SCUDDER
INVESTMENTS(SM)
[LOGO]
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EQUITY/GLOBAL
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Scudder
Latin America Fund
Annual Report
October 31, 2000
The fund seeks long-term capital appreciation.
<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
20 Financial Statements
23 Financial Highlights
25 Notes to Financial Statements
32 Report of Independent Accountants
33 Tax Information
34 Shareholder Meeting Results
35 Officers and Directors
36 Investment Products and Services
38 Account Management Resources
2
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Scudder Latin America Fund
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Class AARP ticker symbol SLAMX fund number 174
Class S ticker symbol SLAFX fund number 074
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Date of o Although the Latin American markets have fallen so
Inception: far in 2000, the region has performed well in
12/8/92 relation to other emerging markets during this
period. We believe that investors are encouraged by
the strengthening economies of Mexico and Brazil
Total Net and the ongoing focus on reform by the region's
Assets as of governments.
10/31/00 --
o Management remains focused on companies with strong
Class AARP: free cash flows and attractive valuations. Since we
$0.02 million believed technology and communication stocks were
already fully valued or overvalued, we were
Class S: underweight in the group, and this hurt performance
$422 million when it rallied in the November 1999-February 2000
period. However, the fact that we hold a smaller
proportion of these stocks has helped since
February, as they have declined significantly.
3
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Letter from the Fund's President
Dear Shareholders,
The past twelve months have been a time of extraordinary volatility in the
global equity markets, particularly in the developing countries. Technology,
media, and communications stocks experienced an enormous rally in the early
months of the period, a time when it appeared that all the old rules of
investing had been thrown out. But the spring brought a substantial correction
to all areas of the globe, and most major markets remain far below their
previous highs.
At times like these, it is important to remember that stock prices are not a
perfect indicator of the fundamental trends that are unfolding within an
individual company or even an entire region. The market tends to overshoot on
the upside, valuing companies far above their actual worth (as was the case with
many technology stocks in the spring); as well as on the downside, as has been
the case with the many high-quality companies that have been swept away in the
emerging markets' downturn this year. Investors should therefore focus on the
fundamental trends that underlie stock price performance, and use market
corrections as opportunities to consider adding to investments that may be
trading below their actual worth.
In the opinion of the fund's management team, stocks in Latin America may
represent such an opportunity. The wealth of
4
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reforms undertaken by governments and businesses in the region during the 1990s
have improved the health of the region's corporations and helped boost economic
growth. Nevertheless, the Latin American markets have declined so far in 2000.
The divergence between the area's improving fundamentals and weak market
performance may offer a unique chance to buy some outstanding companies that
trade below their fair value. For more information on how the fund's management
team is seeking to take advantage of these potential opportunities, please turn
to the Portfolio Management Discussion that begins on page 10.
Thank you for your continued investment in Scudder Latin America 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/Linda C. Coughlin
Linda C. Coughlin
President
Scudder Latin America Fund
5
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Performance Update
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October 31, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Latin America
Scudder Latin Investable Total
America Fund -- Class S Return Index*
----------------------- -------------
12/92** 10000 10000
'93 14728 13041
'94 19651 18352
'95 13567 11480
'96 17407 13691
'97 21455 16796
'98 17114 11700
'99 18992 14403
'00 21680 16902
Yearly periods ended October 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
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Scudder Latin America Fund -- Class S
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1 year $ 11,415 14.15% 14.15%
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5 year $ 15,980 59.80% 9.83%
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Life of Fund** $ 22,583 125.83% 10.86%
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IFC Latin America Investable Total Return Index*
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1 year $ 11,735 17.35% 17.35%
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5 year $ 14,723 47.23% 8.03%
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Life of Fund** $ 16,902 69.02% 6.93%
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6
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Returns and Per Share Information
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
Yearly periods ended October 31
IFC Latin
Scudder Latin America Investable
America Fund -- Class S Total Return Index*
----------------------- -------------------
1993** 53.42 28.72
1994 33.43 48.17
1995 -30.96 -37.44
1996 28.31 19.26
1997 23.25 22.68
1998 -20.23 -30.34
1999 10.97 23.10
2000 14.15 17.35
1993** 1994 1995 1996 1997 1998 1999 2000
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Fund Total
Return (%) 53.42*** 33.43 -30.96 28.31 23.25-20.23 10.97 14.15
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Index Total
Return (%) 28.72 48.17 -37.44 19.26 22.68-30.34 23.10 17.35
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Net Asset Value
($) 18.41 24.44 16.22 20.63 25.12 19.02 19.95 22.74
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Income
Dividends ($) -- .06 -- .15 .26 .25 .37 .05
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Capital Gains
Distributions ($) -- .06 .73 -- -- 1.14 .64 --
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* The IFC Latin America Investable Total Return Index is prepared by
International Finance Corporation. It is an unmanaged, market
capitalization-weighted representation of stock performance in seven
Latin American markets, and measures the returns of stocks that are
legally and practically available to investors. Unlike Fund returns,
Index returns do not reflect fees or expenses.
** The Fund commenced operations on December 8, 1992. Index comparisons
begin December 31, 1992.
*** Total return does not reflect the effect to the shareholder of the
applicable redemption fees. On October 2, 2000, existing shares of the
Fund were redesignated as Class S shares. In addition, the Fund
commenced offering Class AARP shares. The total return information
provided is for the Fund's Class S shares.
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. If the
Adviser had not maintained the Fund's expenses, the five-year and
life-of-Fund total returns would have been lower.
7
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Portfolio Summary
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October 31, 2000
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Geographical
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(Excludes 5% Cash Equivalents) The fund's weighting in
Mexico has decreased
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART from 56% of assets on
BELOW REFLECTING THE FOLLOWING INFORMATION: April 30, 2000, while its
weighting in Brazil has
increased from 35%.
Mexico 50%
Brazil 41%
Argentina 3%
Chile 3%
Panama 2%
Other 1%
------------------------------------------
100%
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Sectors
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(Excludes 5% Cash Equivalents) Management's focus on
companies with strong
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART fundamentals has led it
BELOW REFLECTING THE FOLLOWING INFORMATION: to maintain a
substantial weighting in
the consumer staples and
communications sectors.
Consumer Staples 27%
Communications 24%
Energy 13%
Financial 11%
Construction 7%
Manufacturing 5%
Consumer Discretionary 5%
Media 3%
Metals & Minerals 3%
Service Industries 2%
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100%
----------------------------------------------
8
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Ten Largest Equity Holdings
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(60% of Portfolio) The fund's top holdings
reflect management's
emphasis on well-managed
companies with strong
franchises and steady
earnings growth.
1. Petroleo Brasileiro S.A.
Producer and marketer of petroleum and petroleum
products in Brazil
2. Telefonos de Mexico S.A. de C.V.
Provider of telecommunication services in Mexico
3. Fomento Economico Mexicano S.A. de C.V.
Producer of beer, soft drinks and mineral water in
Mexico
4. Tele Norte Leste Participacoes S.A.
Provider of local telecommunication services in Brazil
5. Banco Itau S.A.
Provider of commercial banking services in Brazil
6. Kimberly Clark de Mexico S.A. de C.V.
Producer of consumer paper products in Mexico
7. Wal-Mart de Mexico S.A. de C.V.
Retailer of discount food, clothing and other
merchandise in Mexico
8. Brasil Telecom Participacoes S.A. (ADR)
Provider of local telecommunication services to the
southwestern region of Brazil
9. Companhia de Bebidas das Americas
Producer of beer, soft drinks, teas, bottled water,
fruit juices and sports drinks in Brazil
10. Grupo Continental S.A.
Producer and distributor of soft drinks, sugar and
mineral water in Mexico
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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October 31, 2000
Dear Shareholders,
The past year has been a tumultuous time in the global equity markets, but
stocks in Latin America have held up well on a relative basis despite losing
ground so far in 2000. A strong performance from the economies of Mexico and
Brazil, combined with falling interest rates, stable currency exchange rates,
and positive developments on the political front, have allowed the Latin
American markets to post a strong performance in relation to other world
markets.
In the first two months of the fund's fiscal year (November and December 1999),
the Class S shares of the fund were up 30.7%. During the following ten months,
the fund's performance decreased 12.67%. For the twelve-month period ended
October 31, 2000, the Class S shares of Scudder Latin America Fund produced a
total return of 14.15%, trailing the 17.35% return of their unmanaged benchmark,
the IFC Latin America Investable Total Return Index (IFC Index).
The primary reason for the fund's underperformance over the full period was its
underweight position in the technology, media, and telecommunications (TMT)
sectors, groups that experienced significant rallies in the first four months of
the fiscal year. By its prospectus, the fund can only invest 25% of its net
assets in any single sector, which provides less flexibility than is afforded to
either the benchmark or our competitors. As a result of its lower weighting in
these areas, the fund trailed both its peer group and the IFC Index during the
first half of the period. The prospectus guidelines were not the only reason for
the fund's underweight position in these areas, however. Although we could have
added to the fund's position in Internet stocks (which are part of the "media"
category, an area where we held substantially less than 25% of net assets), we
chose not to because many had been publicly traded for less than a year and, in
our view, were vastly overpriced by the markets. This positioning ultimately
proved beneficial for the fund, as the TMT sector collapsed and stocks in more
conservative areas --
10
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such as consumer staples -- began to outperform. In this phase, our diversified
approach and focus on fundamentals paid off as the fund was cushioned against
the sharp decline in the more richly valued sectors of the Latin American stock
markets. The value of this approach has been reflected in the fund's long-term
performance numbers: since inception in 1992, the Class S shares of the fund
have posted an average annual return of 10.86%, compared to 6.93% for the IFC
Index.
Investment Backdrop
Almost two years after the Brazilian currency devaluation, Latin America is
reporting solid growth with declining inflation. The region rebounded well from
the 1999 recession, with real gross domestic product (GDP) estimated at 4% for
2000. Inflation is projected to be the lowest in many years, with Mexico and
Brazil in the single digits. Both countries are reporting sharp improvements in
their fiscal accounts, and the current account deficits have been easily
financed by continued strength in foreign direct investment (FDI). Latin
American currencies have withstood both political noise and rising U.S. interest
rates, and have actually strengthened, in the case of Mexico and Brazil, since
the beginning of the year. The improved macroeconomic trends for Brazil and
Mexico, with accompanying declines in unemployment and increases in real wage
rates, have given rise to heightened domestic confidence and stronger consumer
spending.
A key factor in Latin America's recovery is the comprehensive economic and
political reform of the 1990s. The region is better prepared to fend off shocks
than it was a few years ago, due to the tremendous progress made in
restructuring the balance sheets of both the public and private sectors. The
shift in policy toward inflation targeting and strict fiscal discipline
exhibited by the Central Banks of Brazil and Mexico have also won them high
marks in the international markets.
11
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Country Profiles
In Mexico (where the fund holds 48% of net assets), Vicente Fox's convincing
victory in the recent presidential election was a watershed event, heralding a
new era in the country's history. We believe that his victory will be a major
long-term positive for the equity markets. With the outcome of the Mexican
election known, companies are accelerating investment plans, as well as
implementing strategic initiatives in the face of higher growth and a continued
strong currency. GDP growth for the second quarter came in over 7% -- a figure
that surprised the market and led to worry about overheating at the Central
Bank. The strong GDP growth was reflected in third quarter corporate earnings,
and is being driven by all sectors of the economy. Investment, consumption and
exports all reported outstanding numbers for the second quarter, demonstrating
that a recovery is at hand.
We believe that the investment backdrop in Brazil (39% of the fund's net assets)
is also highly positive for two reasons: improving fiscal stability and falling
interest rates. Brazil has been delivering excellent results on the fiscal
front, which has allowed the Central Bank to lower domestic rates to 16.5%, the
lowest level since 1994. We feel that the combination of accelerating growth,
declining inflation and an improved interest rate picture forms the backdrop for
a robust equity market in the next 12-18 months. The business cycle has already
started to turn positive, with indicators such as industrial production and
investment spending on the rise. Increasing retail sales, rising consumer loans,
and declining unemployment suggest that a stronger consumer is helping fuel the
economic recovery.
Risk Factors
Our outlook for the region, while bullish, is not without risk. Increasingly,
Latin American equity investing is becoming a tale of two markets: Mexico and
Brazil. The delisting of companies through buyouts -- as happened earlier this
year with Telefonica of Spain's purchase of the
12
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remaining minority stakes in their Latin American subsidiaries -- has made
investing in the peripheral markets all the more difficult. In the past year,
for example, the market capitalization of the Argentine market has been reduced
by more than half, due to the tender offers made for YPF, Astra, Telefonica de
Argentina and a few others. In addition, the low trading volumes in Latin
America, which are roughly half of normal levels, make investing more
problematic. Global and emerging markets investors have expressed a preference
for larger, more liquid stocks, essentially making some of the other markets,
including Argentina, irrelevant. We hope for increasing trading volumes on the
part of local investors, particularly in Brazil, where the cash flows from
maturing fixed income securities should revert to equities now that interest
rates have fallen to much lower levels.
Investment Strategy
We continue to focus on fundamentals and invest on a bottom-up,
company-by-company basis. Most importantly, we look at the ability of individual
companies to grow their operations using cash flows that are generated
internally, rather than businesses that depend on external sources for the cash
necessary to finance growth. A company that throws off strong cash flows and
doesn't have to use the money for expenses or interest payments is free to plow
the money back into the business. This means that it can invest in growth
opportunities or buy back its own stock, either of which can lead to improved
returns for shareholders. As a result, a common theme among all companies in the
portfolio is a demonstrated ability to generate cash, invest it wisely, and gain
an attractive return from the investment. The greater a company's free cash flow
and the better its return, the greater the likelihood that the company will be a
winner.
The key to making this approach work over the long term, we believe, is to
remain disciplined at all times, even when the markets are eschewing value and
fundamentals in favor of momentum-based strategies (as was the case in the
November 1999-February 2000 period). The subsequent
13
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decline in speculative stocks around the world demonstrates that investments
cannot be judged on a moment-by-moment basis. A solid investment rationale has
nothing to do with what you think will happen in the next week or month.
Instead, it should be based on fundamentals and intense, on-the-ground,
fundamental research.
The portfolio is overweight in both Mexico and Brazil, in order to take
advantage of what we believe are the good prospects for individual companies in
both countries. In Brazil, the portfolio is heavily weighted in companies that
stand to benefit from an economic recovery and falling interest rates, as well
as select fixed-line telecommunications stocks. We favor larger, more liquid
stocks, and the traditional consumer-oriented companies over commodities stocks
and cyclicals (with the exception of oil companies such as Petrobras). The fund
is generally underweight industrials, mining and steel companies, since they are
more exposed to trends in global growth and strong exchange rates could hurt
their profitability. We have trimmed our exposure to the less liquid markets,
including Peru, Argentina and Chile, where economic growth is far less certain
and there are fewer liquid, undervalued companies to choose from.
Conclusion
In our view, the macroeconomic outlook for Latin America in 2001 is extremely
positive. We are optimistic that Latin America is at a turning point, having
survived multiple crises over the past few years. Given our experience in
managing assets during these turbulent times, we are conscious of the potential
for risk and its implications on stock market returns. Certainly, a recession in
the United States would throw off all expectations for a continued economic
rebound in the region, and would jeopardize the prospects for the equity
markets. A second risk, which has come to the fore recently, is the threat of a
large currency devaluation in Argentina, given the country's economic woes. We
do not ascribe to this theory, nor do we believe it would have long-term
implications for the larger markets.
14
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We believe that an abandonment of Argentina's Convertibility program (which pegs
the peso on a one-to-one basis with the U.S. dollar) would, however, cause havoc
in the rest of the markets, at least in the short term.
Despite these potential risks, we remain enthusiastic on the long-term prospects
for stocks in Latin America. It is important to keep in mind, however, that
there will be setbacks along the way. The region has always been highly
volatile, and that is unlikely to change in the coming years. But for investors
who are willing to withstand these short-term fluctuations, the region could
offer substantial opportunities. Thank you for your continued investment in
Scudder Latin America Fund.
Sincerely,
Your Portfolio Management Team
/sEdmund B. Games, Jr. /s/Tara C. Kenney
Edmund B. Games, Jr. Tara C. Kenney
/s/Paul H. Rogers
Paul H. Rogers
The opinions expressed are those of the portfolio management team as of October
31, 2000, and may not actually come to pass.
15
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Scudder Latin America Fund:
A Team Approach to Investing
Scudder Latin America 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 Edmund B. Games, Jr. has set the fund's investment
strategy and overseen its daily operation since the fund was introduced in 1992.
Mr. Games joined the Adviser's equity research area in 1960 and has focused on
Latin American stocks since 1988.
Portfolio manager Tara C. Kenney assists with the fund's research and investment
strategy. Ms. Kenney joined the fund team in 1996 and has 12 years of investment
industry experience.
Portfolio manager Paul H. Rogers joined the fund team in 1996 and is primarily
responsible for research on Latin American corporations. Mr. Rogers joined the
Adviser in 1994 and has over 12 years of investment industry experience.
16
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<TABLE>
<CAPTION>
Investment Portfolio as of October 31, 2000
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Principal
Amount ($) Value ($)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Short-Term Investments 5.3%
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Student Loan Marketing Association, 6.45%**, 11/1/2000
(Cost $22,269,000) .......................................... 22,269,000 22,269,000
Shares
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Common Stocks 94.7%
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Argentina 3.2%
BI S.A. "A" (Provider of financial services) (b) ............... 3,000,000 2,250,000
Perez Companc S.A. "B" (ADR) (Operator of an
investment company) ......................................... 410,045 5,894,392
Telecom Argentina S.A. "B" (ADR) (Provider of
telecommunications services) ................................ 325,000 5,585,938
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13,730,330
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Brazil 38.9%
Aracruz Celulose S.A. "B" (pfd.) (ADR) (Producer of
eucalyptus kraft pulp) ...................................... 420,000 6,300,000
Banco Bradesco S.A. (pfd.) (ADR) (Provider of banking
services) ................................................... 375,000 2,367,189
Banco Itau S.A. (pfd.) (Provider of commercial banking
services) ................................................... 271,153,400 21,192,779
Brasil Telecom Participacoes S.A. (pfd.) (ADR) (Provider of
local telecommunication services to the southwestern
region of Brazil) ........................................... 330,000 17,881,875
Companhia de Bebidas das Americas (pfd.) (Producer of
beer, soft drinks, teas, bottled water, fruit juices and
sports drinks) .............................................. 75,000,005 16,816,185
Companhia Vale do Rio Doce (pfd.) (ADR) (Operator of a
diverse mining and industrial complex) ...................... 520,000 12,220,000
Petrobras Distribuidora S.A.* (pfd.) (Distributor of
petroleum and natural gas) .................................. 400,200,000 6,628,576
Petroleo Brasileiro S.A. (pfd.) (Producer and marketer of
petroleum and petroleum products) ........................... 1,650,000 43,950,789
Tele Norte Leste Participacoes S.A. (pfd.) (ADR) (Provider of
local telecommunication services) ........................... 1,125,000 24,890,625
Telecomunicacoes do Parana S.A. (pfd.) (Provider of
telecommunication services) ................................. 1,425,194,454 11,004,001
Votorantim Celulose e Papel S.A. (ADR) (Producer and
exporter of printing, writing and other specialty papers) ... 80,000 1,380,000
-------------
164,632,019
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
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<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Shares Value ($)
---------------------------------------------------------------------------------------
<S> <C> <C>
Chile 2.9%
Companhia Cervecerias Unidas S.A. (ADR) (Bottler and
distributor of beer, soft drinks and mineral water) ... 530,000 10,235,625
Embotelladora Andina S.A. "B" (ADR) (Distributor of
Coca-Cola soft drinks) ................................ 200,000 1,912,500
-----------
12,148,125
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Colombia 0.2%
Bavaria S.A. (Producer and distributor of beer and
other beverages) ...................................... 309,899 971,379
-----------
Mexico 47.6%
Apasco, S.A. de C.V. (Manufacturer of cement and
ready-mixed concrete) ................................. 2,100,000 10,764,161
Cemex S.A. de C.V. (ADR) (Producer of concrete and
cement) ............................................... 600,000 12,675,000
Coca-Cola FEMSA, S.A. de C.V. "L" (ADR) (Bottler and
distributor of soft drinks) ........................... 290,000 5,564,375
Fomento Economico Mexicano S.A. de C.V. (ADR)
(Producer of beer, soft drinks and mineral water) ..... 900,000
34,368,750
Grupo Continental S.A. (Producer and distributor of
soft drinks, sugar and mineral water) ................. 13,688,500 16,180,768
Grupo Embotelladora Unidas S.A. de C.V. "B" (Producer
and marketer of soft drinks) .......................... 1,889,134 2,569,040
Grupo Financiero Inbursa, S.A. de C.V. "O"* (Provider of
financial services) ................................... 2,975,300 11,344,703
Grupo Industrial Bimbo S.A. de C.V. "A" (Producer of
bread and other baked goods) .......................... 2,500,000 3,472,985
Grupo Televisa S.A. de C.V. (GDR)* (Operator of
entertainment businesses) ............................. 240,000 12,990,000
Kimberly Clark de Mexico S.A. de C.V. "A" (Producer of
consumer paper products) .............................. 8,000,000 20,461,321
Organizacion Soriana S.A. de C.V. "B" (Owner and
operator of the Soriana chain of hypermarkets) ........ 100,000 313,824
Panamerican Beverages Inc. "A" (Bottler of soft drinks) .. 800,800 13,213,200
Pepsi-Gemex S.A. "B"* (Distributor of soft-drink
products) (b) ......................................... 6,544,500 1,597,416
Telefonos de Mexico S.A. de C.V. "L" (ADR) (Provider of
telecommunication services) ........................... 700,000 37,756,250
Wal-Mart de Mexico S.A. de C.V. "C"* (Retailer of discount
food, clothing and other merchandise) ................. 8,000,000 18,243,632
-----------
201,515,425
-----------
Panama 1.5%
Banco Latinoamericano de Exportaciones S.A. "E" (ADR)
(Provider of banking services) ........................ 250,000 6,265,625
-----------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Shares Value ($)
---------------------------------------------------------------------------------------
Peru 0.4%
Union de Cervecerias Backus y Johnston S.A. "T" (Producer
of malted, nonalcoholic and carbonated drinks) ........ 6,803,019 1,900,501
-----------
Total Common Stocks (Cost $376,712,668) 401,163,404
---------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $398,981,668) (a) 423,432,404
---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $400,277,138. At October
31, 2000, net unrealized appreciation for all securities based on tax
cost was $23,155,266. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $74,811,938 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $51,656,672.
(b) Securities valued in good faith by the Valuation Committee of the Board
of Directors at fair value amounted to $3,847,416 (0.91% of net
assets). Their values have been estimated by the Valuation Committee in
the absence of readily ascertainable market values. However, because of
the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a
ready market for the securities existed, and the difference could be
material. The cost of these securities at October 31, 2000 aggregated
$12,104,393. These securities may also have certain restrictions as to
resale.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
-----------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $398,981,668) ................. $ 423,432,404
Cash .................................................................... 242,530
Foreign currency, at value (cost $79,165) ............................... 81,371
Receivable for investments sold ......................................... 965,080
Dividends receivable .................................................... 304,995
Receivable for Fund shares sold ......................................... 77,783
Due from Adviser ........................................................ 32,505
-------------
Total assets ............................................................ 425,136,668
Liabilities
-----------------------------------------------------------------------------------------
Payable for investments purchased ....................................... 1,567,586
Payable for Fund shares redeemed ........................................ 368,633
Accrued management fee .................................................. 445,884
Accrued Directors' fees and expenses .................................... 67,609
Other accrued expenses and payables ..................................... 522,178
-------------
Total liabilities ....................................................... 2,971,890
Net assets, at value $ 422,164,778
Net Assets
-----------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income...................................... 2,584,768
Net unrealized appreciation (depreciation) on:
Investments ........................................................... 24,450,736
Foreign currency related transactions ................................. (7,865)
Accumulated net realized gain (loss) .................................... 25,644,188
Paid-in capital ......................................................... 369,492,951
Net assets, at value $ 422,164,778
Net Asset Value
-----------------------------------------------------------------------------------------
Class AARP
Net Asset Value, offering and redemption price per share
($21,839 / 960 shares of capital stock outstanding, $.01 par value,
100,000,000 shares authorized) ...................................... $ 22.75
Class S
Net Asset Value, offering and redemption price per share ($422,142,939 /
18,563,017 shares of capital stock outstanding, $.01 par value,
100,000,000 shares authorized) ....................................... $ 22.74
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 2000
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $1,039,258) ........ $ 11,419,799
Interest ....................................................... 1,672,082
------------
Total Income ................................................... 13,091,881
------------
Expenses:
Management fee ................................................. 6,323,367
Services to shareholders ....................................... 1,459,612
Custodian and accounting fees .................................. 726,260
Administrative fee ............................................. 227,580
Auditing ....................................................... 55,200
Legal .......................................................... 7,665
Directors' fees and expenses ................................... 101,454
Reports to shareholders ........................................ 101,226
Registration fees .............................................. 25,510
Other .......................................................... 69,884
------------
Total expenses, before expense reductions ...................... 9,097,758
Expense reductions ............................................. (32,505)
------------
Total expenses, after expense reductions ....................... 9,065,253
Net investment income (loss) ................................... 4,026,628
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 55,172,746
Foreign currency related transactions
(including CPMF tax of $383,577) ............................. (960,373)
------------
54,212,373
------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... 12,037,029
Foreign currency related transactions .......................... 657,907
------------
12,694,936
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 66,907,309
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 70,933,937
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Statements of Changes in Net Assets
-------------------------------------------------------------------------------------
Years Ended October 31,
Increase (Decrease) in Net Assets 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ...................... $ 4,026,628 $ 7,748,436
Net realized gain (loss) on investment transactions 54,212,373 (30,707,394)
Net unrealized appreciation (depreciation) on
investment transactions during the period ..... 12,694,936 68,718,457
------------- -------------
Net increase (decrease) in net assets resulting
from operations ................................ 70,933,937 45,759,499
------------- -------------
Distributions to shareholders from:
Net investment income -- Class S .................. (1,108,570) (9,206,695)
------------- -------------
Net realized gains -- Class S ..................... -- (15,934,116)
------------- -------------
Fund share transactions:
Proceeds from shares sold ......................... 204,140,220 264,196,798
Reinvestment of distributions ..................... 1,045,242 23,977,201
Cost of shares redeemed ........................... (301,807,848) (363,449,884)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (96,622,386) (75,275,885)
------------- -------------
Increase (decrease) in net assets ................. (26,797,019) (54,657,197)
Net assets at beginning of period ................. 448,961,797 503,618,994
Net assets at end of period (including
undistributed net investment income of
$2,584,768 and $585,628, respectively) ......... $ 422,164,778 $ 448,961,797
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Class AARP
--------------------------------------------------------------------------------
2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 3.51
---------
--------------------------------------------------------------------------------
Income (loss) from investment operations:
--------------------------------------------------------------------------------
Net investment income (loss) (b) (.03)
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (.73)
---------
--------------------------------------------------------------------------------
Total from investment operations (.76) Less distributions from:
--------------------------------------------------------------------------------
Net investment income --
--------------------------------------------------------------------------------
Net asset value, end of period $22.75
---------
--------------------------------------------------------------------------------
Total Return (%) (3.23)**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ millions) .02
--------------------------------------------------------------------------------
Ratio of expenses (%) 1.91*
--------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.15)**
--------------------------------------------------------------------------------
Portfolio turnover rate (%) 42
--------------------------------------------------------------------------------
(a) For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
(b) Based on daily average shares outstanding during the period.
* Annualized
** Not annualized
23
<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>
------------------------------------------------------------------------------------
Years Ended October 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.95 $19.02 $25.12 $20.63 $16.22
--------------------------------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (b) .20(f) .31 .34 .26 .25
------------------------------------------------------------------------------------
Net realized and unrealized gain 2.64 1.63 (5.05) 4.49 4.30
(loss) on investment transactions
--------------------------------------------
------------------------------------------------------------------------------------
Total from investment operations 2.84 1.94 (4.71) 4.75 4.55
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.05) (.37) (.25) (.26) (.15)
------------------------------------------------------------------------------------
Net realized gains on investment -- (.64) (1.14) -- --
transactions
--------------------------------------------
------------------------------------------------------------------------------------
Total distributions (.05) (1.01) (1.39) (.26) (.15)
------------------------------------------------------------------------------------
Redemption fees (c) -- -- -- -- .01
------------------------------------------------------------------------------------
Net asset value, end of period $22.74 $19.95 $19.02 $25.12 $20.63
--------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) 14.15 10.97 (20.23) 23.25 28.31(d)
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 422 449 504 883 622
------------------------------------------------------------------------------------
Ratio of expenses before expense 1.80(e) 1.96 1.87 1.89 1.96
reductions(%)
------------------------------------------------------------------------------------
Ratio of expenses after expense 1.79(e) 1.96 1.87 1.89 1.96
reductions (%)
------------------------------------------------------------------------------------
Ratio of net investment income (loss) .80 1.61 1.45 .98 1.32
(%)
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 42 48 44 42 22
------------------------------------------------------------------------------------
</TABLE>
(a) On October 2, 2000, existing shares of the Fund were redesignated as
Class S shares.
(b) Based on monthly average shares outstanding during the period.
(c) Until September 5, 1996, upon the redemption or exchange of shares held
by shareholders for less than one year, a fee of 2% was assessed and
retained by the Fund for the benefit of the remaining shareholders.
(d) Shareholders redeeming shares held less than one year will have a lower
total return due to the effect of the 2% redemption fee.
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.79%
and 1.79%, respectively (see Notes to Financial Statements).
(f) Net investment income per share includes non-recurring dividend income
of $.05 per share.
24
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Latin America Fund (the "Fund") is a non-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 October 2, 2000, the Fund commenced offering multiple classes of shares.
Existing shares of the Fund were redesignated as Class S and the Fund commenced
offering Class AARP shares. The two classes of shares provide investors with
different purchase options. Shares of Class AARP are especially designed for
members of AARP. 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 both classes except
that each class bears certain expenses unique to that class such as
reorganization expenses (see Note F). Differences in class-level 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. Effective October 2, 2000, there are no class-specific expenses.
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 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.
25
<PAGE>
Money market instruments purchased with an original maturity of sixty days or
less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge against changes in the exchange rates
relating to foreign currency denominated assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Sales and
purchases of forward contracts having the same settlement date and broker are
offset and any gain (loss) is realized on the date of offset; otherwise, gain
(loss) is realized on settlement date. Realized and unrealized gains and losses
which represent the difference between the value of a forward contract to buy
26
<PAGE>
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.
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.
The Fund was subject to a 0.38% Contribuicao Provisoria sobre Movimentacao
Financiera (CPMF) tax which is applied to foreign exchange transactions
representing capital inflows or outflows to the Brazilian market until June 17,
2000. Effective June 18, 2000, the CPMF tax is 0.30%.
Distribution of Income and Gains.
Distributions of net investment income, if any, are made annually. Net realized
gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed, and, therefore,
will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from accounting principles generally accepted in the United
States of America. These differences primarily relate to investments in certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
27
<PAGE>
B. Purchases and Sales of Securities
During the year ended October 31, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $196,915,280 and
$276,931,605, respectively.
C. Related Parties
As described in Note F, 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 entered into an Administrative Agreement. This
agreement was effective October 2, 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 1.25% of the first $1,000,000,000 of the Fund's average daily
net assets and 1.15% of such net assets in excess of $1,000,000,000, computed
and accrued daily and payable monthly.
Accordingly, for the year ended October 31, 2000, the fee pursuant to the
Agreement aggregated $6,323,367, which was equivalent to an annual effective
rate of 1.25% of the Fund's average daily net assets.
Administrative Fee. Effective October 2, 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 Agreement with the Fund, as described above) in
exchange for the payment by the Fund of an administrative services fee (the
"Administrative Fee") of 0.65% 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
28
<PAGE>
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 October 2, 2000 through
October 31, 2000, the Administrative Agreement expense charged to the Fund
amounted to $227,580, all of which is unpaid at October 31, 2000.
Service Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser,
is the transfer, dividend-paying and shareholder service agent for the Fund.
Prior to October 2, 2000, the amount charged to the Fund by SSC aggregated
$1,179,826, of which $96,623 is unpaid at October 31, 2000.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. Prior to October 2, 2000, the
amount charged to the Fund by STC aggregated $38,567, of which $3,270 is unpaid
at October 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 October 2,
2000, the amount charged to the Fund by SFAC aggregated $245,441, of which
$20,995 is unpaid at October 31, 2000.
Effective October 2, 2000, the above fees will be paid by the Adviser in
accordance with the Administrative Agreement.
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 October 31, 2000, Directors' fees and
expenses aggregated $36,445. In addition, a one-time fee of $65,009 was accrued
by Class S prior to October 2, 2000 for payment to those Directors not
affiliated with the Adviser who did not stand for re-election under the
reorganization discussed in Note F. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $32,505 of such costs.
Other Related Parties. Effective October 2, 2000, Scudder Kemper has agreed to
pay a fee to AARP and/or its affiliates in return for advice relating to
investments by AARP members in Class AARP shares of the Fund. This fee is
29
<PAGE>
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 $6,000,000,000 of net assets, 0.06% for the next
$10,000,000,000 of such net assets and 0.05% of such net assets thereafter.
D. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States of America. These risks
include revaluation of currencies, high rates of inflation, repatriation
restrictions on income and capital, and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid,
subject to government ownership controls, delayed settlements, and their prices
more volatile than those of comparable securities in the United States of
America.
E. Line of Credit
The Fund and several affiliated 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.
F. 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 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. In addition, after December 29, 2000, Class S shares of
the Fund will generally not be available to new investors.
30
<PAGE>
G. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
------------------------------------------------------------------
Shares Dollars Shares Dollars
Shares sold
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class AARP* ....... 1,438 $ 33,844 -- $ --
Class S** ......... 8,340,107 204,106,376 13,356,309 264,196,798
$ 204,140,220 $ 264,196,798
Shares issued to shareholders in reinvestment of distributions
-------------------------------------------------------------------------------------
Class AARP* ....... -- $ -- -- $ --
Class S** ......... 41,379 1,045,242 1,363,891 23,977,201
$ 1,045,242 $ 23,977,201
Shares redeemed
-------------------------------------------------------------------------------------
Class AARP* ....... (478) $ (10,882) -- $ --
Class S** ......... (12,318,111) (301,796,966) (18,697,288) (363,449,884)
$(301,807,848) $(363,449,884)
Net increase (decrease)
-------------------------------------------------------------------------------------
Class AARP* ....... 960 $ 22,962 -- $ --
Class S** ......... (3,936,625) (96,645,348) (3,977,088) (75,275,885)
$ (96,622,386) $ (75,275,885)
</TABLE>
* For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
** On October 2, 2000, existing shares of the Fund were redesignated as
Class S shares.
31
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder Latin America 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 Latin America Fund (the
"Fund") at October 31, 2000, the results of its operations, the changes in its
net assets and the financial highlights for each of 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 October 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 20, 2000
32
<PAGE>
Tax Information (Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$28,300,000 as capital gain dividends for its year ended October 31, 2000, of
which 100% represents 20% rate gains.
The Fund paid foreign taxes of $1,039,258 and earned $3,910,387 of foreign
source income during the year ended October 31, 2000. Pursuant to section 853 of
the Internal Revenue Code, the Fund designates $0.06 per share as foreign taxes
paid and $0.22 per share as income earned from foreign sources for the year
ended October 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.
33
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Latin
America Fund (the "fund"), a series of Scudder International Fund, Inc., 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. 9,660,959 306,424
Linda C. Coughlin 9,659,191 308,192
Dawn-Marie Driscoll 9,660,203 307,180
Edgar R. Fiedler 9,659,503 307,880
Keith R. Fox 9,674,472 292,911
Joan E. Spero 9,648,644 318,739
Jean Gleason Stromberg 9,655,936 311,447
Jean C. Tempel 9,661,647 305,736
Steven Zaleznick 9,648,020 319,363
--------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending October 31, 2000.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
9,681,101 143,613 142,669 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.
34
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Linda C. Coughlin* Joyce E. Cornell*
o President and Director o Vice President
Henry P. Becton, Jr. Carol L. Franklin*
o Director; President, o Vice President
WGBH Educational Foundation
Edmund B. Games, Jr.*
Dawn-Marie Driscoll o Vice President
o Director; President, Driscoll
Associates; Executive Fellow, William F. Glavin*
Center for Business Ethics, o Vice President
Bentley College
Joan R. Gregory*
Edgar R. Fiedler o Vice President
o Director; Senior Fellow and
Economic Counsellor, The James E. Masur*
Conference Board, Inc. o Vice President
Keith R. Fox Howard S. Schneider*
o Director; General Partner, o Vice President
The Exeter Group of Funds
Tien-Yu Sieh*
Joan E. Spero o Vice President
o Director; President, The Doris
Duke Charitable Foundation John Millette*
o Vice President and Secretary
Jean Gleason Stromberg
o Director; Consultant Kathryn L. Quirk*
o Vice President and Assistant Secretary
Jean C. Tempel
o Director; Managing Director, John R. Hebble*
First Light Capital, LLC o Treasurer
Steven Zaleznick Brenda Lyons*
o Director; President and Chief o Assistant Treasurer
Executive Officer, AARP Services, Inc.
Caroline Pearson*
Thomas V. Bruns* o Assistant Secretary
o Vice President
Irene T. Cheng* *Scudder Kemper Investments, Inc.
o Vice President
</TABLE>
35
<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
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Retirement Programs and Education Accounts
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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
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Closed-End Funds
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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.
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Account Management Resources
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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.
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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 219669
Kansas City, MO
64121-9669
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 219735
Kansas City, MO
64121-9735
39
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
INVESTMENTS(SM)
[LOGO]
AARP Investment
Program from Scudder
PO Box 219735
Kansas City, MO 64121-9735
1-800-253-2277
aarp.scudder.com
Scudder Funds
PO Box 219669
Kansas City, MO 64121-9669
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financials Services Group
