SCUDDER
INVESTMENTS (SM)
[LOGO]
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EQUITY/GLOBAL
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Scudder International
Fund
Annual Report
August 31, 2000
A fund seeking long-term growth of capital by investing mainly in foreign equity
securities.
This report applies to the Class AARP and Class S shares of the fund.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
17 Investment Portfolio
23 Financial Statements
26 Financial Highlights
30 Notes to Financial Statements
40 Report of Independent Accountants
41 Tax Information
42 Shareholder Meeting Results
43 Officers and Directors
44 Investment Products and Services
46 Account Management Resources
2
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Scudder International Fund
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Class AARP ticker symbol AINTX fund number 168
Class S ticker symbol SCINX fund number 068
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Date of Inception: o During the past year, the overseas markets
6/18/53 were buffeted by a number of difficulties --
including a weaker euro, rising oil prices,
and rising interest rates-- but the strong
performance of stocks in the technology,
Total Net Assets as media, and telecommunications sectors during
of 8/31/00-- the first half of the period helped boost
the twelve-month returns of the asset class.
Class AARP:
$70.8 million o The Class S shares of the fund produced a
total return of 17.09%, beating the 12.17%
Class S: return of its unmanaged benchmark, the MSCI
$4.8 billion EAFE + Canada Index. The fund also finished
in the top third of funds in the
"international" category during the one-year
period, according to Lipper Analytical
Services, and finished in the top 20% of its
category over the three-, five-, and
ten-year periods.^1 In addition,
Morningstar(TM)has awarded the fund an
overall rating of four stars as of August
31, 2000.^2
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends
and capital gains. For the period ended August 31, 2000, the Class S
shares of Scudder International Fund's Lipper ranking was 213 out of
653 funds for the one-year period, 75 out of 452 funds for the
three-year period, 35 out of 276 for the five-year period, and 10 out
of 51 for the ten-year period. Past performance is no guarantee of
future results.
^2 Morningstar proprietary rankings reflect historical risk-adjusted
performance as of August 31, 2000. The ratings are subject to change
every month. Morningstar ratings are calculated from the funds' 3-, 5-,
and 10-year average annual returns in excess of 90-day Treasury bill
returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below 90-day T-bill returns. Past performance
is no guarantee of future results. The Class S shares of Scudder
International Fund received 4 stars for the 3-, 5-, and 10-year
periods. The top 10% of funds in a broad asset class receive 5 stars,
the next 22.5% receive 4 stars, and the next 35% receive 3 stars.
Scudder International Fund was rated among 1180, 716, and 144 funds for
the 3-, 5-, and 10-year periods, respectively, in its broad asset
class. Not all Scudder Funds receive 4- and 5-star ratings. Ratings are
subject to change.
3
<PAGE>
Letter from the Fund's President
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Dear Shareholders,
Overseas equities have provided a bumpy ride for investors during the twelve
months, as volatility in the U.S. has contributed to unusually large swings in
developed stock markets worldwide. The past six months, in particular, have been
difficult, as a litany of concerns have pressured the overseas markets. In this
period, Scudder International Fund has registered a total return of -10.66%.
Nevertheless, the fund produced a positive total return of 17.09% for the full
twelve-month fiscal year, due to its 31.06% return for the first half of the
fiscal year.
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 these positive underlying trends do not guarantee that stock prices
will rise in the short term, we
4
<PAGE>
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 long-term performance. The fund has
outperformed its unmanaged benchmark over the one-, three-, five-, and ten-year
periods, and has finished in the top 20% of international funds over the three-,
five-, and ten-year intervals, according to Lipper Analytical Services. We
believe that this strong track record underscores the importance of maintaining
a focus on your long-term investment goals even at the times when stock prices
are falling.
Thank you for your continued investment in Scudder International Fund. For
current information on the fund or your account, visit our Web site at
www.scudder.com. There you'll find a wealth of information, including fund
performance, the most recent news on Scudder products and services, and the
opportunity to perform account transactions. You can also speak with one of our
representatives by calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President
Scudder International Fund
5
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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 BAR CHART HERE
BAR CHART DATA:
Scudder International Fund
-- Class S shares EAFE & Canada Index*
0 10000 10000
1 9728 9977
2 10334 9959
3 12337 12517
4 14192 13852
5 14344 13970
6 15640 15103
7 18245 16598
8 19392 16419
9 25610 20715
10 29985 23236
Yearly periods ended August 31
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Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Period ended 8/31/2000 Growth of Average
$10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder International Fund -- Class S shares
--------------------------------------------------------------------------------
1 year $ 11,709 17.09% 17.09%
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5 year $ 20,905 109.05% 15.89%
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10 year $ 29,985 199.85% 11.61%
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MSCI EAFE & Canada Index*
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1 year $ 11,217 12.17% 12.17%
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5 year $ 16,632 66.32% 10.70%
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10 year $ 23,236 132.36% 8.79%
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* The Morgan Stanley Capital International (MSCI) Europe, Australia, the
Far East (EAFE) & Canada Index is an unmanaged capitalization-weighted
measure of stock markets in Europe, Australia, the Far East and Canada.
Index returns assume dividends reinvested net of withholding tax and,
unlike Fund returns, do not reflect any fees or expenses.
6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE SCUDDER
INTERNATIONAL FUND -- CLASS S SHARES TOTAL RETURN (%) AND MSCI EAFE & Canada
Index* TOTAL RETURN (%)
BAR CHART DATA:
Yearly periods ended August 31
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) -2.72 6.23 19.39 15.03 1.07 9.04 16.65 6.29 32.06 17.09
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Index Total -.23 -.19 25.69 10.67 .85 8.11 9.90 -1.08 26.16 12.17
Return (%)
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Net Asset Value 33.93 35.12 40.58 45.07 44.09 45.90 51.35 48.57 54.82 57.73
($)
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Income .95 .51 .37 .34 -- .40 1.32 .21 -- .13
Dividends ($)
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Capital Gains 1.37 .40 .76 1.18 1.33 1.69 .69 5.45 8.10 6.50
Distributions ($)
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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.
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 Class S 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.
7
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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%
------------------------------------
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%
------------------------------------
100%
------------------------------------
8
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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.
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
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
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Portfolio Management Discussion
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August 31, 2000
In the following interview, portfolio manager Irene Cheng discusses Scudder
International Fund's 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 cause 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. Although these developments have contributed to
negative returns for the fund on a year-to-date basis, full-year performance was
nonetheless strong. Over the twelve-month period ended August 31, 2000, the
Class S shares of the fund produced a total return of 17.09%, well ahead of the
12.17% return of its unmanaged benchmark, the MSCI EAFE + Canada Index. The fund
stacked up well against its peers during the full period, finishing in the top
third of funds in the "international" category, as calculated by Lipper
Analytical Services. Longer term, the fund's relative performance is also
favorable, as it has finished in the top 20% of its category over the three-,
five-, and ten-year periods. In addition, Morningstar(TM) has awarded the fund
an overall rating of four stars as of August 31, 2000. We believe that these
results illustrate the long-term value of the fund's investment strategy,
despite the decline in its share price so far in 2000.
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
10
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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, telecom, 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 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 merger 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
11
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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
counterbalanced this exposure with substantial investments in "old economy"
stocks, such as 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. The volatility in the TMT area has been a key factor in the fund's
underperformance year-to-date. Fortunately, we initiated the process of
selective profit-taking during the
12
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beginning of the second half of the period. 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 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
13
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reflects some of the key themes that we believe will emerge 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 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.
14
<PAGE>
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
pickup 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. Despite the recent
weakness in the overseas markets, 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.
15
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Scudder International Fund:
A Team Approach to Investing
Scudder International Fund is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals, each of whom plays an important role in the
fund's management process. Team members work together to develop investment
strategies and select securities for the fund's portfolio. They are supported by
the Adviser's large staff of economists, research analysts, traders, and other
investment specialists who work in offices across the United States and abroad.
The Adviser believes that a team approach benefits fund investors by bringing
together many disciplines and leveraging the firm's extensive resources.
Lead portfolio manager Irene Cheng joined the Adviser in 1993 and the team in
1998. Ms. Cheng has over 17 years of industry experience and focuses on
portfolio management and equity strategy for the Adviser's international equity
accounts.
Portfolio manager Nicholas Bratt joined the Adviser and the team in 1976. Mr.
Bratt is the director of the Adviser's Global Equity Group.
Portfolio manager Carol L. Franklin joined the Adviser in 1981 and the team in
1986. Ms. Franklin has over 22 years of experience in finance and investing.
Portfolio manager Marc J. Slendebroek joined the Adviser in 1994 and the team in
1999. Mr. Slendebroek began his investment career in 1989.
16
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<TABLE>
<CAPTION>
Investment Portfolio as of August 31, 2000
------------------------------------------------------------------------------------------------
Principal
Amount (c) Value ($)
------------------------------------------------------------------------------------------------
Repurchase Agreements 2.4%
------------------------------------------------------------------------------------------------
<S> <C> <C>
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
-----------
------------------------------------------------------------------------------------------------
Convertible Bonds 0.0%
------------------------------------------------------------------------------------------------
United Kingdom
British Aerospace plc, 7.45%, 11/29/2003 -----------
(Producer of military aircraft) (Cost $345,281) GBP ......... 506,989 713,473
-----------
------------------------------------------------------------------------------------------------
Participating Loan Notes 0.2%
------------------------------------------------------------------------------------------------
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 $13,351,889) ............................. 10,250(b) 11,811,073
-----------
Shares
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Common Stocks 97.4%
------------------------------------------------------------------------------------------------
Australia 1.4%
Broken Hill Proprietary Co., Ltd. (Petroleum, mineral
and steel exploration and production) ....................... 3,174,894 34,760,958
WMC Ltd. (Mineral exploration and production) .................. 4,561,074 21,481,664
Woodside Petroleum, Ltd.* (Producer of oil and gas) ............ 1,469,419
12,129,574
-----------
68,372,196
-----------
Belgium 0.0%
Dexia (Provider of municipal lending services) ................. 8,015 1,134,893
Dexia Strip .................................................... 8,015 71
-----------
1,134,964
-----------
Canada 2.3%
Canadian National Railway Co. (Railroad operator) .............. 1,557,078 45,236,211
Nortel Networks Corp. (Provider of telephone, data and
wireless products for the Internet) ......................... 836,317 68,212,105
-----------
113,448,316
-----------
Finland 1.2%
Nokia Oyj (International telecommunications company) ........... 1,329,660
58,276,641
-----------
France 19.2%
AXA SA (Insurance group providing insurance, finance
and real estate services) ................................... 323,348 46,014,476
Accor SA (Operator of hotels, travel agencies
and restaurants) ............................................ 285,268 12,282,466
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
--------------------------------------------------------------------------------------
<S> <C> <C>
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
-----------
944,757,575
-----------
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
---------------------------------------------------------------------------------------
<S> <C> <C>
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
-----------
563,202,806
-----------
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
-----------
70,268,884
-----------
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
-----------
268,489,822
-----------
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
--------------------------------------------------------------------------------------
<S> <C> <C>
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
-------------
1,202,990,342
-------------
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
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
----------------------------------------------------------------------------------------
<S> <C> <C>
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.
22
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of August 31, 2000
-------------------------------------------------------------------------------------------
Assets
-------------------------------------------------------------------------------------------
<S> <C>
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
Net Asset 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
Net Asset 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
Net Asset 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
Net Asset 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.
23
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended August 31, 2000
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Five Months Year Ended
Increase (Decrease) in Year Ended Ended March 31,
Net Assets August 31, 2000 August 31, 1999 1999
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) .... $ 11,993,808 $ 13,184,289 $ 27,196,521
Net realized gain (loss) on
investment transactions ...... 635,576,729 121,162,610 495,847,664
Net unrealized appreciation
(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 -- ........... (489,044,063) (164,421,947) (303,892,941)
Class S
--------------- --------------- ---------------
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.
25
<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>
<CAPTION>
------------------------------------------------------------------------------------
2000(a)
------------------------------------------------------------------------------------
<S> <C>
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
26
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class S (a)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(c) 1999(d) 1999(e) 1998(e) 1997(e) 1996(e)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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 $45.71
--------------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) 17.09 15.19** 7.18 21.57 10.74 19.25
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period 4,841 3,610 3,090 2,885 2,583 2,515
($ millions)
------------------------------------------------------------------------------------
Ratio of expenses (%) 1.12(h) 1.21* 1.17 1.18 1.15 1.14
------------------------------------------------------------------------------------
Ratio of net investment income .25 .93* .92 .83 .64 .86
(loss) (%)
------------------------------------------------------------------------------------
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
27
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Barrett International Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(b) 1999(c) 1999(d)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $54.94 $50.14 $52.40
---------------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (a) .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
28
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class R Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(b) 1999(c)
------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $54.78 $53.33
-------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (a) .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
29
<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
30
<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.
31
<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
32
<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
33
<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.
34
<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
35
<PAGE>
service. For the year ended August 31, 2000, the Administrative Services Fee was
as follows:
Unpaid at
Total Fees Waived August 31,
Administrative Services Fee Aggregated by KDI 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
36
<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.
37
<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.
38
<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.
39
<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
40
<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.
41
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder International Fund
(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. 40,231,420 620,641
Linda C. Coughlin 40,232,394 619,667
Dawn-Marie Driscoll 40,247,815 604,246
Edgar R. Fiedler 40,193,175 658,886
Keith R. Fox 40,238,579 613,481
Joan E. Spero 40,221,123 630,937
Jean Gleason Stromberg 40,225,227 626,834
Jean C. Tempel 40,228,100 623,960
Steven Zaleznick 39,534,647 1,317,419
--------------------------------------------------------------------------------
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*
--------------------------------------------------------------------------------
40,144,651 288,144 419,266 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.
42
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Linda C. Coughlin*
o President and Director
Henry P. Becton, Jr.
o Director; President, WGBH
Educational Foundation
Dawn-Marie Driscoll
o Director; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics, Bentley
College
Edgar R. Fiedler
o Director; Senior Fellow and
Economic Counsellor, The
Conference Board, Inc.
Keith R. Fox
o Director; General Partner,
The Exeter Group of Funds
Joan E. Spero
o Director; President, The Doris
Duke Charitable Foundation
Jean Gleason Stromberg
o Director; Consultant
Jean C. Tempel
o Director; Managing Director,
First Light Capital, LLC
Steven Zaleznick
o Director; President and
Chief Executive Officer,
AARP Services, Inc.
Thomas V. Bruns*
o Vice President
Irene T. Cheng*
o Vice President
Joyce E. Cornell*
o Vice President
Carol L. Franklin*
o Vice President
*Edmund B. Games, Jr.
o Vice President
William F. Glavin*
o Vice President
Joan E. Gregory*
o Vice President
James E. Masur*
o Vice President
Ann M. McCreary*
o Vice President
Howard S. Schneider*
o Vice President
Tien-Yu Sieh*
o Vice President
John Millette*
o Vice President and Secretary
Kathryn L. Quirk*
o Vice President and Assistant Secretary
John R. Hebble*
o Treasurer
Brenda Lyons*
o Assistant Treasurer
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
43
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Scudder Funds
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund
Prime Reserve Shares Scudder Small Company Value Fund
Premium Shares
Managed Shares Growth
Scudder Tax Free Money Fund Scudder Classic Growth Fund
Scudder Capital Growth Fund
Tax Free Scudder Large Company Growth Fund
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund
Scudder California Tax Free Fund Scudder 21st Century Growth Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund
Scudder GNMA Fund Scudder Global Discovery Fund
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio Scudder Health Care Fund
Scudder Pathway Growth Portfolio Scudder Technology Fund
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
44
<PAGE>
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
--------------------------------------------------------------------------------
Closed-End Funds
--------------------------------------------------------------------------------
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>
Scudder funds are offered by prospectus only. For more complete information on
any fund or variable annuity registered in your state, including information
about a fund's objectives, strategies, risks, advisory fees, distribution
charges, and other expenses, please order a free prospectus. Read the prospectus
before investing in any fund to ensure the fund is appropriate for your goals
and risk tolerance. There is no assurance that the objective of any fund will be
achieved, and fund returns and net asset values fluctuate. Shares are redeemable
at current net asset value, which may be more or less than their original cost.
A money market mutual fund investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although a
money market mutual fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in such a fund.
The services and products described should not be considered a solicitation to
buy or an offer to sell a security to any person in any jurisdiction where such
offer, solicitation, purchase, or sale would be unlawful under the securities
laws of such jurisdiction.
Scudder Investor Services, Inc.
45
<PAGE>
Account Management Resources
--------------------------------------------------------------------------------
For shareholders of Scudder funds including those in the AARP Investment Program
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- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to
exchange or redeem shares, and information on other
Scudder funds and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.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 you need
them. Scudder's site also provides news about Scudder
funds, retirement planning information, and more.
46
<PAGE>
--------------------------------------------------------------------------------
Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the
proceeds for schedule (as frequently as once a month) and amount
living expenses of the redemptions, and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into
automated the bank account you designate within three business
withdrawal days after 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 Scudder Class S Shareholders:
information
about these Call a Scudder representative at
services 1-800-SCUDDER
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 2291
Boston, Massachusetts
02107-2291
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 2540
Boston, Massachusetts
02208-2540
47
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About the Fund's Adviser
SCUDDER
INVESTMENTS (SM)
[LOGO]
AARP Investment
Program from Scudder
PO Box 2540
Boston, MA 02208-2540
1-800-253-2277
aarp.scudder.com
Scudder Funds
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
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.
