
months, the fund's
weighting in the energy,
health, and financial
sectors has increased,
while its holdings in
technology and
communications have been
reduced.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
Financial 24%
Technology 14%
Manufacturing 12%
Communications 12%
Energy 6%
Consumer Staples 6%
Health 5%
Service Industries 4%
Consumer Discretionary 3%
Other 14%
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100%
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<TABLE>
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Ten Largest Equity Holdings
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(19% of Portfolio) The fund's top ten
holdings reflect its
high level of
diversification
and focus on
well-managed,
fast-growing companies.
<S><C>
1.Total Fina Elf SA
Explorer, developer, producer, transporter and
marketer of oil and natural gas
2.Vodafone Group plc
Provider of mobile telecommunication services
3.Alcatel SA
Manufacturer of telecommunications equipment
4.Aventis SA
Manufacturer of life science products
5.E.On AG
Electric utility, distributor of oil and chemicals
6.Siemens AG
Electrical engineering and electronics company
7.Shell Transport & Trading plc
Petroleum company
8.Ericsson AB
Producer of advanced systems and products for wired
and mobile communications
9.BP Amoco plc
Integrated world oil company
10.Nestle SA
Food manufacturer
</TABLE>
For more complete details about the Fund's investment portfolio, see page 14. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
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Portfolio Management Discussion
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August 31, 2000
In the following interview, portfolio manager Irene Cheng discusses Barrett
International Shares' (the "fund") strategy and the market environment during
the twelve-month period ended August 31, 2000.
Q: The international markets performed well over the full,
twelve-month reporting period, but have struggled in the six
months since the last report. What factors have been the
causes of these swings?
A: Throughout the period -- particularly in the latter half --
the developed world markets struggled with the faltering euro
exchange rate, concerns about rising interest rates, and
dramatic moves in a fairly narrow group of technology-related
stocks. Nevertheless, fund performance was positive despite
these considerable challenges. Over the twelve-month period
ended August 31, 2000, the fund produced a total return of
17.31%, well ahead of the 12.17% return of its unmanaged
benchmark, the MSCI EAFE + Canada Index.
Given our focus on larger-cap companies in the more developed
economies, it is not surprising that Europe and Japan -- and
indirectly, the United States -- continue to dominate in terms
of their influence on the portfolio. Let's look at each
separately:
In Japan, the fund's largest single-country weighting, soft
macroeconomic conditions and low levels of consumer confidence
continue to be problematic. Ongoing concerns about the
sustainability of the country's economic recovery continue to
be a central reason behind this fragile sentiment. The
majority of the fund's holdings in Japan are in sectors
experiencing significant long-term change such as the
electronics, telecoms, pharmaceutical, and financial sectors.
The Japanese market fared well for most of the first half of
the period. By March, however, the worldwide appetite for
technology stocks weakened and the Japanese market began to
retrace some of its gains. Since the larger Japanese tech
companies compete in the global marketplace, the performance
of their stocks tended to be correlated with that of their
counterparts in the U.S. and Europe. In addition, the
continued unwinding of domestic cross-shareholdings had a
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negative impact on the supply/demand balance in the Japanese
equity market. European markets were influenced by stock
market volatility worldwide and the continued rise of global
oil prices and interest rates. For the first half of the
period, European markets experienced an overwhelmingly
positive investment environment. Accelerating economic growth,
a strong dollar exchange rate, and healthy mergers and
acquisition activity helped fuel the market during that time.
However, this enthusiastic sentiment turned around abruptly as
weakness in the U.S. equity market spread and the European
Central Bank began to raise interest rates. Valuations proved
unsustainable during the second half of the period,
particularly among the technology, media, and
telecommunications sectors (commonly referred to as the
megasector TMT). And despite the increasing evidence of solid
economic recovery all over the continent, the euro exchange
rate continued its negative trend.
Q: How much progress have you seen with respect to
consolidation and corporate restructuring, two important
developments that you have discussed in the past?
A: Restructuring at the corporate level continues to be
significant both in Europe and Japan. However, M&A activity
has slowed from the last year's fast pace. There are several
reasons for this slowdown. First, the global economic upturn
has reduced the level of pressure on companies to address
structural issues in their businesses. Second, large M&A deals
are inherently very complex and difficult to execute. The
collapse of several proposed large transactions during this
year shows that this cannot be underestimated. And finally, it
seems that the regulatory environment for the approval of
large deals has become less accommodating, particularly in
Europe.
Q: How did you position the portfolio throughout the period?
A: The fund entered the period with an overweight position in
the TMT areas. We counter-balanced this exposure with
substantial investments in "old economy" stocks, such as
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producers of industrial commodities and companies undergoing
significant corporate restructuring. The fund was underweight
in areas such as the retail, financial, and consumer sectors,
where we felt that the competitive landscape was becoming
increasingly harsh due to the impact of the Internet and the
trend toward globalization.
This strategy worked particularly well in the first half of
the period as our investments in TMT generally produced
outstanding returns. In fact, these were by and large the only
sectors that showed absolute gains during a period when
investors increased their focus on the so-called new economy.
Most old-economy stocks, including our investments in
companies undergoing significant restructuring and corporate
change, performed below expectations during this time.
The broad correction in global equity markets that began in
March posed several challenges, including persistent bouts of
heightened volatility and a particularly sharp sell-off in TMT
stocks. Concerns about interest-rate hikes in the United
States, Europe, and even Japan, combined with uncertain growth
prospects in these markets, led to a more cautious overall
investment environment. Fortunately, we had initiated the
process of selective profit-taking during the beginning of the
second half of the period, following some exceptional
performance from a number of our TMT selections. Some of the
proceeds were put to work in stocks outside the TMT arena,
where attractive opportunities had surfaced in the wake of the
market's downturn.
We also reduced our exposure to the more economically
sensitive areas of our portfolio, as it became clearer that
the central banks in the United States, and to a lesser extent
Europe, were committed to slowing economic growth. The
proceeds of these sales were largely redeployed to European
financials. Stocks in this sector had declined significantly
over the past two years as interest rates rose, hopes for
further consolidation died down, and the Internet threatened
the demise of traditional banking models. Suspecting that this
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news was fully discounted into stock prices, we increased our
position in this area during the spring. We are further
encouraged that the recent trend towards reducing capital
gains taxes in Europe will allow industry restructuring to
once again gain momentum, and that bank managements are
beginning to define promising strategies to use the Internet
to their advantage.
We continue the process of reducing our exposure to those
areas where valuations have become less fundamentally
grounded, particularly in TMT. Our actions do not reflect a
view that the technological innovation is about to end,
however. We continue to commit funds to this area, but we're
placing greater emphasis on blue chip companies that we
believe are still undervalued in relation to their growth
prospects. Our increased stake in optical
telecom-infrastructure providers is an example of this
strategy.
Q: What are some of the important trends that you feel will
drive the performance of the international markets going
forward?
A: Although we employ a bottom-up approach to stockpicking, we
build the portfolio with a view to the broader trends
unfolding within the global economic environment. At present,
the construction of the portfolio reflects some of the key
themes we see emerging in the year ahead:
o U.S. economic growth will slow, resulting
in a global soft landing. As noted, we have increased
our exposure to European financials and maintain a
somewhat overweight position in technology in
anticipation of this development.
o Continental European economic growth will remain
strong relative to Japan and the United Kingdom. We
remain underweight in the United Kingdom, as well as
overweight in France, Germany, and Italy.
o In Japan, the pace and sustainability of economic
activity are less predictable. We have decreased our
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exposure to the region and are maintaining our focus
on stock specific issues as the main driver for
performance. Additions in the past year include real
estate companies, which are poised to benefit from
regulatory reform and the introduction of a REIT
(real estate investment trust) market. We have also
added several companies in the pharmaceutical sector,
which we believe offer attractive valuations relative
to their global peers. We anticipate that Japanese
pharmaceutical companies will also benefit from
industry restructuring over time. The general process
of profit-taking in TMT has led to a reduction in the
portfolio's technology holdings in Japan.
o Corporate restructuring will remain a powerful
secular trend, resulting in increased profitability
for corporations in Europe, Japan, and the Pacific
Basin.
o The explosion in mobile telephony, Internet and PC
applications will prove sustainable, and will likely
result in continued growth in demand for
telecommunications infrastructure, content, and
consumer access devices. With an eye towards
valuation, we have selectively focused our exposure
on well-managed companies poised to be the winners as
these trends evolve.
We see two main risks over the next 12 months. The first would
be a concerted downturn in the U.S. capital markets, marking
the end of a ten-year, bull market run. A downward spiral in
U.S. equities, joined by a falling dollar, would clearly not
bode well for international markets. The second potential risk
is a pick-up in inflation, which could result in continued
higher interest rates and a hard landing for the global
economy. While neither of these outcomes is likely in our
opinion, we do expect persistent volatility to rock the
markets as these concerns and others continue to occupy
investor sentiment in the short term. However, we believe that
investors who stay in the international markets for the long
term will ultimately be rewarded by the important changes that
continue to transform the overseas economies.
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Investment Portfolio as of August 31, 2000
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<TABLE>
<S> <C> <C>
Principal
Amount (c) Value ($)
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Repurchase Agreements 2.4%
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Donaldson, Lufkin & Jenrette, 6.6%, to be repurchased -----------
at $116,257,310 on 9/1/2000** (Cost $116,236,000).... 116,236,000 116,236,000
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Convertible Bonds 0.0%
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United Kingdom
British Aerospace plc, 7.45%, 11/29/2003 -----------
(Producer of military aircraft) (Cost $345,281)....GBP 506,989 713,473
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Participating Loan Notes 0.2%
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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 $13,351,889)........................ 10,250(b) 11,811,073
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Shares
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Common Stocks 97.4%
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Australia 1.4%
Broken Hill Proprietary Co., Ltd. (Petroleum, mineral
and steel exploration and production)................. 3,174,894 34,760,958
WMC Ltd. (Mineral exploration and production)............ 4,561,074 21,481,664
Woodside Petroleum, Ltd.* (Producer of oil and gas)...... 1,469,419 12,129,574
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68,372,196
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Belgium 0.0%
Dexia (Provider of municipal lending services)........... 8,015 1,134,893
Dexia Strip.............................................. 8,015 71
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1,134,964
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Canada 2.3%
Canadian National Railway Co. (Railroad operator)........ 1,557,078 45,236,211
Nortel Networks Corp. (Provider of telephone, data and
wireless products for the Internet)................... 836,317 68,212,105
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113,448,316
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Finland 1.2%
Nokia Oyj (International telecommunications company)..... 1,329,660 58,276,641
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France 19.2%
AXA SA (Insurance group providing insurance, finance
and real estate services)............................ 323,348 46,014,476
Accor SA (Operator of hotels, travel agencies
and restaurants)..................................... 285,268 12,282,466
The accompanying notes are an integral part of the financial statements.
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Shares Value ($)
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Alcatel SA (Manufacturer of telecommunications
equipment)........................................... 1,350,730 110,378,152
Aventis SA (Manufacturer of life science products)...... 1,453,595 109,041,272
BNP Paribas SA (Bank)................................... 622,879 57,231,459
Bouygues SA (Developer of large public projects,
real estate, offshore oil platforms and energy
networks, provides engineering and research services
and produces television programs and motion pictures)...554,350 34,817,796
Christian Dior SA (Manufacturer of luxury products)........790,240 43,354,907
Compagnie Generale d'Industrie et de Participations
(Producer of automobile components, diagnostic
equipment and abrasive pellets)...................... 152,865 7,246,697
Credit Lyonnais SA (Provider of diversified banking
services)............................................ 1,010,969 40,835,701
Dassault Systemes SA (Computer aided design,
manufacturing and engineering software).............. 190,169 16,342,025
Etablissements Economiques du Casino
Guichard-Perrachon SA (pfd.) (Operator of
supermarkets and convenience stores)................. 450,360 28,586,213
Eurotunnel SA* (Designer, financer and constructor of a
tunnel that runs under the English Channel and
connects England to France)......................... 24,681,677 22,130,275
Lagardere S.C.A. (Holding company with interests in
publishing, defense, audiovisual production and
services, telecommunications and media).............. 395,074 28,145,844
Pinault-Printemps-Redoute SA (Operator of department
stores).............................................. 230,597 43,583,298
Rhodia SA (Drug manufacturer and chemicals specialist).. 2,286,734 32,805,585
STMicroelectronics N.V. (Manufacturer of semiconductor
integrated circuits)................................. 1,184,662 72,566,191
Schneider Electric SA (Manufacturer of electronic
components and automated manufacturing systems)...... 367,294 27,063,422
Societe BIC SA (Manufacturer of office supplies)........ 733,556 34,546,929
Suez Lyonnaise des Eaux SA (Water and electric utility). 383,402 56,806,952
Total Fina Elf SA (Explorer, developer, producer,
transporter and marketer of oil and natural gas)..... 815,528 120,977,915
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944,757,575
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Germany 11.4%
Allianz AG (Multi-line insurance company)............... 158,668 53,525,869
Bayer AG (Chemical producer)............................ 1,140,192 48,231,601
Celanese AG (Manufacturer and distributor of
industrial chemicals)................................ 95,341 1,582,749
Commerzbank AG (Provider of banking services)........... 578,818 18,549,833
DaimlerChrysler AG (Worldwide designer, manufacturer
and marketer of automobiles, trucks and other vehicles). 349,912 18,047,861
Deutsche Telekom AG (Telecommunication services)........ 104,483 4,034,834
The accompanying notes are an integral part of the financial statements.
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Shares Value ($)
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Dresdner Bank AG (Provider of banking services)............... 1,079,104 48,665,120
E.On AG (Electric utility, distributor of oil and chemicals).. 2,165,199 103,796,416
Ergo Versicherungs Gruppe AG (Insurance provider)............. 214,903 27,090,786
Heidelberger Druckmaschinen AG (Manufacturer of
commercial printing presses)............................... 119,282 6,883,020
HypoVereinsbank (Bank)........................................ 820,505 47,892,529
Metro AG (Operator of building, clothing, department,
electronic and food stores)................................ 597,400 22,698,636
Muenchener Rueckversicherungs-Gesellschaft AG
(Registered) (Insurance company)........................... 173,831 47,684,418
SAP AG-VORZUG (Computer software manufacturer)................ 8,463 1,652,867
SAP AG (pfd.)................................................. 123,765 31,423,507
Siemens AG (Electrical engineering and electronics
company)................................................... 505,458 81,442,760
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563,202,806
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Hong Kong 1.4%
China Mobile (Hong Kong) Ltd. (Provider of cellular
telecommunication services)................................ 3,581,000 27,548,803
Hutchison Whampoa, Ltd. (Diversified investment holding
company)................................................... 1,690,300 23,839,856
Legend Holdings Ltd. (Manufacturer of computers and
related products).......................................... 12,252,000 13,038,638
Li & Fung Ltd. (Exporter of consumer products)................ 1,340,000 5,841,587
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70,268,884
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Italy 5.5%
Alleanza Assicurazioni SpA (Life insurance company)........... 1,440,400 17,876,441
Assicurazioni Generali SpA (Multi-line insurance and
financial services company)................................ 1,713,000 52,692,813
Banca Intesa SpA (Bank)....................................... 11,668,959 49,930,962
Holding di Partecipazioni Industriali SpA (Holding company)... 9,732,500 14,558,449
Mediobanca SpA (Provider of loans and credit to
manufacturing and service firms)........................... 5,445,400 58,686,641
Riunione Adriatica di Sicurta SpA (Insurance company.......... 2,772,450 32,414,571
San Paolo-- IMI SpA (Personal, investment and
commercial banking)........................................ 2,386,500 42,329,945
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268,489,822
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Japan 24.5%
Advantest Corp. (Producer of measuring instruments
and semiconductor testing devices)......................... 123,100 25,088,315
Chugai Pharmaceutical Co., Ltd.
(Pharmaceutical company)................................... 2,512,000 44,722,639
DDI Corp. (Provider of telecommunication services)............ 2,033 16,001,874
Daiwa Securities Group, Inc. (Provider of brokerage
and other financial services).............................. 2,489,000 31,019,209
East Japan Railway Co. (Railroad operator).................... 8,530 46,358,696
The accompanying notes are an integral part of the financial statements.
16
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Shares Value ($)
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Fuji Bank, Ltd. (Provider of commercial banking services)..... 9,440,000 71,737,631
Fujisawa Pharmaceutical Co. (Manufacturer and marketer
of antibiotics)............................................ 325,000 11,054,629
Fujitsu, Ltd. (Manufacturer of computers)..................... 2,051,000 59,385,214
Kyocera Corp. (Manufacturer of ceramic packaging)............. 313,000 55,842,579
Matsushita Electric Industrial Co., Ltd. (Manufacturer of
consumer electronic products).............................. 2,218,000 60,687,406
Mitsubishi Estate Co., Ltd. (Real estate company)............. 2,588,000 25,462,894
Mitsui Fudosan Co., Ltd. (Real estate company)................ 3,614,000 39,113,287
Murata Manufacturing Co., Ltd. (Manufacturer of ceramic
applied electronic computers).............................. 357,600 54,718,966
NEC Corp. (Manufacturer of telecommunication and
computer equipment)........................................ 2,173,000 62,103,167
NTT DoCoMo, Inc. (Provider of various telecommunication
services and equipment).................................... 1,995 52,716,454
Nikko Securities Co., Ltd. (Securities broker and dealer)..... 3,138,000 30,256,765
Nintendo Co., Ltd. (Manufacturer of game equipment)........... 238,400 41,192,804
Nippon Telegraph & Telephone Corp. (Provider of
telecommunication services)................................ 2,561 30,476,668
Nissan Motor Co., Ltd.* (Manufacturer of motor vehicles)...... 4,966,000 24,941,679
Nomura Securities Co., Ltd. (Financial advisor, securities
broker and underwriter).................................... 2,494,000 58,307,065
Ricoh Co., Ltd. (Manufacturer of copiers and
information equipment)..................................... 1,177,000 20,568,825
Rohm Co., Ltd. (Maker of linear ICs and semiconductors)....... 13,800 3,924,569
Sakura Bank, Ltd. (Provider of banking services).............. 7,116,000 52,943,253
Sankyo Co., Ltd. (Leading ethical drug producer).............. 1,958,000 45,317,279
Sanyo Electric Co., Ltd. (Manufacturer of consumer
electronics)............................................... 2,943,000 24,957,037
Sony Corp. (ADR) (Manufacturer of consumer electronics)....... 133,400 15,240,950
Sony Corp..................................................... 354,500 39,529,142
Sumitomo Electric Industries, Ltd. (Manufacturer of
electric wires and cables)................................. 2,098,000 38,728,073
Tokyo Electron Ltd. (Manufacturer of semiconductor
production equipment)...................................... 176,000 24,704,648
Toshiba Corp. (Manufacturer of electric machinery)............ 5,346,000 52,548,295
Yamanouchi Pharmaceutical Co., Ltd. (Manufactures
and markets a wide variety of pharmaceuticals)............. 876,000 43,340,330
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1,202,990,342
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Korea 1.9%
SK Telecom Co., Ltd. (Provider of mobile
telecommunication services)................................ 171,300 37,697,587
Samsung Electronics Co. (Electronics manufacturer)............ 236,170 58,257,042
-------------
95,954,629
-------------
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
------------------------------------------------------------------------------------------
Shares Value ($)
------------------------------------------------------------------------------------------
Netherlands 4.7%
ABN AMRO Holding NV (Diversified financial services).......... 2,173,990 54,038,882
Akzo Nobel NV (Producer and marketer of health care
products, coatings, chemicals and fibers).................. 507,110 22,423,815
ASM Lithography Holding NV* (Developer, manufacturer
and marketer of photolithography projection systems)....... 826,700 31,212,898
Equant NV* (Provider of international data network
services).................................................. 646,800 25,034,982
Fortis (NL) NV (Provider of banking and insurance
services).................................................. 506,800 15,598,442
Gucci Group NV (New York shares) (Designer and
producer of personal luxury accessories and apparel)....... 406,880 41,832,350
Heineken NV (International brewer and soft drink
producer).................................................. 124,400 6,316,946
Laurus NV (International food retailer)....................... 855,700 8,204,197
VNU NV (International publishing company)..................... 467,520 24,902,458
------------
229,564,970
------------
Singapore 0.4%
Chartered Semiconductor Manufacturing Ltd.* (ADR)
(Provider of wafer fabrication services to semiconductor
suppliers)................................................. 224,500 19,054,438
------------
Spain 0.9%
Telefonica SA* (Provider of telecommunication services)....... 2,190,389 42,001,595
------------
Sweden 1.6%
Ericsson AB "B" (Producer of advanced systems and
products for wired and mobile communications).............. 3,847,180 77,607,644
------------
Switzerland 3.9%
Nestle SA (Registered) (Food manufacturer).................... 35,448 76,434,114
Roche Holdings AG (Develops and manufactures
pharmaceutical and chemical products)...................... 3,286 29,443,768
Swiss Re (Registered) (Life, accident and health insurance
company)................................................... 12,140 24,935,462
UBS AG (Registered) (Provider of banking and asset
management services)....................................... 405,567 59,052,978
------------
189,866,322
------------
Taiwan 1.1%
GigaMedia Ltd.* (Provider of broadband Internet
access services and content)............................... 382,327 4,014,434
Hon Hai Precision Industry Co., Ltd. (Manufacturer of
electronic products)....................................... 120 916
Taiwan Semiconductor Manufacturing Co.* (Manufacturer
of integrated circuits).................................... 6,420,006 27,818,647
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
------------------------------------------------------------------------------------------
Shares Value ($)
------------------------------------------------------------------------------------------
United Microelectronics Corp., Ltd.* (Manufacturer of
integrated circuits)....................................... 7,926,900 21,068,597
------------
52,902,594
------------
United Kingdom 16.0%
ARM Holdings plc* (Designer of RISC microprocessors
and related technology).................................... 1,474,084 19,675,126
BAE SYSTEMS plc (Producer of military aircraft)............... 6,700,374 41,702,665
BOC Group plc (Diversified chemical company).................. 2,455,683 35,662,670
BP Amoco plc (Integrated world oil company)................... 8,443,905 77,238,868
British Airways plc (Provider of passenger and cargo
airline services).......................................... 4,228,209 19,951,761
Cable & Wireless plc (International telecommunication
services in the United Kingdom and Hong Kong).............. 2,463,644 45,500,255
Diageo plc (Producer and distributor of food products,
beer and liquor; owner of fast food restaurants)........... 4,333,100 36,964,387
EMI Group plc (Music recording and retailing company)......... 110,313 1,022,669
Glaxo Wellcome plc (Pharmaceutical company)................... 847,033 24,344,019
Granada Media plc* (Producer of TV programs, feature
films and made for TV movies).............................. 1,614,662 15,226,583
Prudential plc (Provider of a broad range of financial
services).................................................. 2,882,592 37,722,215
Reed International plc (Publisher of scientific, professional
and business-to-business materials)........................ 7,102,700 60,797,113
Rentokil Initial plc (Environmental services company)......... 5,048,602 11,792,462
Reuters Group plc (International news and information
agency).................................................... 3,793,230 75,944,397
Rio Tinto plc (Mining company)................................ 3,972,225 63,334,305
Shell Transport & Trading plc (Petroleum company)............. 9,227,477 78,716,862
SmithKline Beecham plc (Manufacturer of ethical drugs
and health care products).................................. 1,916,591 24,955,793
Vodafone Group plc (Provider of mobile
telecommunication services)................................ 29,195,755 117,858,893
------------
788,411,043
------------
------------------------------------------------------------------------------------------
Total Common Stocks (Cost $3,859,156,752) 4,786,304,781
------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $3,989,089,922) (a) 4,915,065,327
------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing.
** Repurchase agreements are fully collateralized by U.S. Treasury or Government
agency securities.
(a)The cost for federal income tax purposes was $3,989,964,891. At August 31,
2000, net unrealized appreciation for all securities based on tax cost was
$925,100,436. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$1,136,720,000 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value of $211,619,564.
(b)Represents number of contracts. Each contract equals a nominal value of
EUR 2,931.
(c)Principal amount stated in U.S. dollars unless otherwise noted.
Currency Abbreviation EUR euro
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Financial Statements
-------------------------------------------------------------------------------
Statement of Assets and Liabilities as of August 31, 2000
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
------------------------------------------------------------------------------------------
Investments in securities, at value (cost $3,989,089,922)...... $4,915,065,327
Receivable for investments sold................................ 74,454,595
Dividends receivable........................................... 4,311,721
Interest receivable............................................ 62,859
Receivable for Fund shares sold................................ 59,811,527
Foreign taxes recoverable...................................... 5,411,821
Due from Adviser............................................... 43,918
--------------
Total assets................................................... 5,059,161,768
Liabilities
------------------------------------------------------------------------------------------
Due to custodian bank.......................................... 100,275
Payable for investments purchased.............................. 67,254,494
Payable for Fund shares redeemed............................... 5,461,667
Accrued management fee......................................... 3,292,065
Accrued Directors' fees and expenses........................... 90,591
Other accrued expenses and payables............................ 3,765,732
--------------
Total liabilities 79,964,824
------------------------------------------------------------------------------------------
Net assets, at value $4,979,196,944
------------------------------------------------------------------------------------------
Net Assets
------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income............................ 2,821,881
Net unrealized appreciation (depreciation) on:
Investments.................................................. 925,975,405
Foreign currency related transactions........................ (484,154)
Accumulated net realized gain (loss)........................... 68,965,224
Paid-in capital................................................ 3,981,918,588
------------------------------------------------------------------------------------------
Net assets, at value $4,979,196,944
------------------------------------------------------------------------------------------
Net Asset Value
------------------------------------------------------------------------------------------
Class AARP
NetAsset Value, offering and redemption price per share ($70,825,633 /
1,226,585 shares of capital stock outstanding, $.01 par value, --------------
100,000,000 shares authorized).............................. $ 57.74
--------------
Class S
NetAsset Value, offering and redemption price per share ($4,840,971,734 /
83,849,480 shares of capital stock outstanding, $.01 par value, --------------
200,000,000 shares authorized).............................. $ 57.73
--------------
Barrett International Shares
NetAsset Value, offering and redemption price per share ($26,091,190 /
450,231 shares of capital stock outstanding, $.01 par value, --------------
100,000,000 shares authorized).............................. $ 57.95
--------------
Class R Shares
NetAsset Value, offering and redemption price per share ($41,308,387 /
717,944 shares of capital stock outstanding, $.01 par value, --------------
100,000,000 shares authorized).............................. $ 57.54
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Statement of Operations for the year ended August 31, 2000
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $7,347,868)........ $ 55,020,255
Interest....................................................... 10,373,241
--------------
Total Income................................................... 65,393,496
--------------
Expenses:
Management fee................................................. 36,335,757
Services to shareholders....................................... 11,654,123
Custodian and accounting fees.................................. 3,444,519
Administration fee............................................. 921,739
Administrative services fees................................... 55,959
Auditing....................................................... 135,682
Legal.......................................................... 68,848
Directors' fees and expenses................................... 121,753
Reports to shareholders........................................ 555,776
Registration fees.............................................. 31,574
Other.......................................................... 117,876
--------------
Total expenses, before expense reductions...................... 53,443,606
Expense reductions............................................. (43,918)
--------------
Total expenses, after expense reductions....................... 53,399,688
------------------------------------------------------------------------------------------
Net investment income (loss)................................... 11,993,808
------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments.................................................... 641,294,981
Foreign currency related transactions.......................... (5,718,252)
--------------
635,576,729
--------------
Net unrealized appreciation (depreciation) during the period on:
Investments.................................................... (17,115,887)
Foreign currency related transactions.......................... 4,873,546
--------------
(12,242,341)
------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions..................... 623,334,388
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 635,328,196
------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Statements of Changes in Net Assets
-------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Five Months
Year Ended Ended Year Ended
August 31, August 31, March 31,
Increase (Decrease) in Net Assets 2000 1999 1999
-----------------------------------------------------------------------------------
Operations:
Net investment income (loss).......$ 11,993,808 $ 13,184,289 $ 27,196,521
Net realized gain (loss) on
investment transactions
Net unrealized appreciation ...... 635,576,729 121,162,610 495,847,664
(depreciation) on investment
transactions during the period.. (12,242,341) 351,081,101 (311,164,241)
---------------- --------------- --------------
Net increase (decrease) in net
assets resulting from
operations...................... 635,328,196 485,428,000 211,879,944
---------------- --------------- --------------
Distributions to shareholders
from:
Net investment income --
Class S......................... (9,066,651) -- --
---------------- --------------- --------------
Barrett International Shares (83,506) -- --
---------------- --------------- --------------
Net realized gains --
Class S......................... (489,044,063) (164,421,947) (303,892,941)
---------------- --------------- --------------
Barrett International Shares.... (2,802,911) (1,218,599) (2,373,251)
---------------- --------------- --------------
Class R Shares (3,204,448) -- --
---------------- --------------- --------------
Fund share transactions:
Proceeds from shares sold.......... 4,961,467,887 1,241,030,773 2,263,481,804
Net assets acquired in tax-free
reorganizations................. 103,167,614 -- --
Reinvestment of distributions...... 464,101,472 157,322,243 290,405,369
Cost of shares redeemed........... (4,318,525,427) (1,193,055,248) (2,231,646,711)
---------------- --------------- --------------
Net increase (decrease) in net
assets from Fund share
transactions.................... 1,210,211,546 205,297,768 322,240,462
---------------- --------------- --------------
Increase (decrease) in net assets.. 1,341,338,163 525,085,222 227,854,214
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 undistributed net
investment income of
$2,821,881, $12,626,603 and ------------ --------------- ---------------
$2,638,610, respectively).......$4,979,196,944 $3,637,858,781 $3,112,773,559
------------ --------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Financial Highlights
-------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Class AARP
<TABLE>
<S> <C>
-----------------------------------------------------------------------------------
2000(a)
-----------------------------------------------------------------------------------
Net asset value, beginning of period $57.26
-----------------------------------------------------------------------------------
-------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------
Net investment income (loss) (b) .01
-----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .47
-----------------------------------------------------------------------------------
-------
Total from investment operations .48
-----------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------
Net investment income --
-----------------------------------------------------------------------------------
Net asset value, end of period $57.74
-----------------------------------------------------------------------------------
------
Total Return (%) .84**
-----------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Net assets, end of period ($ millions) 71
-----------------------------------------------------------------------------------
Ratio of expenses (%) 1.05*
-----------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .30*
-----------------------------------------------------------------------------------
Portfolio turnover rate (%) 83
-----------------------------------------------------------------------------------
</TABLE>
(a)For the period from August 14, 2000 (commencement of sale of Class AARP) to
August 31, 2000.
(b) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
23
<PAGE>
<PAGE>
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class S (a)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
2000(c) 1999(d) 1999(e) 1998(e) 1997(e) 1996(e)
-----------------------------------------------------------------------------------
Net asset value, beginning of
period $54.82 $50.07 $52.06 $48.07 $45.71 $39.72
------------------------------------------------
----------------------------------------------------------------------------------
Income (loss) from investment
operations:
----------------------------------------------------------------------------------
Net investment income (loss) (b) .16 .20(g) .47(f) .43 .30 .38
----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions 9.38 7.20 3.10 9.16 4.53 7.19
-----------------------------------------------
----------------------------------------------------------------------------------
Total from investment operations 9.54 7.40 3.57 9.59 4.83 7.57
----------------------------------------------------------------------------------
Less distributions from:
----------------------------------------------------------------------------------
Net investment income (.13 -- -- (.25) (1.28) (.40)
----------------------------------------------------------------------------------
Net realized gains on
investment transactions (6.50) (2.65) (5.56) (5.35) (1.19) (1.18)
----------------------------------------------------------------------------------
------------------------------------------------
Total distributions (6.63) (2.65) (5.56) (5.60) (2.47) (1.58)
----------------------------------------------------------------------------------
Net asset value, end of period $57.73 $54.82 $50.07 $52.06 $48.07 $45.71
----------------------------------------------------------------------------------
------------------------------------------------
Total Return (%) 17.09 15.19** 7.18 21.57 10.74 19.25
----------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Net assets, end of period
($ millions) 4,841 3,610 3,090 2,885 2,583 2,515
----------------------------------------------------------------------------------
Ratio of expenses (%) 1.12(h) 1.21* 1.17 1.18 1.15 1.14
----------------------------------------------------------------------------------
Ratio of net investment income
(loss) (%) .25 .93* .92 .83 .64 .86
----------------------------------------------------------------------------------
Portfolio turnover rate (%) 83 82* 80 56 36 45
----------------------------------------------------------------------------------
</TABLE>
(a)On August 14, 2000, International shares of the Fund were redesignated
as Class S shares.
(b)Based on monthly average shares outstanding during the period.
(c)For the year ended August 31, 2000.
(d)For the five months ended August 31, 1999. On June 7, 1999, the Fund
changed its fiscal year end from March 31 to August 31.
(e)For the years ended March 31.
(f)Net investment income per share includes non-recurring dividend income
amounting to $.09 per share.
(g)Net investment income per share includes non-recurring dividend income
amounting to $.02 per share.
(h)The ratio of operating expenses excluding costs incurred in connection with
the reorganization was 1.12% (see Notes to Financial Statements).
* Annualized
** Not annualized
24
<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>
<S> <C> <C> <C>
----------------------------------------------------------------------------------
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) .25 .25(f) .52(e)
----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 9.45 7.20 2.78
----------------------------------------------------------------------------------
-------------------------
Total from investment operations 9.70 7.45 3.30
----------------------------------------------------------------------------------
Less distributions from:
----------------------------------------------------------------------------------
Net investment income (.19) -- --
----------------------------------------------------------------------------------
Net realized gains on investment transactions (6.50) (2.65) (5.56)
----------------------------------------------------------------------------------
-------------------------
Total distributions (6.69) (2.65) (5.56)
----------------------------------------------------------------------------------
Net asset value, end of period $57.95 $54.94 $50.14
----------------------------------------------------------------------------------
-------------------------
Total Return (%) 17.31 15.27** 6.60**
----------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Net assets, end of period ($ millions) 26 25 23
----------------------------------------------------------------------------------
Ratio of expenses (%) .96(g) 1.03* 1.08*
----------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .39 1.11* 1.02*
----------------------------------------------------------------------------------
Portfolio turnover rate (%) 83 82* 80
----------------------------------------------------------------------------------
</TABLE>
(a)Based on monthly average shares outstanding during the period.
(b)For the year ended August 31, 2000.
(c)For the five months ended August 31, 1999. On June 7, 1999, the Fund
changed its fiscal year end 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 of operating expenses excluding costs incurred in connection with
the reorganization was 0.96% (see Notes to Financial Statements).
* 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.
Class R Shares
<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------------
2000(b) 1999(c)
----------------------------------------------------------------------------------
Net asset value, beginning of period $54.78 $53.33
----------------------------------------------------------------------------------
------------------
Income (loss) from investment operations:
----------------------------------------------------------------------------------
Net investment income (loss) (a) .06 (.02)
----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 9.20 1.47
----------------------------------------------------------------------------------
------------------
Total from investment operations 9.26 1.45
----------------------------------------------------------------------------------
Less distributions from:
----------------------------------------------------------------------------------
Net realized gains on investment transactions (6.50) --
----------------------------------------------------------------------------------
Net asset value, end of period $57.54 $54.78
----------------------------------------------------------------------------------
------------------
Total Return (%) 16.58 2.72**
----------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Net assets, end of period ($ millions) 41 2.8
----------------------------------------------------------------------------------
Ratio of expenses (%) 1.47(d) 1.63*
----------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .09 (.09)**
----------------------------------------------------------------------------------
Portfolio turnover rate (%) 83 82*
----------------------------------------------------------------------------------
</TABLE>
(a)Based on monthly average shares outstanding during the period.
(b)For the year ended August 31, 2000.
(c)For the period August 2, 1999 (commencement of Class R Shares) to August
31, 1999.
(d)The ratio of operating expenses excluding costs incurred in connection with
the reorganization was 1.47% (see Notes to Financial Statements).
* Annualized
** Not annualized
26
<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 and is organized as a Maryland Corporation.
On June 7, 1999, the Fund changed its fiscal year end for financial reporting
and federal income tax purposes from March 31 to August 31.
The Fund offers four classes of shares; Class S, Barrett International Shares,
Class AARP and Class R Shares. On August 11, 2000, the International Shares of
the Fund were redesignated as Class S. In addition, all of the net assets
acquired from the merger with AARP International Stock Fund were designated as
Class AARP, and all of the net assets acquired from the merger with Scudder
International Growth and Income Fund were exchanged for Class S shares (see Note
F). Shares of Class AARP are especially designed for members of AARP. Class R
Shares are only 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
reorganization expenses (see Note E). 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 accounting
principles generally accepted in the United States of America, 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
27
<PAGE>
--------------------------------------------------------------------------------
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 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. Purchase 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.
28
<PAGE>
--------------------------------------------------------------------------------
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.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gains (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. Earnings and profits distributed to shareholders on redemption of Fund
shares ("tax equalization") may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. 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
29
<PAGE>
--------------------------------------------------------------------------------
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. Divided income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
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 year ended August 31, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $4,253,830,394 and
$3,750,633,155, respectively.
C. Related Parties
As described in Note E, Scudder Kemper Investments, Inc. has initiated a
restructuring program for most of its Scudder no-load, open-end funds. As part
of this reorganization, the Fund adopted a new Investment Management Agreement
and entered into an Administrative Agreement. Both of these agreements were
effective August 14, 2000. The terms of the newly adopted and the pre-existing
agreements are set out below.
Management Agreement. Under the Investment Management Agreement (the
"Agreement") with Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser"), the Adviser directs the investments of the Fund in accordance with
its investment objectives, policies and restrictions. The Adviser determines the
securities, instruments and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Agreement. The management fee payable under the Agreement is equal to
an annual rate of 0.90% on the first $500,000,000 of average daily net assets,
0.85% on the next $500,000,000 of such net assets, 0.80% on 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.
Effective August 14, 2000, the Fund, as approved by the Fund's Board of
Directors, adopted a new Investment Management Agreement (the
30
<PAGE>
--------------------------------------------------------------------------------
"Management Agreement") with Scudder Kemper. The Management Agreement is
identical to the pre-existing Agreement, except for the dates of execution and
termination and fee rate. The management fee payable under the Management
Agreement is equal to an annual rate of 0.675% on the first $6,000,000,000 of
average daily net assets, 0.625% on the next $1,000,000,000 of such net assets,
and 0.60% of such net assets in excess of $7,000,000,000, computed and accrued
daily and payable monthly.
Accordingly, for the year ended August 31, 2000, the fees pursuant to the
Agreement and the Management Agreement amounted to $36,335,757, which was
equivalent to an annual effective rate of 0.76% of the Fund's average daily net
assets.
Administrative Fee. Effective August 14, 2000, the Fund, as approved by the
Fund's Board of Directors, adopted an Administrative Agreement (the
"Administrative Agreement") with Scudder Kemper. Under the Administrative
Agreement the Adviser provides or pays others to provide substantially all of
the administrative services required by the Fund (other than those provided by
Scudder Kemper under its Management Agreement with the Fund, as described above)
in exchange for the payment by the Fund of an administrative services fee (the
"Administrative Fee") of 0.375% of average daily net assets. As of the effective
date of the Administrative Agreement, each service provider will continue to
provide the services that it currently provides to the Fund (i.e., fund
accounting, shareholder services, custody, audit and legal) under the current
arrangements, except that Scudder Kemper will pay these entities for the
provision of their services to the Fund and will pay most other Fund expenses,
including insurance, registration, printing and postage fees. Certain expenses
of the Fund will not be borne by Scudder Kemper under the Administrative
Agreement, such as taxes, brokerage, interest and extraordinary expenses, and
the fees and expenses of the Independent Directors (including the fees and
expenses of their independent counsel). For the period August 14, 2000 through
August 31, 2000, the Administrative Agreement expense charged to the Fund
amounted to $921,739, all of which was unpaid at August 31, 2000.
Service Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser,
is the transfer, dividend-paying and shareholder service agent for Class S and
Barrett International Shares of the Fund. Prior to August 14, 2000, the amount
charged by SSC to Class S and Barrett International Shares aggregated $3,420,086
and $10,603, respectively, of which $602,732 is unpaid at August 31, 2000.
31
<PAGE>
--------------------------------------------------------------------------------
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.
Prior to August 14, 2000, the amount charged to Class R Shares aggregated
$71,173.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. Prior to August 14, 2000, the
amount charged to the Class S shares of the Fund by STC aggregated $3,776,386,
of which $731,678 is unpaid at August 31, 2000.
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. Prior to August 14,
2000, the amount charged to the Fund by SFAC aggregated $1,250,099, of which
$219,547 is unpaid at August 31, 2000.
The Class S 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 Fund will be charged expenses that
exceed the estimated savings to such 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. Prior to
August 14, 2000, the Special Servicing Agreement expense charged to the Class S
shares of the Fund amounted to $889,843.
Effective August 14, 2000, the above service fees will be paid by the Adviser in
accordance with the Administrative Agreement.
Other Fees. Kemper Distributors, Inc. ("KDI"), as 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
32
<PAGE>
service. For the year ended August 31, 2000, the Administrative Services Fee was
as follows:
Total Fees Waived Unpaid at
Administrative Services Fee Aggregated by KDI August 31, 2000
--------------------------------------------------------------------------------
------------ ----------- -----------
Class R Shares ............... $ 55,959 $ 0 $ 55,959
------------ ----------- -----------
Directors' Fees and Expenses. The Fund pays each Director not affiliated with
the Adviser an annual retainer plus specified amounts for attended board and
committee meetings. For the year ended August 31, 2000, Directors' fees and
expenses aggregated $33,916. In addition, a one-time fee of $87,837 was accrued
for payment to those Directors not affiliated with the Adviser who did not stand
for re-election under the reorganization discussed in Note E. Inasmuch as the
Adviser will also benefit from administrative efficiencies of a consolidated
Board, the Adviser has agreed to bear $43,918 of such costs.
Other Related Parties. Effective August 14, 2000, Scudder Kemper has agreed to
pay a fee to AARP and/or its affiliates in return for advice and other services
relating to investments by AARP members in Class AARP shares of the Fund. This
fee is calculated on a daily basis as a percentage of the combined net assets of
the AARP classes of all funds managed by Scudder Kemper. The fee rates, which
decrease as the aggregate net assets of the AARP classes become larger, are as
follows: 0.07% for the first $6 billion of net assets, 0.06% for the next $10
billion of such net assets and 0.05% of such net assets thereafter.
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
revolving credit facility with Chase Manhattan Bank 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.
E. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry
33
<PAGE>
conditions and investor needs. The program proposes to streamline the management
and operations of most of the no-load open-end funds Scudder Kemper advises
principally through the liquidation of several small funds, mergers of certain
funds with similar investment objectives, the creation of one Board of
Directors/Trustees and the adoption of an administrative fee covering the
provision of most of the services currently paid for by the affected funds.
Costs incurred in connection with this restructuring initiative are being borne
jointly by Scudder Kemper and certain of the affected funds.
F. Acquisition of Assets
On August 11, 2000, the Fund acquired all of the net assets of AARP
International Stock Fund and Scudder International Growth and Income Fund
pursuant to plans of reorganization approved by shareholders of the respective
funds on July 13, 2000. The acquisitions were accomplished by tax-free exchanges
of 1,206,125 shares of the Class AARP shares of the Fund for 3,476,954 shares of
AARP International Stock Fund and 595,597 shares of the Class S shares of the
Fund for 2,671,709 shares of Scudder International Growth and Income Fund
outstanding on August 11, 2000. AARP International Stock Fund's net assets at
that date ($69,063,164), including $322,150 of unrealized appreciation, and
Scudder International Growth and Income Fund's net assets at that date
($34,104,450), including $2,609,047 of unrealized appreciation, were combined
with those of the Fund. The aggregate nets assets of the Fund immediately before
the acquisition were $4,794,833,129. The combined net assets of the Fund
immediately following the acquisition were $4,898,000,743.
34
<PAGE>
G. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Year Ended Five Months Ended
August 31, 2000 August 31, 1999
------------------------------- -------------------------------
Shares sold Shares Dollars Shares Dollars
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class AARP** ........ 35,520 $ 2,055,944 -- $ --
Class S ............. 77,162,962 4,904,586,415 23,688,225 1,237,843,269
Barrett
International
Shares ........... 42,572 2,681,859 6,462 343,000
Class R Shares* ..... 798,157 52,143,669 51,931 2,844,504
-------------- --------------
$4,961,467,887 $1,241,030,773
-------------- --------------
Shares issued in tax-free reorganizations
------------------------------------------------------------------------------------
Class AARP** ........ 1,206,125 $ 69,063,164 -- $ --
Class S ............. 595,597 34,104,450 -- --
-------------- --------------
$ 103,167,614 $ --
-------------- --------------
Shares issued to shareholders in reinvestment of distributions
------------------------------------------------------------------------------------
Class AARP** ........ -- $ -- -- $ --
Class S ............. 7,566,454 458,569,993 3,072,099 156,369,846
Barrett
International
Shares ........... 38,094 2,329,790 18,682 952,397
Class R Shares* ..... 54,936 3,201,689 -- --
-------------- --------------
$ 464,101,472 $ 157,322,243
-------------- --------------
Shares redeemed
------------------------------------------------------------------------------------
Class AARP** ........ (15,060) $ (873,162) -- $ --
Class S ............. (67,322,438) (4,299,849,795) (22,623,108) (1,191,569,309)
Barrett
International
Shares ........... (88,451) (5,541,896) (27,968) (1,464,486)
Class R Shares* ..... (186,688) (12,260,574) (392) (21,453)
-------------- --------------
$(4,318,525,427) $(1,193,055,248)
-------------- --------------
Net increase (decrease)
------------------------------------------------------------------------------------
Class AARP** ........ 1,226,585 $ 70,245,946 -- $ --
Class S ............. 18,002,575 1,097,411,063 4,137,216 202,643,806
Barrett
International
Shares ........... (7,785) (530,247) (2,824) (169,089)
Class R Shares* ..... 666,405 43,084,784 51,539 2,823,051
-------------- --------------
$1,210,211,546 $ 205,297,768
-------------- --------------
</TABLE>
* 1999 -- For the period August 2, 1999 (commencement of sale of Class R
Shares) to August 31, 1999.
** 2000 -- For the period August 14, 2000 (commencement of sale of Class AARP)
to August 31, 2000.
35
<PAGE>
<TABLE>
<CAPTION>
Year Ended
March 31, 1999
--------------------------------
Shares sold Shares Dollars
------------------------------------------------------------------------------------
<S> <C> <C>
Class S .......................................... 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
------------------------------------------------------------------------------------
Class S .......................................... 5,925,727 $ 288,615,428
Barrett International Shares* .................... 36,722 1,789,941
Class R Shares ................................... -- --
---------------
$ 290,405,369
---------------
Shares redeemed
------------------------------------------------------------------------------------
Class S .......................................... (43,688,877) $(2,231,145,939)
Barrett International Shares* .................... (9,908) (500,772)
Class R Shares ................................... -- --
---------------
$(2,231,646,711)
---------------
Net increase (decrease)
------------------------------------------------------------------------------------
Class S .......................................... 6,297,215 $ 298,219,641
Barrett International Shares* .................... 460,840 24,020,821
Class R Shares ................................... -- --
---------------
$ 322,240,462
---------------
</TABLE>
(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.
36
<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 August 31, 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 of
America. 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 of
America 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 August 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
October 20, 2000
37
<PAGE>
Tax Information
--------------------------------------------------------------------------------
The Fund paid distributions of $4.95 per share from net long-term capital gains
during its year ended August 31, 2000, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$505,000,000 as capital gain dividends for its year ended August 31, 2000, of
which 100% represents 20% rate gains.
The Fund paid foreign taxes of $7,347,868 and earned $16,857,517 of foreign
source income during the year ended August 31, 2000. Pursuant to Section 853 of
the Internal Revenue Code, the Fund designates $0.09 per share as foreign taxes
paid and $0.20 per share as income earned from foreign sources for the year
ended August 31, 2000.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
38
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Barrett International
Shares (the "fund") was held on July 13, 2000, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To elect Directors of Scudder International Fund, Inc.
Number of Votes:
Director For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 263,567 0
Linda C. Coughlin 263,567 0
Dawn-Marie Driscoll 263,567 0
Edgar R. Fiedler 263,567 0
Keith R. Fox 263,567 0
Joan E. Spero 263,567 0
Jean Gleason Stromberg 263,567 0
Jean C. Tempel 263,567 0
Steven Zaleznick 263,567 0
--------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending August 31, 2000.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
263,567 0 0 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* Broker non-votes are proxies received by the fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
39
<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 & Co.
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
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.