SCUDDER
INVESTMENTS(SM)
[LOGO]
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EQUITY/GLOBAL
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Scudder International Growth and Income Fund
Fund #300
Semiannual Report
February 29, 2000
A fund seeking long-term growth of capital and current income by investing at
least 80% of its net assets in foreign equities (equities issued by
foreign-based companies and generally listed on foreign exchanges).
A no-load fund with no commissions to buy, sell, or exchange shares.
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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
14 Investment Portfolio
17 Financial Statements
20 Financial Highlights
21 Notes to Financial Statements
26 Officers and Directors
27 Investment Products and Services
29 Scudder Solutions
2
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Scudder International Growth and Income Fund
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ticker symbol SIGIX fund number 300
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Date of o The U.S. trend favoring a small group of growth and
Inception: technology stocks carried over into the international
6/30/97 markets.
o Management's stock selection was a positive contributor
to performance, but was not enough to compensate for an
unfavorable environment for the fund's investment
Total Net style.
Assets as
of 2/29/00: o The fund's 7.44% return for the six-month fiscal period
$37.7 million trailed the return of its benchmark, the MSCI
EAFE+Canada Index, which is comprised of a number of
securities that do not meet the fund's dividend yield
requirements.
3
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Letter from the Fund's President
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Dear Shareholders,
At a time when some investors have been preoccupied with getting into the latest
Internet "dot-com" sensation in the U.S., the international markets have
outperformed the domestic stock market by significant margins. The Japanese
market has rallied and many other world markets turned in powerful returns for
the six-month period. The turnaround underscores the validity of diversification
and the importance of maintaining exposure to the international markets.
While investors have been getting used to total returns of 20% or more, the
drivers of U.S. market performance have been changing. Over the last two years,
a shrinking number of growth and technology stocks have continued to propel U.S.
market returns while other sectors have drifted or declined. This condition has
spread beyond U.S. borders as the Internet levels the playing field for many
companies around the world, breaking down the barriers of space, time, and
access to customers. Investors have been unreserved in expressing their
enthusiasm for stocks involved in these developing industries, which has
contributed to unsupportable valuations for many fledging companies.
Scudder International Growth and Income Fund is precluded from investing in most
of these higher risk companies, which was a significant handicap to performance
over the six months. Nevertheless, the fund's managers remain committed to their
investment discipline, which we believe can play an important
4
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role in an investor's portfolio. For a detailed discussion of the fund's
investment strategy and the market environment, please turn to page 10.
For current information on your fund and your account, visit our Internet Web
site at www.scudder.com. There you'll find a wealth of information, including
current fund performance, the latest news on Scudder products and services, and
the opportunity to perform account transactions. You can also call our
representatives at 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Nicholas Bratt
Nicholas Bratt
President, Scudder International Growth and Income 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 Growth and Income Fund MSCI EAFE plus Canada Index*
6/97** 10000 10000
8/97 9708 9433
2/98 10580 10211
8/98 9873 9332
2/99 10030 10646
8/99 10980 11773
2/00 11797 13490
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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 Growth and Income Fund
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1 year $ 11,762 17.62% 17.62%
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Life of Fund** $ 11,797 17.97% 6.39%
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MSCI EAFE plus Canada Index*
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1 year $ 12,671 26.71% 26.71%
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Life of Fund** $ 13,490 34.90% 11.87%
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* The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far
East (EAFE) plus 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 commenced operations on June 30, 1997.
6
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Returns and Per Share Information
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Yearly periods ended February
Scudder International
Growth and Income Fund MSCI EAFE plus Canada Index*
1998 5.80 2.11
1999 -5.20 4.27
2000 17.62 26.71
1998 1999 2000
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Fund Total
Return (%) 5.80 -5.20 17.62
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Index Total
Return (%) 2.11 4.27 26.71
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Net Asset
Value ($) 12.68 11.93 13.54
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Income
Dividends ($) .02 .10 .11
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Capital Gain
Distributions ($) -- -- .39
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* The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far
East (EAFE) plus 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.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the total return would have been lower.
7
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Portfolio Summary
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February 29, 2000
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Geographical
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(Excludes 5% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Europe 66%
Japan 27%
U.S. & Canada 4%
Pacific Basin 3%
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100%
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Management maintained a fully invested approach to selecting stocks with above
average dividends.
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Sectors
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(Excludes 5% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Financial 24%
Manufacturing 20%
Communications 13%
Technology 11%
Consumer Discretionary 10%
Utilities 4%
Energy 4%
Service Industries 4%
Metals & Materials 4%
Other 6%
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100%
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The fund's Japanese holdings significantly outperformed the local market. In
other regions technology, media, and telecommunications stocks dominated returns
- -- stocks that generally do not meet the fund's dividend yield requirements.
8
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Ten Largest Equity Holdings
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(37% of Portfolio)
1. Telecom Italia Mobile SpA
Cellular telecommunication services
2. SAP AG
Computer software manufacturer
3. Koninklijke KPN NV
Provider of telecommunication services
4. Nomura Securities Co., Ltd.
Financial advisor, securities broker and underwriter
5. BCE, Inc. Telecommunication services
6. ABB, Ltd.
Manufacturer of equipment for power generation and distribution
7. Matsushita Electric Industrial Co., Ltd.
Manufacturer of consumer electronic products
8. EMI Group PLC
Music recording and retailing company
9. Canon, Inc.
Producer of visual image and information equipment
10. Nintendo Co., Ltd.
Manufacturer of game equipment
Toward the end of the six-month period, a return to blue chip, "old economy"
stocks began to help the fund outperform in many markets, but it was not enough
to catch up to the huge gains of technology, media, and telecommunications
stocks early in the period.
For more complete details about the Fund's investment portfolio, see page 14. 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 managers Sheridan Reilly and Lauren
Lambert discuss the market environment and their approach to managing the fund.
Q: The dominance of U.S. high growth and technology stocks has not been confined
just to the American stock markets. How is it affecting the international
markets?
A: We are seeing a global convergence of technology, media, and
telecommunications primarily driven by the growth of the Internet and wireless
communications. The phenomenon is resulting in enormous gains for stocks in
these sectors, while so-called "old-economy" stocks generally have languished.
Euphoric investor optimism for tech, media, and telecommunications ("TMT")
companies has propelled these stocks to record high valuation levels. This
narrow focus on the part of investors has left few investment dollars for other
sectors, such as established, blue chip companies that pay dividends -- the
types of companies that comprise the fund's investment universe. The bifurcation
of the U.S. market is well documented by the divergence of growth and value
stocks. In 1999, the performance spread between these two sectors reached
historic proportions in the U.S. as growth stocks outperformed value stocks by
the widest margin in over two decades. Many of the stocks driving the growth
stock indices are TMT stocks. The nature of their evolving industries requires
them to compete globally. As a result, the outperformance of TMT stocks is a
worldwide phenomenon.
Q: With tech, media, and telecom dominating returns, where did that leave
dividend-paying stocks?
A: As we alluded to earlier, the fund's traditional hunting ground of
dividend-paying stocks was severely out of favor during the six months. Since we
are continuing to stick to our investment discipline of investing in stocks with
relative dividend yields at least 25% higher than the median of the local
market, or 25% higher than the stock's own average three-year yield, the fund
was at a significant
10
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disadvantage to achieving competitive performance. For example, the Finnish
stock market was up 118% over the six months, propelled primarily by the
outstanding performance of Nokia, one of the world's dominant cellular phone
makers and a huge component of the Finnish stock market. With the fund's
investment discipline precluding it from investing in Nokia, mostly forest
products companies met the fund's dividend yield requirements -- a sector that
declined over the period. As a result, our holdings in Finland underperformed
the market by a whopping 140%. We had a similar experience in France. The
overall market was up 25%, primarily driven by a number of TMT names that we
generally could not hold in the portfolio. This scenario was repeated in several
markets around the world.
Q: How did the fund perform?
A: The fund returned 7.44% for the six months, which trailed the 14.60% return
of its benchmark, the unmanaged MSCI EAFE+Canada Index. Investors should keep in
mind that this benchmark includes a significant number of stocks that do not
meet our dividend-yield requirements, including many of the top performing TMT
stocks of the period.
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World Stock Markets
As of 2/29/00
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Total return in U.S. $ Six months
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Latin America 42%
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World (excluding U.S.) 15%
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Japan 14%
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Far East 14%
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Europe 14%
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U.S. 4%
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Source: Morgan Stanley Capital International. All indices are unmanaged and
include reinvestment of dividends and capital gains.
11
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Q: Was there a market in which the fund excelled?
A: Yes. The fund's Japanese holdings performed well, returning 28% versus 14%
for the market. The Japanese market is not yet experiencing the bifurcation that
we have been seeing in the U.S. and other world markets. The rally there has
been driven by good performance particularly in financial stocks -- an area that
the fund has had significant exposure. Among our notable performers in the
financial area were Sumitomo Bank and Nomura Securities. Elsewhere in Japan, the
fund also benefited from good performance from Nintendo.
Q: With the fund's style out of favor, what will it take for a turnaround?
A: We see two factors that could cause the current environment to become more
favorable to dividend-paying stocks. The first is a broadening of the market
away from the few TMT stocks that have been driving returns to date. While we
believe that prospects are bright for many TMT companies, we believe that stock
valuations are clearly above levels that are sustainable over the long term. A
slowdown in the rate of gains might allow the rest of the market to catch up.
The second factor that could turn the markets is a realization by investors that
earnings and company fundamentals matter again. Investors have apparently been
chasing returns rather than investing in good companies with solid financial
statements and current earnings. As a result, the biggest gainers over the six
months have been momentum stocks, or stocks that have recently provided the best
performance.
The catalyst for change is always hard to ascertain, but rising interest rates
could be a trigger. In the U.S., the Federal Reserve has been pursuing a program
of slowing the U.S. economy by raising interest rates. We are also seeing rates
rise in a number of world markets as growth heats up globally. While rising
rates historically have not favored dividend-paying stocks, we think that some
dividend-paying stocks have already been beaten down by a lack of investor
interest and in anticipation of higher
12
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rates. This doesn't provide any guarantees, but certainly makes the very
reasonable valuations of dividend-paying stocks appear more attractive than the
higher risk stocks that have recently been getting everyone's attention.
Q: Is the fund's approach still valid?
A: In times like these the temptation to abandon one's investment approach and
jump on the bandwagon can be high. Often, the point at which the environment
appears the most dismal for a sector can be one of the most attractive times to
invest, and it is often exactly the wrong time to shift one's strategy. The fund
does not participate in the highfliers that have garnered the headlines and huge
gains over the last year. It also does not assume the significantly greater
risks associated with those investments. The fund is a conservatively run
portfolio with a strict investment discipline. For investors who are seeking a
conservative approach to international opportunities, we think this fund
continues to be a good choice.
13
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<TABLE>
<CAPTION>
Investment Portfolio as of February 29, 2000 (Unaudited)
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Principal
Amount ($) Value ($)
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Repurchase Agreements 4.7%
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<S> <C> <C>
Donaldson, Lufkin & Jenrette, 5.75%, to be repurchased
at $1,765,282 on 3/1/2000* (Cost $1,765,000) .................. 1,765,000 1,765,000
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Convertible Bonds 2.0%
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United Kingdom
Diego, 2%, 4/14/2004 (Operator in food, alcoholic
beverages, fast food restaurants and property
management) (Cost $878,526) ................................... 899,000 734,933
Shares
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Common Stocks 93.3%
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Belgium 2.9%
Dexia (Provider of municipal lending services) ................... 8,015 1,096,149
--------------
Canada 3.7%
BCE, Inc. (Telecommunication services) ........................... 12,739 1,387,346
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Finland 2.3%
UPM-Kymmene Oyj (Manufacturer of paper and pulp
products) ..................................................... 30,800 857,280
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France 8.3%
Accor SA (Operator of hotels, travel agencies and
restaurants) .................................................. 18,925 691,364
Lafarge SA (Producer of cement, concrete and aggregates) ......... 7,475 559,876
Lafarge SA, Rights ............................................... 7,475 217
Schneider Electric SA (Manufacturer of electronic
components and automated manufacturing systems) ............... 16,913 1,095,153
Scor SA (Property, casualty and life reinsurance company) ........ 19,674 790,980
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3,137,590
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Germany 6.5%
Bayerische Motoren Werke (BMW) AG (Manufacturer of
luxury cars and motorcycles) .................................. 29,911 768,939
SAP AG (Computer software manufacturer) .......................... 2,691 1,690,465
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2,459,404
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The accompanying notes are an integral part of the financial statements.
14
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Shares Value ($)
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Hong Kong 2.9%
HSBC Holdings PLC (International banking and financial
services company) ...................................... 93,200 1,068,780
------------
Italy 4.7%
Telecom Italia Mobile SpA (Cellular telecommunication
services) .............................................. 128,800 1,761,374
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Japan 25.6%
Asahi Glass Co., Ltd. (Manufacturer of glass products) .... 70,000 476,839
Canon, Inc. (Producer of visual image and information
equipment) ............................................. 28,000 1,162,216
East Japan Railway Co. (Railroad operator) ................ 64 288,320
Matsushita Electric Industrial Co., Ltd. (Manufacturer of
consumer electronic products) .......................... 41,000 1,191,644
Matsushita Electric Works, Ltd. (Manufacturer of
building materials and lighting equipment) ............. 100,000 846,502
Nintendo Co., Ltd. (Manufacturer of game equipment) ....... 5,100 1,111,253
Nomura Securities Co., Ltd. (Financial advisor, securities
broker and underwriter) ................................ 57,000 1,604,905
Sakura Bank, Ltd. (Provider of banking services) .......... 139,000 791,580
Sekisui House, Ltd. (Home builder) ........................ 75,000 558,583
Sumitomo Trust & Banking Co., Ltd. (Commercial bank) ...... 121,000 682,480
Teijin, Ltd. (Manufacturer of polyester products) ......... 232,000 908,193
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9,622,515
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Netherlands 8.1%
DSM NV (Chemical manufacturer) ............................ 20,030 659,527
Koninklijke KPN NV (Provider of telecommunication services) 12,700 1,620,770
Royal Dutch Petroleum Co. (Petroleum company) ............. 14,540 762,893
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3,043,190
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Spain 2.7%
Union Electrica Fenosa SA (Producer and distributor of
electrical energy) ..................................... 48,730 1,012,545
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Sweden 5.0%
Avesta-Sheffield AB (Manufacturer of stainless steel
products) ............................................. 206,400 812,617
Investor AB (Investment Company) .......................... 72,900 1,067,961
------------
1,880,578
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
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Shares Value ($)
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Switzerland 5.0%
ABB, Ltd. (Manufacturer of equipment for power
generation and distribution) ..................... 11,216 1,198,868
Novartis AG (Registered) (Pharmaceutical company) ... 518 662,551
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1,861,419
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United Kingdom 15.6%
British Aerospace PLC (Producer of military
aircraft) ....................................... 210,524 1,036,672
Corus Group PLC (Manufacturer and distributor of
metal products) .................................. 320,398 528,858
EMI Group PLC (Music recording and retailing
company) ......................................... 110,313 1,181,380
J Sainsbury PLC (Retail distributor of food through
supermarkets) .................................... 144,547 577,647
Lasmo PLC (Oil production and exploration) .......... 476,173 708,891
National Power PLC (Electricity generation company).. 88,800 525,990
Peninsular and Oriental Steam Navigation Co. ........
(Shipping and transportation company) ............ 60,930 664,069
Royal & Sun Alliance Insurance Group PLC
(Insurance company) .............................. 119,980 652,403
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5,875,910
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Total Common Stocks (Cost $32,617,774) 35,064,080
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Total Investment Portfolio-- 100.0% (Cost $35,261,300) (a) 37,564,013
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* Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $35,286,096. At February 29,
2000, net unrealized appreciation for all securities based on tax cost was
$2,277,917. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$6,883,423 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value of $4,605,506.
The accompanying notes are an integral part of the financial statements.
16
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Financial Statements
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Statement of Assets and Liabilities as of February 29, 2000 (Unaudited)
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Assets
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Investments in securities, at value (cost $35,261,300) ......... $ 37,564,013
Cash ........................................................... 240
Foreign currency, at value (cost $4,774) ....................... 4,825
Dividends receivable ........................................... 14,454
Interest receivable ............................................ 16,114
Receivable for Fund shares sold ................................ 512,589
Foreign taxes recoverable ...................................... 60,128
Deferred organizational expense ................................ 16,683
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Total assets ................................................... 38,189,046
Liabilities
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Payable for Fund shares redeemed ............................... 229,277
Accrued management fee ......................................... 47,846
Other accrued expenses and payables ............................ 172,502
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Total liabilities .............................................. 449,625
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Net assets, at value $ 37,739,421
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Net Assets
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Net assets consist of:
Accumulated distributions in excess of net investment income (166,499) Net
unrealized appreciation (depreciation) on:
Investments .................................................. 2,302,713
Foreign currency related transactions ........................ (5,819)
Accumulated net realized gain (loss) ........................... 2,309,857
Paid-in capital ................................................ 33,299,169
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Net assets, at value $ 37,739,421
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Net Asset Value
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NetAsset Value, offering and redemption price per share
($37,739,421 / 2,788,161 shares of capital stock outstanding,
$.01 par value, 100,000,000 shares authorized) .............. $ 13.54
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
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Statement of Operations for the six months ended February 29, 2000 (Unaudited)
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Investment Income
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Dividends (net foreign taxes withheld of $22,104) .............. $ 169,141
Interest ....................................................... 69,881
-----------
Total income ................................................... 239,022
-----------
Expenses:
Management fee ................................................. 201,168
Services to shareholders ....................................... 121,963
Custodian and accounting fees .................................. 84,736
Auditing ....................................................... 14,953
Legal .......................................................... 6,431
Directors' fees and expenses ................................... 21,466
Reports to shareholders ........................................ 11,739
Registration fees .............................................. 8,454
Amortization of organization expenses .......................... 3,565
Reorganization expense ......................................... 39,069
Other .......................................................... 3,092
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Total expenses, before reductions .............................. 516,636
Expense reductions ............................................. (125,522)
-----------
Total expenses, after expense reductions ....................... 391,114
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Net investment income (loss) $ (152,092)
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Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 2,533,623
Foreign currency related transactions .......................... (24,263)
-----------
2,509,360
-----------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... 672,890
Foreign currency related transactions .......................... (6,325)
-----------
666,565
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Net gain (loss) on investment transactions 3,175,925
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Net increase (decrease) in net assets resulting from operations $ 3,023,833
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The accompanying notes are an integral part of the financial statements.
18
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------
Six Months Six Months
Ended February Ended Year Ended
Increase (Decrease) in Net 29, 2000 August 31, February 28,
Assets (Unaudited) 1999 1999
- ------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C>
Net investment income (loss) ........................ $ (152,092) $ 440,180 $ 594,441
Net realized gain (loss) on
investment transactions .......................... 2,509,360 2,433,869 645,242
Net unrealized appreciation
(depreciation) on investment
transactions during the period ................... 666,565 1,335,406 (4,691,964)
------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations ................. 3,023,833 4,209,455 (3,452,281)
------------ ------------ ------------
Distributions to shareholders
from:
Net investment income ............................... (115,269) (230,332) (427,107)
------------ ------------ ------------
Net realized gains .................................. (1,138,446) -- --
------------ ------------ ------------
Fund share transactions:
Proceeds from shares sold ........................... 19,526,750 8,670,160 36,802,035
Reinvestment of distributions ....................... 1,212,864 216,720 397,892
Cost of shares redeemed ............................. (24,609,837) (18,910,219) (36,316,961)
------------ ------------ ------------
Net increase (decrease) in net
assets from Fund share transactions .............. (3,870,223) (10,023,339) 882,966
------------ ------------ ------------
Increase (decrease) in net assets ................... (2,100,105) (6,044,216) (2,996,422)
Net assets at beginning of period ................... 39,839,526 45,883,742 48,880,164
------------ ------------ ------------
Netassets at end of period (including
accumulated distributions in excess of
net investment income of $166,499 and
$66,834 at February 29, 2000 and
February 28, 1999, respectively, and
undistributed net investment income of -------------- --------------- --------------
$100,862 at August 31, 1999) ..................... $ 37,739,421 $ 39,839,526 $ 45,883,742
-------------- --------------- --------------
Other Information
- ------------------------------------------------------------------------------------------------------
Shares outstanding at beginning
of period ........................................ 3,065,900 3,845,661 3,854,083
------------ ------------ ------------
Shares sold ......................................... 1,452,211 682,226 2,826,965
Shares issued to shareholders in
reinvestment of distributions .................... 86,695 16,762 30,294
Shares redeemed ..................................... (1,816,645) (1,478,749) (2,865,681)
------------ ------------ ------------
Net increase (decrease) in Fund
shares ........................................... (277,739) (779,761) (8,422)
Shares outstanding at end of
period ........................................... 2,788,161 3,065,900 3,845,661
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<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.
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2000(b) 1999(c) 1999(d) 1998(e)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.99 $11.93 $12.68 $12.00
------------------------------------
- --------------------------------------------------------------------------------------
Income (loss) from investment operations:
- --------------------------------------------------------------------------------------
Net investment income (loss) (a) (.05) .13(g) .14 .01
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.03 1.00 (.79) .69
------------------------------------
- --------------------------------------------------------------------------------------
Total from investment operations .98 1.13 (.65) .70
- --------------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------------
Net investment income (.04) (.07) (.10) (.02)
- --------------------------------------------------------------------------------------
Net realized gains on investment transactions (.39) -- -- --
------------------------------------
- --------------------------------------------------------------------------------------
Total distributions (.43) (.07) (.10) (.02)
- --------------------------------------------------------------------------------------
Net asset value, end of period $13.54 $12.99 $11.93 $12.68
------------------------------------
- --------------------------------------------------------------------------------------
Total Return (%) (f) 7.44** 9.47** (5.20) 5.80**
- --------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- --------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 38 40 46 49
- --------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.48(h)* 2.42* 2.19 2.65*
- --------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.85(h)* 1.75* 1.75 1.75*
- --------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.33)** 1.99* 1.10 .17*
- --------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72* 141* 131 50*
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</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended February 29, 2000 (Unaudited).
(c) For the six months ended August 31, 1999. On June 7, 1999, the Fund changed
its fiscal year end from February 28 to August 31.
(d) For the year ended February 28, 1999.
(e) For the period June 30, 1997 (commencement of operations) to February 28,
1998.
(f) Total returns would have been lower had certain expenses not been reduced.
(g) Net investment income per share includes non-recurring dividend income
amounting to $.04 per share.
(h) The annualized ratio of operating expenses excluding reorganization costs
before and after expense reductions was 2.38% and 1.75%, respectively.
* Annualized
** Not annualized
20
<PAGE>
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder International Growth and Income 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 Fund changed its fiscal year end from February 28 to August
31.
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 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 Corporation,
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.
21
<PAGE>
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.
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 semiannually. 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. 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
22
<PAGE>
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
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis. All discounts
are accreted for both tax and financial purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
B. Purchases and Sales of Securities
For the six months ended February 29, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $13,618,295 and
$20,300,224, respectively.
C. Related Parties
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 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 1.00% of the Fund's
average daily net assets computed and accrued daily and payable monthly. In
addition, the Adviser and certain of its subsidiaries have agreed to reimburse
or not to impose, respectively, all or a portion of their fees payable by the
Fund until June 30, 2000 in order to maintain the annualized expenses of the
Fund at not more than 1.75% of average daily net assets. For the six months
ended February 29, 2000, the Adviser did not impose a portion of its management
fee which amounted to $125,522, and the amount imposed amounted to $75,646,
which is equivalent to an annualized effective rate of 0.38% of the Fund's
average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
23
<PAGE>
six months ended February 29, 2000, the amount charged to the Fund by SSC
aggregated $75,331, of which $24,802 was unpaid at February 29, 2000.
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. For the six months ended February
29, 2000, the amount charged to the Fund by STC aggregated $4,046, all of which
was paid at February 29, 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 records of the Fund. For the six months ended February
29, 2000, the amount charged to the Fund by SFAC aggregated $25,000, of which
$4,167 was unpaid at February 29, 2000.
The Fund is 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
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
the potential to be invested in the Underlying Funds. For the six months ended
February 29, 2000, the Special Servicing Agreement expense charged to the Fund
amounted to approximately $24,261.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the six
months ended February 29, 2000, Directors' fees and expenses aggregated $21,466.
24
<PAGE>
D. Line of Credit
The Fund and several Scudder 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 on 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. Plan of Reorganization
On February 7, 2000 the Directors of the Fund approved an Agreement and Plan of
Reorganization (the "Reorganization") between the Fund and the Scudder
International Fund, pursuant to which Scudder International Fund would acquire
all or substantially all of the assets and liabilities of the Fund in exchange
for International Shares of the Scudder International Fund. The proposed
transaction is part of Scudder Kemper's initiative to restructure and streamline
the management and operations of the funds it advises. The Reorganization can be
consummated only if, among other things, it is approved by a majority vote of
the shareholders of the Fund. A special meeting of the shareholders of the Fund
to approve the Reorganization will be held on or about July 13, 2000.
As a result of the Reorganization, each shareholder of the Scudder International
Growth and Income Fund will become a shareholder of the International Shares of
the Scudder International Fund and would hold, immediately after the closing of
the Reorganization (the "Closing"), that number of full and fractional voting
shares of the International Shares of the Scudder International Fund having an
aggregate net asset value equal to the aggregate net asset value of such
shareholder's shares held in the Fund as of the close of business on the
business day preceding the Closing. The Closing is expected to take place during
the third quarter of 2000. In the event the shareholders of the Fund fail to
approve the Reorganization, the Fund will continue to operate and the Fund's
Directors may resubmit the Plan for shareholder approval or consider other
proposals.
25
<PAGE>
Officers and Directors
- --------------------------------------------------------------------------------
Nicholas Bratt* Joyce E. Cornell*
o President o Vice President
Sheryle J. Bolton Susan E. Dahl*
o Director; Chief Executive Officer, o Vice President
Scientific Learning Corporation
Philip S. Fortuna*
William T. Burgin o Vice President
o Director; General Partner,
Bessemer Venture Partners Carol L. Franklin*
o Vice President
Keith R. Fox
o Director; General Partner, Edmund B. Games, Jr.*
The Exeter Group of Funds o Vice President
William H. Luers Joan R. Gregory*
o Director; Chairman and President, o Vice President
U.N. Association of America
Theresa Gusman*
Kathryn L. Quirk* o Vice President
o Director; Vice President and
Assistant Secretary Ann M. McCreary*
o Vice President
Joan E. Spero
o Director; President, Doris Duke Robert C. Peck*
Charitable Foundation o Vice President
Paul Bancroft III Sheridan Reilly*
o Honorary Director; Venture o Vice President
Capitalist and Consultant
Shahram Tajbakhsh*
William H. Gleysteen, Jr. o Vice President
o Honorary Director; Consultant;
Guest Scholar, Brookings Institution Tien Yu Sieh*
o Vice President
Wilson Nolen
o Honorary Director; Consultant John Millette*
o Vice President and Secretary
Robert G. Stone, Jr.
o Honorary Director; Chairman John R. Hebble*
Emeritus and Director, Kirby o Treasurer
Corporation
Caroline Pearson*
Elizabeth J. Allan* o Assistant Secretary
o Vice President
*Scudder Kemper Investments, Inc.
Irene T. Cheng*
o Vice President
26
<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>
27
<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
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.
28
<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.
29
<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
30
<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
