-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pr3GSnx9t1eb0XFIAH2JywvKE7wVzuiFZ1sw7mxEnhWxhbVZG0z5Q+1Zi9pX6JNi I1fcPlg1p6YZFszsFtsdfg== 0000088053-01-000001.txt : 20010122 0000088053-01-000001.hdr.sgml : 20010122 ACCESSION NUMBER: 0000088053-01-000001 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20010102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCUDDER INTERNATIONAL FUND INC CENTRAL INDEX KEY: 0000088053 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132827803 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00642 FILM NUMBER: 1500366 BUSINESS ADDRESS: STREET 1: 345 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10154 BUSINESS PHONE: 2123266200 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER INTERNATIONAL INVESTMENTS LTD DATE OF NAME CHANGE: 19761203 N-30D 1 0001.txt ANNUAL REPORT - SCUDDER LATIN AMERICA FUND SCUDDER INVESTMENTS(SM) [LOGO] - -------------------------------------------------------------------------------- EQUITY/GLOBAL - -------------------------------------------------------------------------------- Scudder Latin America Fund Annual Report October 31, 2000 The fund seeks long-term capital appreciation. Contents - -------------------------------------------------------------------------------- 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 Scudder Latin America Fund - -------------------------------------------------------------------------------- Class AARP ticker symbol SLAMX fund number 174 Class S ticker symbol SLAFX fund number 074 - -------------------------------------------------------------------------------- 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 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 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 Performance Update - -------------------------------------------------------------------------------- October 31, 2000 - -------------------------------------------------------------------------------- Growth of a $10,000 Investment - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Fund Index Comparison - -------------------------------------------------------------------------------- Total Return Growth of Average Period ended 10/31/2000 $10,000 Cumulative Annual - -------------------------------------------------------------------------------- Scudder Latin America Fund -- Class S - -------------------------------------------------------------------------------- 1 year $ 11,415 14.15% 14.15% - -------------------------------------------------------------------------------- 5 year $ 15,980 59.80% 9.83% - -------------------------------------------------------------------------------- Life of Fund** $ 22,583 125.83% 10.86% - -------------------------------------------------------------------------------- IFC Latin America Investable Total Return Index* - -------------------------------------------------------------------------------- 1 year $ 11,735 17.35% 17.35% - -------------------------------------------------------------------------------- 5 year $ 14,723 47.23% 8.03% - -------------------------------------------------------------------------------- Life of Fund** $ 16,902 69.02% 6.93% - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- Returns and Per Share Information - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Fund Total Return (%) 53.42*** 33.43 -30.96 28.31 23.25-20.23 10.97 14.15 - -------------------------------------------------------------------------------- Index Total Return (%) 28.72 48.17 -37.44 19.26 22.68-30.34 23.10 17.35 - -------------------------------------------------------------------------------- Net Asset Value ($) 18.41 24.44 16.22 20.63 25.12 19.02 19.95 22.74 - -------------------------------------------------------------------------------- Income Dividends ($) -- .06 -- .15 .26 .25 .37 .05 - -------------------------------------------------------------------------------- Capital Gains Distributions ($) -- .06 .73 -- -- 1.14 .64 -- - -------------------------------------------------------------------------------- * 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 Portfolio Summary - -------------------------------------------------------------------------------- October 31, 2000 - -------------------------------------------------------------------------------- Geographical - -------------------------------------------------------------------------------- (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% - ------------------------------------------ - -------------------------------------------------------------------------------- Sectors - -------------------------------------------------------------------------------- (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% - ---------------------------------------------- 100% - ---------------------------------------------- 8 - -------------------------------------------------------------------------------- Ten Largest Equity Holdings - -------------------------------------------------------------------------------- (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 Portfolio Management Discussion - -------------------------------------------------------------------------------- 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 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 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 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 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 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 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
Investment Portfolio as of October 31, 2000 - ------------------------------------------------------------------------------------------------- Principal Amount ($) Value ($) - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Short-Term Investments 5.3% - ------------------------------------------------------------------------------------------------- Student Loan Marketing Association, 6.45%**, 11/1/2000 (Cost $22,269,000) .......................................... 22,269,000 22,269,000 Shares - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Common Stocks 94.7% - ------------------------------------------------------------------------------------------------- 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 ------------- 13,730,330 ------------- 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 -------------
The accompanying notes are an integral part of the financial statements. 17
- --------------------------------------------------------------------------------------- Shares Value ($) - --------------------------------------------------------------------------------------- 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 ----------- 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 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 - ---------------------------------------------------------------------------------------
* 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 Financial Statements - -------------------------------------------------------------------------------- Statement of Assets and Liabilities as of October 31, 2000 - --------------------------------------------------------------------------------
Assets - ----------------------------------------------------------------------------------------- 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
The accompanying notes are an integral part of the financial statements. 20 - -------------------------------------------------------------------------------- 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
- ------------------------------------------------------------------------------------- Statements of Changes in Net Assets - ------------------------------------------------------------------------------------- Years Ended October 31, Increase (Decrease) in Net Assets 2000 1999 - ------------------------------------------------------------------------------------- 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
The accompanying notes are an integral part of the financial statements. 22 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 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)
- ------------------------------------------------------------------------------------ Years Ended October 31, 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------
(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 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 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 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 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 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 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 G. Share Transactions The following table summarizes shares of capital stock and dollar activity in the Fund:
Year Ended Year Ended October 31, 2000 October 31, 1999 ------------------------------------------------------------------ Shares Dollars Shares Dollars Shares sold - ------------------------------------------------------------------------------------- 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)
* 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 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 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 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 Officers and Directors - -------------------------------------------------------------------------------- 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
35 Investment Products and Services - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Scudder Funds - -------------------------------------------------------------------------------- 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 36 - -------------------------------------------------------------------------------- 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.
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. 37 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. 38 - -------------------------------------------------------------------------------- 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 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 -----END PRIVACY-ENHANCED MESSAGE-----