SCUDDER
INVESTMENTS (SM)
[LOGO]
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EQUITY/GLOBAL
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Scudder Greater
Europe Growth Fund
Annual Report
October 31, 2000
The fund seeks to provide long-term growth of capital.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
16 Glossary of Investment Terms
17 Investment Portfolio
22 Financial Statements
25 Financial Highlights
27 Notes to Financial Statements
34 Report of Independent Accountants
35 Tax Information
36 Shareholder Meeting Results
37 Officers and Directors
38 Investment Products and Services
40 Account Management Resources
2
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Scudder Greater Europe Growth Fund
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Class AARP ticker symbol SGEGX fund number 177
Class S ticker symbol SCGEX fund number 077
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Date of o Despite posting a negative return during the latter
Inception: half of the twelve-month reporting period, the fund
10/10/94 has maintained an impressive long-term performance
record. The Class S shares of the fund have
outperformed their unmanaged benchmark -- the MSCI
Europe Index -- over the three- and five-year
periods, and are ranked in the top 13% and 8%,
Total Net respectively, of their peer group in those periods
Assets as of according to Lipper, Inc.^1 The fund has also been
10/31/00 -- awarded an overall rating of 5 stars by
Morningstar(TM).^2
Class AARP:
$1 million o Although the European markets have declined in recent
months, we remain encouraged by the continued
Class S: development of important long-term themes such as
$1,410 million steady growth, improved tax policies, and corporate
restructuring. We encourage investors to focus on
what we believe are the long-term benefits of
investing in Europe, rather than the short-term
fluctuations of the region's equity markets.
^1 Source: Lipper, Inc., an independent analyst of investment performance.
Performance includes reinvestment of dividends and capital gains. For
the period ended October 31, 2000 the Class S shares of the Scudder
Greater Europe Growth Fund's Lipper ranking was 50 out of 151 funds for
the one-year period, 10 out of 78 funds for the three-year period, and
3 out of 39 for the five-year period. Past performance is no guarantee
of future results.
^2 Morningstar proprietary rankings reflect historical risk-adjusted
performance as of October 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. Scudder Greater Europe Growth 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 Greater Europe Growth
Fund was rated among 1208, 750, and 153 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,
Stocks in Europe have provided investors with an uneven performance over the
past twelve months, as the combination of local concerns and volatility in the
U.S. market has dampened investor sentiment. The past six months, during which
the MSCI Europe Index has fallen -6.81%, have proven particularly difficult. In
this period, the Class S shares of the Scudder Greater Europe Growth Fund
registered a total return of -10.28%. However, we are pleased to report that the
Class S shares of the fund nevertheless produced a gain of 11.31% for the full
year, due to their 24.06% return in the first six months of the fiscal period.
This environment has been unsettling even for experienced investors, but, as
always, we encourage shareholders to remain focused on the long-term trends that
continue to unfold in Europe. Merger 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
way to gain efficiencies and boost profits. We are also encouraged by the
growing recognition by European governments that excessive intervention in the
free market can be a hindrance to economic growth. Although positive underlying
trends such as these do not guarantee that stock prices will rise in the short
term, we believe that they provide the foundation for strong market performance
over time.
4
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Using a bottom-up, research-driven approach that seeks to invest in companies
that are poised to benefit from favorable growth trends, the management team of
Scudder Greater Europe Growth Fund has produced strong long-term results. Since
its inception in 1994, the Class S shares of the fund have outperformed their
unmanaged benchmark by a wide margin. In this time, their average annualized
return of 19.44% is far ahead of the 15.22% return of the MSCI Europe Index. The
fund has performed well relative to its peers, as well: Lipper, Inc. ranks the
Class S shares of the fund in the top 13% and 8%, respectively, over the
trailing three- and five-year periods. We believe that the fund's strong track
record is a result of management's continued use of long-term company
fundamentals to construct the portfolio on a stock-by-stock basis.
Thank you for your continued investment in Scudder Greater Europe Growth 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 Greater Europe Growth Fund
5
<PAGE>
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:
Scudder Greater Morgan Stanley Capital
Europe Growth Fund -- Class S International (MSCI) Europe Index*
----------------------------- ----------------------------------
'94** 10000 10000
'95 11506 11321
'96 14395 13298
'97 17917 16754
'98 22339 20618
'99 25993 23201
'00 28932 23419
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 Greater Europe Growth Fund-- Class S
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1 year $ 11,131 11.31% 11.31%
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5 year $ 25,144 151.44% 20.25%
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Life of Fund** $ 29,366 193.66% 19.44%
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Morgan Stanley Capital International (MSCI) Europe Index*
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1 year $ 10,094 .94% .94%
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5 year $ 20,685 106.85% 15.63%
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Life of Fund** $ 23,419 134.19% 15.22%
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6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE FUND TOTAL
RETURN (%) AND INDEX TOTAL RETURN (%)
BAR CHART DATA:
Yearly periods ended October 31
Greater Europe Growth Morgan Stanley Capital
Fund -- Class S International (MSCI) Europe Index*
1995** 15.06 13.21
1996 25.11 17.47
1997 24.47 25.99
1998 24.68 23.06
1999 16.36 12.53
2000 11.31 .94
1995** 1996 1997 1998 1999 2000
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Fund Total
Return (%) 15.06 25.11 24.47 24.68 16.36 11.31
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Index Total
Return (%) 13.21 17.47 25.99 23.06 12.53 .94
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Net Asset Value ($) 13.99 17.20 21.17 24.23 28.13 31.14
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Income
Dividends ($) .02 .11 .06 .54 .06 .08
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Capital Gains
Distributions ($) -- .14 .14 1.30 -- .10
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* The Morgan Stanley Capital International (MSCI) Europe Index is an
unmanaged capitalization-weighted measure of 14 stock markets in
Europe. Index returns assume dividends reinvested net of withholding
tax and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on October 10, 1994. Index comparisons
begin October 31, 1994.
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 total returns for
the life of Fund period would have been lower.
7
<PAGE>
Portfolio Summary
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October 31, 2000
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Geographical
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(Excludes 7% Cash Equivalents)
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
The fund's allocations
in Germany and the
Netherlands increased
during the period, while
its positions in France
and Finland declined.
United Kingdom 21%
Germany 21%
France 19%
Netherlands 12%
Italy 9%
Switzerland 6%
Spain 5%
Finland 3%
Greece 1%
Other 3%
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100%
------------------------------------
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Sectors
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(Excludes 7% Cash Equivalents)
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
The fund's performance
during its most recent
fiscal year was helped
by its media and
financial holdings.
Financial 30%
Manufacturing 14%
Energy 10%
Communications 9%
Consumer Discretionary 7%
Consumer Staples 6%
Service Industries 5%
Technology 5%
Health 4%
Other 10%
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100%
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8
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Ten Largest Equity Holdings
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(22% of Portfolio) The fund's top holdings
reflect management's
emphasis on growing
companies that are
undergoing positive
fundamental change.
1. Total Fina ELF SA
Explorer, developer and producer of oil and natural
gas in France
2. Royal Dutch Petroleum Co.
Producer, explorer, refiner and marketer of petroleum
products in the Netherlands
3. Siemens AG
Provider of electrical engineering and electronics
services in Germany
4. Vodafone Group plc
Provider of mobile telecommunication services in the
United Kingdom
5. Marschollek, Lautenschlaeger und Partner AG
Operator of an independent life insurance company in
Germany
6. Nokia Oyj
Manufacturer of telecommunication networks and
equipment in Finland
7. Nestle SA
Producer of food products in Switzerland
8. Akzo Nobel NV
Producer and marketer of health care products,
coatings, chemicals and fibers in the Netherlands
9. Schering AG
Producer of pharmaceutical and chemical products in
Germany
10. Aventis SA
Manufacturer of life science products in France
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
<PAGE>
Portfolio Management Discussion
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October 31, 2000
Dear Shareholders,
After several years of stellar performance, the European equity markets came
under pressure during the six months ended October 31, 2000. A litany of issues
weighed on the region's markets, including concerns about higher interest rates
in the U.S. and the Eurozone (the 11 countries that constitute the European
Union), rising oil prices, downgrades in the telecommunications sectors, and a
sharp decline in the value of the euro, the region's common currency. Stock
market weakness in the U.S. has also been a problem, as the slide in the Nasdaq
average and earnings disappointments from several leading stocks -- particularly
in the technology sector -- depressed sentiment in Europe. Europe's full-year
numbers remain positive, however, due to the strong run-up in technology, media,
and telecommunications (TMT) stocks during the first half of the fiscal period.
In this environment, the Class S shares of the Scudder Greater Europe Growth
Fund produced a twelve-month return of 11.31%. However, the Class S shares of
the fund has fallen 10.28% since April 30. In comparison, its unmanaged
benchmark, the MSCI Europe Index, has returned -6.81% and .94% over the six- and
twelve-month periods, respectively. We wish to remind investors that short-term
volatility is a natural occurrence in the overseas markets, and that a period of
more muted gains was inevitable following a multiyear rally. In our view, the
fund continues to offer investors an attractive way to participate in the
exciting developments that continue to unfold in Europe. The strength of the
underlying fundamental trends in the region, as well as our investment strategy,
is reflected in the fund's long-term record: Scudder Greater Europe Growth Fund
-- Class S shares has outperformed the benchmark over the three- and five-year
periods, and has also finished in the top 13% and 8%, respectively, of its peer
group in those intervals, according to Lipper, Inc. In addition, the fund has
been awarded an overall rating of 5 stars by Morningstar(TM).
10
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Investment Backdrop
We believe that, despite the recent turmoil in the European markets, there are a
number of positives that investors should consider. In fact, this region is
experiencing the strongest growth in a decade. Stronger growth continues to
result in job creation, with countries like Germany and Italy reporting the
lowest levels of unemployment in years. The fiscal situation in the public
sector has improved across Europe, thanks to belt-tightening prior to EMU
qualification and higher levels of economic growth. In addition, there is room
to ease corporate and personal taxes, which should enhance European
competitiveness and support consumption trends. However, evidence that inflation
is rising has prompted the European Central Bank to raise interest rates several
times. Their preemptive stance, along with the ongoing deregulation in utilities
prices and technology-driven productivity improvements, should mitigate
inflation pressures going forward.
We are also encouraged by the tax reform that is taking place across the
Eurozone. In July, Germany's government approved the most far-reaching tax
package in a generation. The measures include tax-free disposal of corporate
cross-shareholdings, a staged decrease in the corporate tax rate from 40% to 25%
(excluding local taxes), and a drop in the personal tax rate. These initiatives
should accelerate the restructuring process and speed up industry consolidation
by making corporate transactions less costly. Further, lower tax rates generally
boost corporate earnings, improve companies' balance sheets, and drive new
investment. The change in Germany's tax policy makes the country a more
attractive business location than it has been in the past, and sends a signal to
other Eurozone countries to lower their tax burdens to stimulate investment and
remain competitive. In the portfolio, we have been positioned for this
development through our holdings in Deutsche Bank and the insurers Allianz and
Munich RE, all companies with large cross-shareholdings which can be unwound
soon (and redeployed more efficiently) without adverse tax consequences.
11
<PAGE>
On the negative side, the euro touched new lows despite increases in short-term
interest rates by the European Central Bank. The currency has been weak due to
the difference in growth rates between the Eurozone and the U.S. The interest
rate backdrop has also been a negative, as short-term interest rates in the U.S.
stand at 6.5% vs. 4.75% in Europe. Sentiment has been further weakened by
conflicting statements by politicians and central bankers, as well as capital
flows out of the region as European companies continue to purchase assets in the
United States. On the positive side, a weak currency has had positive
implications, benefitting export companies and supporting economic growth. We
believe that the weakness in the euro is not supported by macroeconomic
fundamentals in the region. A narrowing of the growth gap between the U.S. and
Europe and a slowdown in merger and acquisition activity should support the
currency over the medium term.
Portfolio Positioning
In managing the fund, we continue to use bottom-up, fundamental research to
identify companies that we believe are key niche players, as well as companies
benefiting from structural changes in the less developed markets and smaller
firms possessing a strong global franchise. We strive to invest in companies
early in their growth stage and hold them as they gain recognition and scale.
The fund also invests in large-cap companies that are poised to boost their
earnings through fundamental changes such as restructuring, the introduction of
a new product, or entrance into a new market. We think that our dual focus on
growth and change opportunities offers a useful balancing of risks over time.
The portfolio has evolved significantly since the first quarter of this year.
Most notably, the fund's media holdings have been reduced and its commitments to
the financial sector have been increased to an overweight position. The fund has
a more balanced sectoral approach than it had earlier in the year, following our
decision to increase the fund's holdings in financials and pharmaceuticals.
Energy stocks also retain a significant weighting in the
12
<PAGE>
portfolio, based on our belief that the economic and commercial environment for
these companies is as good as it has been in decades, at the same time as the
stocks are trading at valuation levels lower than we have seen for many years.
For the full year, fund performance was helped by the performance of media
holdings L'Espresso (Italy), Seat (Italy), Publicis (France), and TF1 (France).
These stocks ran up on the back of stronger growth in the European advertising
market. We moved to take profits in these companies during 2000 based on
valuation concerns. The fund also benefited from its holdings in the niche
financial firms Bipop (Italy) and MLP (Germany), as well as Siemens (Germany)
and Serco (U.K.). On the negative side, the fund was hurt by its positions in
cyclical companies, namely BOC (U.K.), ThyssenKrupp (Germany), Usinor (France),
and BASF (Germany). Fund holdings in the technology and communications areas --
such as Nokia (Finland), Ericsson (Sweden), Philips, Tieto, and Dassault Systems
-- also detracted during the second half of the reporting period. Nokia and
Ericsson represent core blue chip holdings that, despite recent disappointments,
remain formidable global competitors in the mobile handset area. Nokia
management has a proven record of correctly forecasting sector trends, and has
the leading global market share in mobile phones, giving the company huge
economies of scale. Ericsson's business is largely in mobile infrastructure,
where the company has reported good results and retains a leading global
franchise.
A recent addition in the pharmaceutical area is a Swiss biotech firm, Ares
Serono. A premier global player in the biotech industry, the company is
benefiting from a blockbuster drug for multiple sclerosis which is currently
marketed in Europe and is slated to be launched in the U.S. in 2001. The company
has two additional growth franchises, 65% of the global reproductive/infertility
market (which is growing at 10% per year), and an excellent position in human
growth hormones. Despite its high-quality pipeline and strong revenue growth, we
were able to purchase Ares Sereno at an attractive valuation relative to its
peer group.
13
<PAGE>
Heineken, a global producer and distributor of beverages, was another recent
purchase. The company reported an increase in earnings for the first half of the
year, driven by better pricing and sales volumes, improved sales mix, and a
favorable currency impact. Recent acquisitions and an expansion of the
distribution network underpin substantial opportunities for brand expansion and
profit growth going forward.
Outlook
We believe that the European markets will face more challenging headwinds in the
months ahead. Despite downward pressure on share prices amid the recent market
volatility, valuations in certain sectors remain stretched. Global growth is
peaking and corporate profit expectations may still be too high. Europe,
nonetheless, remains an exciting investment environment from a long-term
standpoint. Globalization and the development of the single market continue to
drive corporate restructuring and consolidation, and governments continue to
move toward badly needed tax and pension reform. Fostered by deregulation and a
developing entrepreneurial culture, new companies are coming to the market and,
once there, are being disciplined by a more discerning investor base. Against
this backdrop, Scudder Greater Europe Growth Fund is diversified in an attempt
to help balance the risks and capture the rewards of the current investment
landscape.
Sincerely,
Your Portfolio Management Team
/s/Carol L. Franklin /s/Joan R. Gregory
Carol L. Franklin Joan R. Gregory
/s/Nicholas Bratt
Nicholas Bratt
The opinions expressed are those of the portfolio management team as of October
31, 2000, and may not actually come to pass.
14
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Scudder Greater Europe Growth Fund:
A Team Approach to Investing
Scudder Greater Europe Growth 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 Carol L. Franklin sets the fund's investment strategy and
oversees its daily operation. Ms. Franklin joined the Adviser in 1981 and has 12
years of European research and investment management experience.
Portfolio manager Nicholas Bratt joined the Adviser in 1976 and has over 25
years of experience in global investing.
Portfolio manager Joan R. Gregory focuses on stock selection for the fund. Ms.
Gregory joined the Adviser in 1992 and has been involved with global and
international investments since 1989.
15
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Glossary of Investment Terms
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Consolidation The reduction in the number of companies in a particular
industry, brought about by merger and acquisition
activity.
European The bank founded to oversee monetary policy for the eleven
Central Bank countries that converted their local currencies to the euro
(ECB) on January 1, 1999. The ECB's primary mission is to maintain
price stability and issue euro currency.
EMU The integration of European economies involving, among other
(European changes, a move to a single currency for member nations. To
Monetary qualify for EMU membership, nations will be required to
Union) meet certain guidelines concerning total governmental debt
and annual budget deficits, designed to ensure a strong
common currency.
Fundamental Analysis of companies based on the projected impact of
Research management, products, sales, and earnings on their balance
sheets and income statements. Distinct from technical
analysis, which evaluates the attractiveness of
a stock, based on historical price and trading volume
movements, rather than the financial results of the
underlying company.
Restructuring The general term for major corporate changes aimed at
greater efficiency and adaptation to changing markets.
Cost-cutting initiatives, debt retirement, management
realignments, and the sale of non-core businesses are all
developments frequently associated with corporate
restructuring.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
16
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Investment Portfolio as of October 31, 2000
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
----------------------------------------------------------------------------------
<S> <C> <C>
----------------------------------------------------------------------------------
Short-Term Investments 7.4%
----------------------------------------------------------------------------------
Federal National Mortgage Association, 6.45%**, -----------
11/1/2000 (Cost $103,262,000) ...................... 103,262,000 103,262,000
-----------
Shares
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Common Stocks 92.6%
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Finland 3.2%
JOT Automation Group Oyj (Manufacturer of high
technology production automation systems and
equipment) ......................................... 1,207,900 4,205,323
Kone Oyj "B" (Manufacturer of elevators) .............. 120,700 7,071,977
Nokia Oyj (Provider of telecommunications services) ... 703,300 28,958,583
Sonera Oyj (Provider of telecommunication services) ... 195,213 4,303,263
----------
44,539,146
----------
France 17.3%
Accor SA (Operator of hotels, travel agencies and
restaurants) ....................................... 269,030 10,896,916
Alcatel SA (Manufacturer of transportation,
telecommunication and energy equipment) ............ 297,234 18,147,294
Altran Technologies SA (Provider of engineering and
consulting services) ............................... 76,873 15,725,162
Aventis SA (Manufacturer of life science products) .... 330,200 23,833,098
BNP Paribas SA (Provider of banking services) ......... 211,751 18,268,533
Bouygues SA (Developer of large public projects, real
estate, offshore oil platforms and energy networks) 156,535 7,975,303
Cap Gemini SA (Provider of computer consulting
services) .......................................... 55,782 8,905,051
Etablissements Economiques du Casino
Guichard-Perrachon SA (Operator of supermarkets
and convenience stores) ............................ 100,000 8,737,755
Galeries Lafayette (Operator of department store chain) 105,200 16,981,747
Havas Advertising SA (Operator of advertising, media
consultation and production industry businesses) ... 45,623 735,687
Lagardere SA (Producer of audiovisual and
telecommunication services) ........................ 268,600 15,258,668
STMicroelectronics NV (Manufacturer of semiconductor
integrated circuits) ............................... 387,471 19,560,302
Schneider Electric SA (Manufacturer of electronic
components and automated manufacturing systems) .... 243,079 15,842,012
Suez Lyonnaise des Eaux SA (Operator of water and
electric utilities) ................................ 112,250 17,138,016
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Thomson Multimedia* (Manufacturer of consumer
electronic products) ............................... 20,144 923,685
Total Fina ELF SA "B" (Explorer of oil and natural gas) 292,787 41,917,354
-----------
240,846,583
-----------
Germany 19.6%
Allianz AG (Provider of multi-line insurance services) 60,232 20,483,978
Bayer AG (Producer of chemical products) .............. 456,512 19,808,774
Bayerische Hypo-und Vereinsbank (Provider of banking
services) .......................................... 249,100 13,685,558
Commerzbank AG (Provider of banking services) ......... 391,600 11,056,530
Deutsche Bank AG (Provider of financial services) ..... 263,300 21,687,380
Deutsche Telekom AG (Provider of telecommunication
services) .......................................... 263,222 9,845,836
Dresdner Bank AG (Provider of banking services) ....... 358,569 14,904,244
ERGO Versicherungs Gruppe AG (Provider of insurance
services) .......................................... 84,945 11,757,363
Epcos AG* (Producer of electronic components and
integrated circuits) ............................... 88,802 6,748,858
Marschollek, Lautenschlaeger und Partner AG (pfd.)
(Operator of independent life insurance company) ... 220,100 29,716,774
Metro AG (Operator of building, clothing, electronic and
food stores) ....................................... 215,200 8,680,013
Muenchener Rueckversicherungs-Gesellschaft AG
(Provider of insurance services) ................... 58,020 18,327,582
ProSieben Sat.1 Media AG (Preferred) (Producer and
broadcaster of television programming, operator of
interactive Internet web sites) .................... 512,000 16,129,777
SAP AG (Manufacturer of computer software) ............ 36,300 5,945,979
SAP AG -- Vorzug (Manufacturer of computer software)... 34,300 6,946,515
Schering AG (Producer of pharmaceutical and chemical
products) .......................................... 447,000 24,975,714
Siemens AG (Developer of electrical products) ......... 247,300 31,499,226
-----------
272,200,101
-----------
Greece 1.0%
Alpha Credit Bank AE (Provider of commercial banking
services) .......................................... 209,925 7,760,619
National Bank of Greece SA (Provider of banking
services) .......................................... 152,519 5,798,513
-----------
13,559,132
-----------
Ireland 0.6%
Irish Life & Permanent plc (Operator of retail financial
services group) .................................... 863,686 8,661,444
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Shares Value ($)
---------------------------------------------------------------------------------------
<S> <C> <C>
Italy 8.1%
Assicurazioni Generali (Provider of insurance and financial
services) ............................................. 520,900 17,139,990
Banco Intesa SpA (Provider of banking services) .......... 4,837,035 20,085,035
Bulgari SpA (Manufacturer and retailer of fine jewelry,
luxury watches and perfumes) .......................... 854,900 10,068,767
ENI SpA (Explorer and distributor of petroleum
products) ............................................. 2,144,000 11,615,287
Gruppo Coin SpA* (Operator of department stores
selling clothing, accessories and furnishings) ........ 643,350 8,795,442
Riunione Adriatica di Sicurta SpA (Provider of
insurance services) ................................... 1,254,250 16,476,271
Saipem SpA (International contractor in oil and gas
exploration and drilling, construction of refineries and
pipelines) ............................................ 2,734,500 14,257,087
San Paolo-- IMI SpA (Provider of commercial banking
services) ............................................. 898,200 14,567,698
-----------
113,005,577
-----------
Netherlands 11.2%
ABN AMRO Holding NV (Provider of financial services) ..... 793,536 18,395,593
Akzo Nobel NV (Producer and marketer of health care
products, coatings, chemicals and fibers) ............. 579,000 26,377,449
Heineken Holding NV "A" (Producer and distributor of
beers, spirits, wines and soft drinks) ................ 312,600 11,148,662
Heineken NV (Producer of beer and soft drinks) ........... 49,000 2,662,935
ING Groep NV (Provider of insurance and financial
services) ............................................. 228,670 15,712,655
Koninklijke (Royal) Philips Electronics NV (Manufacturer of
lighting and electronic products) ..................... 470,951 18,519,745
Qiagen NV* (Provider of biopharmaceutical products and
technologies) ......................................... 126,400 5,451,000
Royal Dutch Petroleum Co. (Producer, explorer, refiner and
marketer of petroleum products) ....................... 702,600 41,697,276
VNU NV (Provider of international publishing services) ... 340,244 16,034,960
-----------
156,000,275
-----------
Norway 0.7%
Norsk Hydro AS (Producer of fertilizers, oil, gas and
aluminum products) .................................... 229,300 9,125,015
-----------
Spain 5.0%
Banco Popular Espanol SA (Provider of commercial
banking services throughout Europe) ................... 655,300 19,614,796
Cortefiel SA (Owner and operator of various retail clothing
stores) ............................................... 539,000 9,680,185
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Shares Value ($)
-----------------------------------------------------------------------------------
<S> <C> <C>
Promotora de Informaciones SA* (Prisa) (Provider of media
products) ........................................... 100,005 1,927,667
Recoletos Compania Editorial SA* (Publisher of financial,
sports, women's and health publications) ............ 195,200 1,765,281
Telefonica SA (Provider of telecommunication services) . 1,081,399 20,633,530
Union Electrica Fenosa SA (Producer and distributor of
electrical energy) .................................. 885,453 16,383,521
----------
70,004,980
----------
Sweden 0.5%
Ericsson LM "B" (Producer of advanced systems and
products for wired and mobile communications) ....... 476,000 6,333,333
----------
Switzerland 5.8%
Credit Suisse Group (Provider of universal banking and
financial services) ................................. 75,225 14,103,380
Nestle SA (Producer of food products) .................. 13,561 28,102,768
Roche Holding AG (PC) (Manufacturer of pharmaceutical
and chemical products) .............................. 1,620 14,798,554
Serono SA (Developer and marketer of biotechnology
products) ........................................... 15,335 13,795,102
UBS AG (Provider of banking and asset management
services) ........................................... 72,600 10,056,968
----------
80,856,772
----------
United Kingdom 19.6%
ARM Holdings plc* (Designer of RISC microprocessors and
related technology) ................................. 600,600 5,919,059
BOC Group plc (Producer of chemical products) .......... 826,692 11,502,002
BP Amoco plc (Provider of oil internationally) ......... 2,449,400 20,749,264
Bae Systems plc (Producer of military aircraft) ........ 2,739,707 15,545,130
Barclays plc (Provider of commercial and investment
banking, insurance and other financial services) .... 574,910 16,431,047
British Telecom plc (Provider of telecommunication
services) ........................................... 931,300 10,905,848
Cable and Wireless plc (Provider of telecommunication
services) ........................................... 350,500 4,952,804
Capital Radio plc (Operator of radio broadcasting
company) ............................................ 56,978 1,230,416
Diageo plc (Producer and distributor of food products,
beer and liquor; owner of fast-food restaurants) .... 2,148,910 20,259,279
Glaxo Wellcome plc (Developer of pharmaceutical
products) ........................................... 455,647 13,101,730
Granada Compass plc* (Provider of an assortment of
hospitality and media services) ..................... 2,150,898 18,516,748
HSBC Holdings plc (Provider of international banking and
financial services) ................................. 1,245,973 17,732,852
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Shares Value ($)
----------------------------------------------------------------------------------------------
<S> <C> <C>
J Sainsbury plc (Retail distributor of food through
supermarkets) ............................................ 1,278,700 7,176,597
Prudential Corp. plc (Provider of a broad range of financial
services) ................................................ 549,400 7,381,198
Reed International plc (Publisher of scientific, professional
and business-to-business materials) ...................... 904,100 8,346,692
Reuters Group plc (Provider of international news and
information) ............................................. 493,400 9,596,439
Rio Tinto plc (Developer of mining products) ................ 529,200 8,551,714
Royal & Sun Alliance Insurance Group plc (Provider of
insurance services) ...................................... 2,560,159 18,199,708
Serco Group plc (Provider of management support
services) ................................................ 1,136,000 10,454,675
SmithKline Beecham plc (Manufacturer of ethical drugs and
health care products) .................................... 1,194,402 15,406,323
Vodafone Group plc (Provider of mobile
telecommunication services) .............................. 7,379,675 30,668,965
-------------
272,628,490
-------------
----------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,167,036,264) 1,287,760,848
----------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,270,298,264) (a) 1,391,022,848
----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $1,274,543,412. At October
31, 2000, net unrealized appreciation for all securities based on tax
cost was $116,479,436. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $183,675,194 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $67,195,758.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
-----------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $1,270,298,264) ............. $ 1,391,022,848
Cash .................................................................. 18,744
Receivable for investments sold ....................................... 12,830,239
Dividends receivable .................................................. 1,116,781
Receivable for Fund shares sold ....................................... 18,842,887
Foreign taxes recoverable ............................................. 1,685,345
Due from Adviser ...................................................... 32,505
---------------
Total assets .......................................................... 1,425,549,349
Liabilities
-----------------------------------------------------------------------------------------
Payable for investments purchased ..................................... 10,485,620
Payable for Fund shares redeemed ...................................... 1,467,364
Accrued management fee ................................................ 1,133,617
Accrued Directors' fees and expenses .................................. 73,907
Other accrued expenses and payables ................................... 1,525,734
---------------
Total liabilities ..................................................... 14,686,242
-----------------------------------------------------------------------------------------
Net assets, at value $ 1,410,863,107
-----------------------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... 587,200
Net unrealized appreciation (depreciation) on:
Investments ......................................................... 120,724,584
Foreign currency related transactions ............................... (191,087)
Accumulated net realized gain (loss) .................................. 46,997,480
Paid-in capital ....................................................... 1,242,744,930
-----------------------------------------------------------------------------------------
Net assets, at value 1,410,863,107
-----------------------------------------------------------------------------------------
Net Asset Value
-----------------------------------------------------------------------------------------
Class AARP
NetAsset Value, offering and redemption price per share ($1,028,046 / 33,011
shares of capital stock outstanding, $.01 par value, 100,000,000 shares
authorized) ........................................................ $ 31.14
Class S
NetAsset Value, offering and redemption price per share ($1,409,835,061 /
45,269,748 shares of capital stock outstanding, $.01 par value,
100,000,000 shares authorized) ..................................... $ 31.14
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 2000
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $2,417,741) ........ $ 19,026,861
Interest ....................................................... 4,961,983
-------------
Total Income ................................................... 23,988,844
-------------
Expenses:
Management fee ................................................. 14,443,770
Administrative fee ............................................. 421,497
Services to shareholders ....................................... 3,813,353
Custodian and accounting fees .................................. 1,238,453
Auditing ....................................................... 79,850
Legal .......................................................... 4,125
Directors' fees and expenses ................................... 105,059
Reports to shareholders ........................................ 396,021
Registration fees .............................................. 151,452
Reorganization fees ............................................ 135,194
Other .......................................................... 46,411
-------------
Total expenses, before expense reductions ...................... 20,835,185
Expense reductions ............................................. (32,505)
-------------
Total expenses, after expense reductions ....................... 20,802,680
--------------------------------------------------------------------------------
Net investment income (loss) 3,186,164
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 141,109,733
Foreign currency related transactions .......................... (1,078,305)
-------------
140,031,428
-------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (55,186,006)
Foreign currency related transactions .......................... (222,637)
-------------
(55,408,643)
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 84,622,785
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 87,808,949
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 2000 1999
---------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ..................... $ 3,186,164 $ 4,225,178
Net realized gain on investment transactions ..... 140,031,428 60,708,531
Net unrealized appreciation (depreciation) on
investment transactions during the period ..... (55,408,643) 106,957,885
--------------- ---------------
Net increase in net assets resulting from
operations .................................... 87,808,949 171,891,594
--------------- ---------------
Distributions to shareholders from:
Net investment income:
Class AARP ..................................... -- --
--------------- ---------------
Class S ........................................ (3,040,920) (2,849,719)
--------------- ---------------
Net realized gains:
Class AARP ..................................... -- --
--------------- ---------------
Class S ........................................ (3,789,535) --
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ........................ 3,262,435,262 1,875,696,213
Reinvestment of distributions .................... 6,504,234 2,719,498
Cost of shares redeemed .......................... (2,974,422,151) (2,144,456,345)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions ............................ 294,517,345 (266,040,634)
--------------- ---------------
Increase (decrease) in net assets ................ 375,495,839 (96,998,759)
Net assets at beginning of period ................ 1,035,367,268 1,132,366,027
Net assets at end of period (including
undistributed net investment income of $587,200 --------------- ---------------
and $2,822,146, respectively) ................. $ 1,410,863,107 $ 1,035,367,268
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<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 $32.02
----------
--------------------------------------------------------------------------------
Income (loss) from investment operations:
--------------------------------------------------------------------------------
Net investment income (loss) (b) (.03)
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (.85)
----------
--------------------------------------------------------------------------------
Total from investment operations (.88)
--------------------------------------------------------------------------------
Net asset value, end of period $31.14
----------
--------------------------------------------------------------------------------
Total Return (%) (2.75)**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1
--------------------------------------------------------------------------------
Ratio of expenses (%) 1.35*
--------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.09)**
--------------------------------------------------------------------------------
Portfolio turnover rate (%) 72
--------------------------------------------------------------------------------
(a) For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
(b) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
25
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class 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 $28.13 $24.23 $21.17 $17.20 $13.99
------------------------------------------
----------------------------------------------------------------------------------
Income (loss) from investment operations:
----------------------------------------------------------------------------------
Net investment income (loss) (b) .07 .10(c) .16 .03 .13
----------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 3.12 3.86 4.74 4.14 3.33
------------------------------------------
----------------------------------------------------------------------------------
Total from investment operations 3.19 3.96 4.90 4.17 3.46
----------------------------------------------------------------------------------
Less distributions from:
----------------------------------------------------------------------------------
Net investment income (.08) (.06) (.54) (.06) (.11)
----------------------------------------------------------------------------------
Net realized gains on investment
transactions (.10) -- (1.30) (.14) (.14)
------------------------------------------
----------------------------------------------------------------------------------
Total distributions (.18) (.06) (1.84) (.20) (.25)
----------------------------------------------------------------------------------
Net asset value, end of period $31.14 $28.13 $24.23 $21.17 $17.20
------------------------------------------
----------------------------------------------------------------------------------
Total Return (%) 11.31 16.36 24.68 24.47(d) 25.11(d)
----------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
----------------------------------------------------------------------------------
Net assets, end of period
($ millions) 1,410 1,035 1,132 196 120
----------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.42(e) 1.46 1.48 1.72 1.97
----------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.42(e) 1.46 1.48 1.66 1.50
----------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) .22 .37 .63 .16 .82
----------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 83 93 89 39
----------------------------------------------------------------------------------
</TABLE>
(a) On October 2, 2000 existing shares of the Fund were redesignated as
Class S.
(b) Based on monthly average shares outstanding during the period.
(c) Net investment income per share includes non-recurring dividend income
amounting to $.08 per share.
(d) Total returns would have been lower had certain expenses not been
reduced.
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.41%
and 1.41%, respectively (see Notes to Financial Statements).
26
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Greater Europe Growth 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 E). 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.
27
<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.
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.
28
<PAGE>
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 foreign denominated
investments and 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.
B. Purchases and Sales of Securities
For the year ended October 31, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,234,471,889 and
$978,688,365, 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 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 1.00% on the first
29
<PAGE>
$1,000,000,000 of average daily net assets and 0.90% of such net assets in
excess of $1,000,000,000, computed and accrued daily and payable monthly.
Effective October 2, 2000, the Fund, as approved by the Fund's Board of
Directors, adopted a new Investment Management Agreement (the "Management
Agreement") with Scudder Kemper. The Management Agreement is identical to the
pre-existing Agreement, except for the date of execution and termination and fee
rate. The management fee payable under the Management Agreement is equal to an
annual rate of 1.00% of the first $1,000,000,000 of the Fund's average daily net
assets, 0.90% on the next $500,000,000 of such assets, 0.85% on the next
$500,000,000 of such assets, and 0.80% of such assets in excess of
$2,000,000,000, computed and accrued daily and payable monthly.
Accordingly, for the year ended October 31, 2000, the fees pursuant to the
Agreement and the Management Agreement amounted to $14,443,770. This was
equivalent to an effective annual rate of 0.99% 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 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 October 2, 2000 through
October 31, 2000, the Administrative Agreement expense charged to the Fund
amounted to $421,497, of which $268,055 is unpaid at October 31, 2000.
30
<PAGE>
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
$1,782,899, of which $4,847 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 $128,120, of which $403 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 $519,078, of which
$1,478 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 $40,050. 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 E. 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
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. 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
31
<PAGE>
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 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 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. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund. In addition, after December 29, 2000, Class
S shares of the Fund will generally not be available to new investors.
32
<PAGE>
F. 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>
Class AARP* ....... 33,683 $ 1,027,300 -- $ --
Class S** ......... 95,336,229 3,261,407,962 70,803,786 1,875,696,213
-------------- --------------
$3,262,435,262 $1,875,696,213
-------------- --------------
Shares issued to shareholders in reinvestment of distributions
--------------------------------------------------------------------------------------
Class AARP* ....... -- $ -- -- $ --
Class S** ......... 186,155 6,504,234 102,622 2,719,498
-------------- --------------
$ 6,504,234 $ 2,719,498
-------------- --------------
Shares redeemed
--------------------------------------------------------------------------------------
Class AARP* ....... (672) $ (20,691) -- $ --
Class S** ......... (87,055,905) (2,974,401,460) (80,829,241) (2,144,456,345)
-------------- --------------
$(2,974,422,151) $(2,144,456,345)
-------------- --------------
Net increase (decrease)
--------------------------------------------------------------------------------------
Class AARP* ....... 33,011 $ 1,006,609 -- $ --
Class S** ......... 8,466,479 293,510,736 (9,922,833) (266,040,634)
-------------- --------------
$ 294,517,345 $(266,040,634)
-------------- --------------
</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.
33
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and to the
Shareholders of Scudder Greater Europe Growth 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 Greater Europe Growth 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 22, 2000
34
<PAGE>
Tax Information (Unaudited)
--------------------------------------------------------------------------------
The Fund paid distributions of $0.10 per share from net long-term capital gains
during its year ended October 31, 2000, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$149,239,000 as capital gain dividends for its year ended October 31, 2000, of
which 100% represents 20% rate gains.
The Fund paid foreign taxes of $2,417,741 and earned $3,704,398 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 $0.09 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.
35
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Greater Europe
Growth 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. 26,393,039 429,534
Linda C. Coughlin 26,373,471 449,102
Dawn-Marie Driscoll 26,389,376 433,197
Edgar R. Fiedler 26,355,589 466,984
Keith R. Fox 26,405,285 417,288
Joan E. Spero 26,374,524 448,049
Jean Gleason Stromberg 26,381,282 441,291
Jean C. Tempel 26,387,323 435,250
Steven Zaleznick 26,369,625 452,948
--------------------------------------------------------------------------------
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*
--------------------------------------------------------------------------------
26,051,068 453,569 317,937 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.
36
<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, WGBH o Vice President
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 E. 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
*Scudder Kemper Investments, Inc.
Irene T. Cheng*
o Vice President
</TABLE>
37
<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
38
<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.
39
<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.
40
<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 219669
Kansas City, MO
64121-9669
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 219735
Kansas City, MO
64121-9735
41
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
INVESTMENTS (SM)
[LOGO]
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 Financial Services Group
