<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>sr-int.txt
<DESCRIPTION>SEMIANNUAL REPORT SCUDDER INTERNATIONAL FUND
<TEXT>
SCUDDER
INVESTMENTS
--------------------------------------------------------------------------------
EQUITY/GLOBAL
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Scudder International
Fund
Semiannual Report
February 28, 2001
A fund seeking long-term growth of capital by investing mainly in foreign equity
securities.
This report applies to the Class AARP and Class S shares of the fund.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
14 Glossary of Investment Terms
16 Investment Portfolio
23 Financial Statements
27 Financial Highlights
29 Notes to Financial Statements
38 Report of Independent Accountants
39 Officers and Directors
40 Investment Products and Services
42 Account Management Resources
2
<PAGE>
Scudder International Fund
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Class AARP ticker symbol AINTX fund number 168
Class S ticker symbol SCINX fund number 068
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Date of Inception: o The overseas stock markets lost substantial ground
6/18/53 during the past six months, as slowing global growth,
rising energy prices, and concerns about the health
of Japan's economy conspired to dampen investor
sentiment.
Total Net Assets as
of 2/28/01 --
o Midway through last year, the fund adopted a
positioning that was more in line with that of its
Class AARP: benchmark, the MSCI EAFE + Canada Index. As a result,
$.05 billion the portfolio is now balanced between the growth and
value investment styles.
Class S:
$4 billion
o On a sector basis, the fund is underweight (relative
to the benchmark) in technology and
telecommunications equipment. From a regional
standpoint, it is overweight in Europe and
underweight in Japan, reflecting management's outlook
for the two areas.
3
<PAGE>
Letter from the Fund's President
--------------------------------------------------------------------------------
Dear Shareholders,
The past year has been exceptionally difficult for investors in international
equities. Although overseas stocks are generally expected to provide investors
with a measure of portfolio diversification, problems in the United States --
such as high market volatility and slower economic growth -- spread to all of
the global markets.
Scudder International Fund's Class S shares did not perform well in this
challenging environment. The Class S shares of the fund posted a return of
-16.13% during the six-month period, behind its benchmark but slightly ahead of
the median return of the funds in its Lipper peer group. Given that the fund's
management team has repositioned the portfolio so that it is more closely in
line with its benchmark in terms of both country and sector allocations, the
primary cause for underperformance during the period was stock selection.
It is unavoidable that over an extended length of time, any mutual fund will
suffer from periods in which it underperforms, as Scudder International Fund did
during the past year. At these times, we encourage investors to evaluate the
fund based on its long-term performance record. The fund has outperformed its
unmanaged benchmark by a wide margin and finished in the top quartile of Lipper
international funds over the three-, five-, and ten-year intervals.^1 It is also
ranked 4 stars by Morningstar Inc.(TM)
^1 Scudder International Fund's Class S shares ranked 409, 95, 44, and 13 for
the 1-, 3-, 5-, and 10-year periods as of 2/28/01. There were 700, 516, 312, and
56 funds, respectively, in Lipper's International Funds category. Performance
includes reinvestment and capital gains and is no guarantee of future results.
The median return of the 751 funds in the international category during the
six-month period was -17.22%.
Source: Lipper, Inc. as of 2/28/01.
4
<PAGE>
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These measures include the fund's most recent results, demonstrating that a
person who had invested three, five, or ten years ago would have benefited from
the strength of the fund's long-term performance.^2
Of course, past performance is no guarantee of future results. But we believe
that in an extended period of volatility and falling stock prices, a strong
track record and experienced management team make the fund a compelling option
for investors who want to maintain exposure to the wealth of positive, dynamic
trends that continue to impact the overseas economies.
Thank you for your continued investment in Scudder International Fund. For
current information on the fund or your account, visit us on the Web. There you
will 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 us
toll-free.
Sincerely,
/s/ Linda C. Coughlin
Linda C. Coughlin
President
Scudder International Fund
^2 Scudder International Fund's Class S shares received a 4-star Overall
Morningstar Rating(TM) in the international category, reflecting Morningstar
ratings for the following periods as of 2/28/01: 3-year, 4 stars; 5-year, 4
stars; 10-year, 4 stars. For these periods, there were 1,278, 797, and 158
funds, respectively, in Morningstar's international category. Ratings are for
the Class S shares only; other classes may vary.
Source: Morningstar, Inc. as of 2/28/01. Ratings are subject to change every
month. Past performance is no guarantee of future results. Morningstar ratings
are calculated from the fund's 3-, 5-, and 10-year returns in excess of the
90-day T-bill and a risk factor reflecting fund performance below the 90-day
T-bill. The top 10% of the funds in a rating category receive 5 stars, the next
22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2
stars, and the bottom 10% receive 1 star.
5
<PAGE>
Performance Update
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February 28, 2001
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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 International Fund -- Class S MSCI EAFE & Canada Index*
1991 10000 10000
1992 10140 9305
1993 10160 8898
1994 13721 12292
1995 12433 11745
1996 14940 13753
1997 16772 14328
1998 19730 16543
1999 21068 17249
2000 33204 21855
2001 24880 18102
Yearly periods ended February 28
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Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 2/28/2001 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder International Fund -- Class S
--------------------------------------------------------------------------------
1 year $ 7,493 -25.07% -25.07%
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5 year $ 16,653 66.53% 10.74%
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10 year $ 24,880 148.80% 9.54%
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MSCI EAFE & Canada Index*
--------------------------------------------------------------------------------
1 year $ 8,282 -17.18% -17.18%
--------------------------------------------------------------------------------
5 year $ 13,162 31.62% 5.65%
--------------------------------------------------------------------------------
10 year $ 18,102 81.02% 6.11%
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6
<PAGE>
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--------------------------------------------------------------------------------
Returns and Per Share Information
--------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE FUND TOTAL
RETURN (%) AND INDEX TOTAL RETURN (%)
Yearly periods ended February 28
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 1.40 .20 35.05 -9.39 20.17 12.26 17.63 6.79 57.60 -25.07
------------------------------------------------------------------------------------
Index Total
Return (%) -6.95 -4.38 38.15 -4.45 17.09 4.18 15.46 4.27 26.71 -17.18
------------------------------------------------------------------------------------
Net Asset
Value ($) 35.75 34.10 45.18 38.63 44.80 47.76 50.05 47.96 69.53 45.88
------------------------------------------------------------------------------------
Income
Dividends ($) -- .83 .69 -- .40 1.28 .25 -- .13 .05
------------------------------------------------------------------------------------
Capital Gains
Distributions ($) .40 .86 .09 2.42 1.18 1.19 5.35 5.56 4.82 7.01
------------------------------------------------------------------------------------
</TABLE>
* The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far
East (EAFE) & Canada Index is an unmanaged capitalization-weighted measure of
stock markets in Europe, Australia, the Far East and Canada. Index returns
assume reinvestment of dividends net of withholding tax and, unlike Fund
returns, do not reflect any fees or expenses.
On August 14, 2000, International Shares of the Fund were redesignated as
Class S. In addition, the Fund commenced offering Class AARP. 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.
7
<PAGE>
Portfolio Summary
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February 28, 2001
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Geographical
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 5% Cash Equivalents)
During the past
Europe 76% six months, management
Japan 18% has increased the fund's
Pacific Basin 4% weighting in Europe and
Canada 2% reduced its position
------------------------------------ in Japan.
100%
------------------------------------
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Sectors
--------------------------------------------------------------------------------
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 5% Cash Equivalents) The fund is currently
balanced between growth
stocks and value stocks.
Financial 26%
Manufacturing 13%
Communications 8%
Consumer Staples 8%
Service Industries 8%
Technology 7%
Energy 6%
Health 6%
Utilities 4%
Other 14%
------------------------------------
100%
------------------------------------
8
<PAGE>
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Ten Largest Equity Holdings
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(22% of Portfolio) The fund's top ten
holdings reflect its
focus on well-managed
companies with
1. Aventis SA favorable earnings
Manufacturer of life science products in France outlooks.
2. Reed International plc
Publisher of scientific, professional and business materials in the
United Kingdom
3. Total Fina Elf SA
Explorer of oil and natural gas in France
4. E.On AG
Distributor of oil and chemicals in Germany
5. Bayer AG
Provider of chemical products in Germany
6. Vodafone Group plc
Provider of mobile telecommunication services in the United Kingdom
7. Nestle SA
Producer of food and beverage products in Switzerland
8. Shell Transport & Trading plc
Provider of oil in the United Kingdom
9. Assicurazioni Generali SpA
Provider of insurance and financial services in Italy
10. BP Amoco plc
Provider of oil internationally in the United Kingdom
For more complete details about the Fund's investment portfolio, see page 16. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
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February 28, 2001
In the following interview, portfolio manager Irene Cheng discusses Scudder
International Fund's strategy and the market environment during the six-month
period ended February 28, 2001.
Q: Could you provide details on the challenges facing the
international markets during the past six months?
A: Although foreign stocks are generally expected to provide
investors with a measure of diversification, overseas stocks were
hurt by a similar set of factors that caused the markets to
crumble in the United States: slowing technology sales, rising
energy prices, and fears of what slower growth in the U.S. would
mean for the global economy. Virtually all of the major global
markets posted losses over the period, and currency exchange
rates were generally unfavorable for dollar-based investors. And
as was the case in the U.S., volatility was high and most
technology stocks fell sharply.
Q: The fund currently holds 76% of net assets in Europe. What is
your view on the developments taking place there?
A: Europe's poor stock market performance obscures the important
trends that we believe should support the region's economy in the
long term. Investors are rightly concerned that the weakness in
the U.S. economy will prove contagious. However, the structural
changes that we've discussed in the past continue at an
accelerating pace. For instance, deregulation and restructuring
(see glossary) are sweeping some of the region's most important
industries; labor markets are growing more flexible; and tax code
reform is becoming more widespread as deep cuts in Germany have
forced other countries to compete in kind. We are also encouraged
by the fact that barriers to merger and acquisition activity are
falling, and that more companies are gaining access to financing
(i.e., borrowing money and selling stock) in the capital markets.
So far, these changes have had a significant impact on Europe's
economy, but this has yet to translate into strong relative
performance for the region's markets. The good news is that this
discrepancy raises the possibility of
10
<PAGE>
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stronger stock market performance once investors recognize the
importance of these changes. In light of our positive long-term
outlook, we are taking advantage of weakness in stock prices to
buy shares of companies that we expect to benefit from these
trends.
Q: Sentiment regarding the outlook for Japan continues to worsen.
Are you finding any opportunities there?
A: Faltering economic growth, concerns about the health of the
banking system, and a lack of meaningful reform caused stock
prices -- and the yen -- to suffer substantial declines
throughout the period. While we believe that it will take a long
time to resolve these issues, there are signs that much-needed
structural reform could be on the horizon. The rapidly
deteriorating state of public finances is forcing the government
to acknowledge that its options with regard to additional fiscal
stimulus (i.e., spending) packages is extremely limited.
Meanwhile, we are finding opportunities in well-managed companies
that we believe are poised for strong earnings growth. In many
cases, this potential has arisen from meaningful restructuring
initiatives. We believe that the key for successful investing in
Japan has been -- and will continue to be -- a
research-intensive, "bottom-up" (i.e., company-focused) approach.
Q: How did the fund perform during the period?
A: The fund's Class S shares total return for the six-month
period ended February 28, 2001, was -16.13%. In contrast, its
unmanaged benchmark -- the MSCI EAFE + Canada Index -- returned
-15.40%. The primary detractor from performance was the fund's
position in a number of technology and telecommunications stocks
that suffered as the sharp downturn of the U.S. economy and
global stock markets significantly affected technology spending
plans by major corporations.
Although the fund underperformed during the reporting period --
and throughout the past year -- we remain confident in the
long-term effectiveness of our stock
11
<PAGE>
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selection process. Utilizing our large team of economists and
stock analysts, we integrate broad global themes, country
analysis, and individual company assessment into our investment
process. When assessing individual companies, we look at a wide
range of factors, including their products, earnings, financial
strength, management, and competition. Most important, we look
for companies or industries that are experiencing positive
fundamental changes. We believe that this approach enables us to
find the companies best positioned to capitalize on the favorable
long-term trends we see unfolding in the global economy.
While past performance is no guarantee of future results, this
process has contributed to strong results for the fund over time.
It has outperformed its benchmark over the three-, five-, and
ten-year periods, and has also finished in the top quartile of
international funds over all three intervals, according to
Lipper, Inc. Additionally, the fund is ranked 4 stars by
Morningstar Inc.(TM)
Q: How is the portfolio positioned with respect to growth stocks
versus value stocks?
A: The fund holds roughly an equal balance between growth and
value. We have kept the fund underweighted in the technology
sector, and have increased its exposure to traditional value
areas such as pharmaceuticals, utilities, banks, and consumer
staples. This gave the portfolio a larger weighting in
"defensive" stocks, i.e., those that tend to hold up better in
down markets, and helped support performance when the fund's
remaining weighting in technology continued to decline. We feel
that this neutral approach is warranted given the extreme
volatility of the markets, which makes it difficult to pick
winning industries.
The fund's underweighting in technology is heavily influenced by
our cautious projections for the European telecommunications
equipment market. We expect that increasing competition among
equipment vendors and the weak financial position of telecom
operators -- which are
12
<PAGE>
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the equipment companies' largest customers -- will pressure the
performance of these stocks despite strong expectations for
demand. The fund's current holdings in the tech sector include
selected Japanese companies benefiting from restructuring and the
declining value of the yen. In addition, the portfolio holds a
number of semiconductor equipment vendors such as Tokyo Electron
(Japan) and Advantest (Japan), which we believe to have reached
attractive valuations following recent sharp price declines.
Q: What is your outlook for the international stock markets?
A: We anticipate that the environment for overseas equities will
remain challenging in the months ahead. As the markets wrestle
with the peculiar combination of falling short-term interest
rates and declining corporate earnings, it is likely that the
high volatility we have witnessed in the global markets during
the past year will persist. International markets are under
pressure on a variety of fronts, the most important of which is
the economic slowdown in the United States and its potential
effects on corporate earnings worldwide. In this uncertain
environment, our security selection will remain focused on
companies and industries that are undergoing positive change, and
that we believe will be able to perform well regardless of the
direction of the global economy.
13
<PAGE>
Glossary of Investment Terms
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Bottom-up An investment style that focuses on the use of research
Investing Style to assess the performance of individual companies before
considering the impact of economic trends. This
approach, which is the opposite of "top-down" investing,
assumes that the most significant determinant of
performance is individual stock selection, rather than
industry or country allocation.
Defensive Stocks and bonds that are more conservative than
Securities average, and tend to perform better than the overall
market when that market is weak. Often, non-cyclical
stocks are used to establish a defensive position, since
they tend not to be as severely affected during economic
slowdowns.
Deregulation The process of reducing government regulation in order
to create freer markets and allow business to operate
more efficiently.
Growth Stock Stock of a company that has displayed above-average
earnings growth and is expected to continue to increase
profits faster than the overall market. Stocks of such
companies usually trade at higher valuations and
experience more price volatility than the market as a
whole. Distinct from value stock.
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.
14
<PAGE>
Value Stock A company whose stock price does not fully reflect its
intrinsic value, as indicated by price/earnings ratio,
price/book value ratio, dividend yield, or some other
valuation measure, relative to its industry or the
market overall. Value stocks tend to display less price
volatility and may carry higher dividend yields.
Distinct from growth stock.
Weighting Refers to the allocation of assets -- usually in terms
(over/under) of sectors, industries, or countries -- within a
portfolio relative to the portfolio's benchmark index or
investment universe.
(Sources: Zurich Scudder Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
15
<PAGE>
Investment Portfolio as of February 28, 2001
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<TABLE>
<CAPTION>
Principal
Amount (c) Value ($)
----------------------------------------------------------------------------------------------------
<S> <C> <C>
----------------------------------------------------------------------------------------------------
Repurchase Agreements 3.5%
----------------------------------------------------------------------------------------------------
Salomon Smith Barney, 5.45%, to be repurchased at -----------
$144,081,809 on 3/1/2001** (Cost $144,060,000) .............. 144,060,000 144,060,000
-----------
----------------------------------------------------------------------------------------------------
Short-Term Investments 2.0%
----------------------------------------------------------------------------------------------------
Colgate Palmolive, 5.44***, 3/30/2001 .......................... 7,000,000 6,969,550
Federal Home Loan Bank Discount Note, 4.95%***,
3/1/2001 .................................................... 40,000,000 40,000,000
Verizon Network Funding, 5.50%***, 4/3/2001 .................... 35,000,000 34,825,146
----------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $81,794,696) 81,794,696
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Convertible Bonds 0.0%
----------------------------------------------------------------------------------------------------
United Kingdom
British Aerospace plc, 7.45%, 11/29/2003 -----------
(Producer of military aircrafts) (Cost $66,099).......... GBP 88,051 101,865
-----------
----------------------------------------------------------------------------------------------------
Participating Loan Notes 0.3%
----------------------------------------------------------------------------------------------------
Luxembourg
Eurotunnel Finance Ltd., Step-up Coupon, 1% to
12/31/2005, 1% plus 26.45% of net available cash flow -----------
to 4/30/2040 (Cost $13,351,889) ............................. 10,250(b) 12,114,351
-----------
Shares
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Common Stocks 94.2%
----------------------------------------------------------------------------------------------------
Australia 1.3%
BHP Ltd. (Producer of petroleum, mineral and
steel products) ............................................. 3,174,894 35,196,824
WMC Ltd. (Developer of mineral products) ....................... 4,561,074 19,163,874
-----------
54,360,698
-----------
Belgium 0.6%
Dexia Strip VVRR* (Provider of municipal lending services) ..... 8,015 74
Interbrew* (Operator of brewing business) ...................... 827,300 23,153,428
Interbrew Strip VVRR* .......................................... 622,500 5,748
-----------
23,159,250
-----------
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
----------------------------------------------------------------------------------------------------
Shares Value ($)
----------------------------------------------------------------------------------------------------
Canada 2.3%
Canadian National Railway Co. (Operator of
railroads) .................................................. 1,557,078 58,541,187
Celestica Inc.* (Provider of services to original equipment
manufacturers) .............................................. 160,300 7,854,700
Nortel Networks Corp. (Provider of telephone, data and
wireless products for the Internet) ......................... 1,559,609 28,837,170
-----------
95,233,057
-----------
Denmark 0.4%
Infineon Technologies AG (Manufacturer and marketer
of semiconductors) .......................................... 506,925 16,897,297
-----------
France 17.5%
AXA SA (Provider of insurance, finance and real
estate services) ............................................ 260,513 33,002,728
Accor SA (Operator of hotels, travel agencies and
restaurants) ................................................ 382,913 15,093,592
Alcatel SA (Manufacturer of transportation,
telecommunication and energy equipment) ..................... 680,018 26,559,941
Aventis SA (Manufacturer of life science products) ............. 1,453,595 117,843,129
BNP Paribas SA (Provider of banking services) .................. 492,086 40,347,841
Bouygues SA (Developer of large public projects,
real estate, off-shore oil platforms and energy
networks) ................................................... 722,438 28,276,804
Christian Dior SA (Manufacturer of luxury products) ............ 633,936 27,610,713
Compagnie Generale d'Industrie et de Participations
(Producer of automobile components, diagnostic
equipment and abrasive pellets) ............................. 212,783 11,886,627
Credit Lyonnais SA (Provider of diversified banking
services) ................................................... 1,010,969 35,313,479
Etablissements Economiques du Casino
Guichard-Perrachon SA (pfd.) (Operator of supermarkets
and convenience stores) ..................................... 450,360 29,919,680
Eurotunnel SA* (Designer, financier and constructor of
Eurotunnel) ................................................. 24,681,677 24,385,113
France Telecom SA (Provider of telecommunication
services) ................................................... 260,981 15,591,199
Pinault-Printemps-Redoute SA (Operator of
department stores) .......................................... 105,558 21,355,014
Rhodia SA (Manufacturer of drug and chemical
products) ................................................... 2,286,734 32,833,137
Schneider Electric SA (Manufacturer of electronic
components and automated manufacturing systems) ............. 660,894 43,326,787
Societe BIC SA (Manufacturer of office supplies) ............... 414,998 17,703,303
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
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Shares Value ($)
----------------------------------------------------------------------------------------------------
Suez Lyonnaise des Eaux SA (Provider of water and
electric utility services) .................................. 383,402 63,722,559
Total Fina Elf SA (Explorer of oil and natural gas) ............ 700,909 99,342,789
Vivendi Universal SA (Provider of various public services) ..... 634,057 40,162,316
-----------
724,276,751
-----------
Germany 14.8%
Allianz AG (Provider of multi-line insurance services) ......... 129,515 42,991,767
BASF AG (Producer of chemical products) ........................ 326,364 14,705,791
Bayer AG (Producer of chemical products) ....................... 1,855,373 90,626,088
Bayerische Hypo-und Vereinsbank AG (Provider of
banking services) ........................................... 820,505 50,760,088
Celanese AG (Manufacturer and distributor of
industrial chemicals) ....................................... 95,341 1,721,047
Commerzbank AG (Provider of banking services) .................. 578,818 15,338,760
Deutsche Bank AG (Registered) (Provider of financial
services) ................................................... 590,238 49,049,661
Deutsche Post AG* (Registered) (Provider of mail
delivery) ................................................... 1,044,266 22,379,615
Deutsche Telekom AG (Registered) (Provider of
telecommunication services) ................................. 652,944 15,916,449
Dresdner Bank AG (Provider of banking services) ................ 992,518 41,056,577
E.On AG (Distributor of oil and chemicals) ..................... 1,823,850 93,464,875
Ergo Versicherungs Gruppe AG (Provider of insurance
services) ................................................... 214,903 32,641,846
Heidelberger Druckmaschinen AG (Manufacturer of
commercial printing presses) ................................ 119,282 7,599,593
KarstadtQuelle AG (Operator of department stores) .............. 82,469 2,908,844
Metro AG (Operator of building, clothing, electronic
and food stores) ............................................ 597,400 28,821,584
Muenchener Rueckversicherungs-Gesellschaft AG
(Registered) (Provider of financial and insurance
services) ................................................... 111,094 36,128,197
Preussag AG (Provider of a diverse array of services) .......... 375,452 14,282,952
ProSieben Sat.1 Media AG (pfd.) (Producer of television
programming and operator of Internet Web sites) ............. 338,830 9,072,901
SAP AG -- VORZUG (pfd.) (Manufacturer of computer
software) ................................................... 119,983 18,944,457
Siemens AG (Developer of electrical products) .................. 206,210 24,028,984
-----------
612,440,076
-----------
Hong Kong 1.1%
China Mobile (Hong Kong) Ltd.* (Provider of cellular
telecommunication services) ................................. 3,846,000 21,005,346
Hutchison Whampoa Ltd. (Provider of investment services) ....... 1,690,300 20,045,481
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
----------------------------------------------------------------------------------------------------
Shares Value ($)
----------------------------------------------------------------------------------------------------
MTR Corp., Ltd.* (Provider of public transport services) ....... 2,438,000 4,485,352
-----------
45,536,179
-----------
Italy 6.0%
Alleanza Assicurazioni SpA (Provider of life
insurance services) ......................................... 1,440,400 21,705,490
Assicurazioni Generali SpA (Provider of insurance and
financial services) ......................................... 2,012,200 70,323,967
Banca Intesa SpA (Provider of banking services) ................ 11,668,959 49,131,869
Holding di Partecipazioni Industriali SpA (Operator of a
diverse holding company) .................................... 2,530,450 9,112,314
Mediobanca SpA (Provider of banking services) .................. 5,445,400 60,436,678
Riunione Adriatica di Sicurta SpA (Provider of insurance
services) ................................................... 2,772,450 37,861,536
-----------
248,571,854
-----------
Japan 16.9%
Advantest Corp. (Producer of measuring instruments
and semiconductor testing devices) .......................... 135,200 15,478,720
Chugai Pharmaceutical Co., Ltd. (Producer of
pharmaceuticals) ............................................ 1,956,000 28,054,648
DDI Corp. (Provider of telecommunication services) ............. 2,033 8,652,537
Daiwa Securities Group, Inc. (Provider of brokerage
and other financial services) ............................... 2,489,000 22,690,832
East Japan Railway Co. (Operator of railroad services) ......... 5,672 31,816,888
Matsushita Electric Industrial Co., Ltd. (Manufacturer
of consumer electronic products) ............................ 2,719,000 51,149,047
Mitsubishi Estate Co., Ltd. (Provider of real estate services) . 3,752,000 36,887,640
Mitsui Fudosan Co., Ltd. (Provider of real estate services) .... 4,396,000 42,395,880
Mizuho Holdings, Inc. (Provider of financial services) ......... 7,440 45,597,549
Murata Manufacturing Co., Ltd. (Manufacturer of
ceramic applied electronic computers) ....................... 234,600 19,430,184
NEC Corp. (Manufacturer of telecommunication and
computer equipment) ......................................... 2,111,000 34,302,852
NTT DoCoMo, Inc. (Provider of telecommunication
services and equipment) ..................................... 2,729 47,155,856
Nissan Motor Co., Ltd.* (Manufacturer of motor vehicles) ....... 5,271,000 33,919,612
Nomura Securities Co., Ltd. (Provider of financial services) ... 2,494,000 48,933,180
Rohm Co., Ltd. (Developer of linear ICs and
semiconductors) ............................................. 64,300 10,399,217
Sakura Bank, Ltd. (Provider of banking services) ............... 7,116,000 42,097,549
Sankyo Co., Ltd. (Manufacturer of pharmaceutical
products) ................................................... 1,630,000 33,923,647
Sharp Corp. (Manufacturer of consumer and industrial
electronics) ................................................ 3,517,000 44,785,768
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
----------------------------------------------------------------------------------------------------
Shares Value ($)
----------------------------------------------------------------------------------------------------
Sony Corp. (ADR) (Manufacturer of consumer and
industrial electronic equipment) ............................ 133,400 9,539,434
Sony Corp. ..................................................... 354,500 25,498,170
Sumitomo Electric Industries Ltd. (Manufacturer of
electric wires and cables) .................................. 2,098,000 25,090,994
Toshiba Corp. (Manufacturer of electric machinery) ............. 2,907,000 16,207,737
Yamanouchi Pharmaceutical Co., Ltd. (Manufacturer of
pharmaceutical products) .................................... 738,000 27,577,630
-----------
701,585,571
-----------
Netherlands 6.8%
ABN AMRO Holding NV (Provider of financial services) ........... 1,360,090 30,014,553
Akzo Nobel NV (Producer and marketer of healthcare
products, coatings, chemicals and fibers) ................... 507,110 24,676,248
ASM Lithography Holding NV (Developer, manufacturer
and marketer of photolithography projections
systems) .................................................... 832,500 18,225,612
Elsevier NV (International publisher of scientific,
professional, business, and consumer information
books) ...................................................... 1,013,940 14,342,913
Equant NV* (Provider of international data network
services) ................................................... 646,800 17,856,960
European Aeronautic Defence and Space Co.*
(Manufacturer of airplanes and military equipment) .......... 696,789 14,476,052
Fortis (NL) NV (Provider of banking and insurance
services) ................................................... 506,800 14,712,466
Gucci Group NV (New York Shares) (Designer and
producer of personal luxury accessories and apparel) ........ 406,880 35,752,546
Heineken NV (Producer of beer and soft drinks) ................. 840,700 46,614,431
ING Groep NV (Provider of insurance and financial
services) ................................................... 329,300 22,819,638
Unilever NV (Manufacturer of branded and packaged
consumer goods) ............................................. 497,100 28,159,482
VNU NV (Provider of international publishing services) ......... 467,520 19,900,659
-----------
287,551,560
-----------
Singapore 0.1%
Chartered Semiconductor Manufacturing Ltd. (ADR)*
(Provider of wafer fabrication services to
semiconductor suppliers) .................................... 205,400 6,007,950
-----------
Spain 1.2%
Repsol YPF, SA (Manufacturer of crude oil and natural gas) ..... 405,681 6,929,832
Telefonica SA (Provider of telecommunication services) ......... 2,462,987 42,186,388
-----------
49,116,220
-----------
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
----------------------------------------------------------------------------------------------------
Shares Value ($)
----------------------------------------------------------------------------------------------------
Sweden 0.4%
Telefonaktiebolaget LM Ericsson AB "B" (Producer of
advanced systems and products for wired and mobile
communications) ............................................. 1,850,180 15,461,219
-----------
Switzerland 6.2%
Nestle SA (Registered) (Producer of food and beverage
products) ................................................... 36,641 80,427,182
Roche Holding AG (Manufacturer of pharmaceutical
and chemical products) ...................................... 3,286 28,339,462
STMicroelectronics NV (Manufacturer of semiconductor
integrated circuits) ........................................ 451,288 14,251,029
Swiss Re (Registered) (Provider of life insurance services) .... 10,710 22,507,870
Serono SA "B" (Developer and marketer of biotechnology
products) ................................................... 56,822 46,690,893
UBS AG (Registered) (Provider of banking and asset
management services) ........................................ 405,567 64,610,901
-----------
256,827,337
-----------
Taiwan 0.5%
GigaMedia Ltd.* (Provider of broadband internet access
services and content) ....................................... 382,327 967,765
Hon Hai Precision Industry Co., Ltd. (Manufacturer of
electronic products) ........................................ 120 746
Taiwan Semiconductor Manufacturing Co. (Manufacturer
of integrated circuits) ..................................... 4,303,000 11,971,252
United Microelectronics Corp., Ltd. (Manufacturer of
integrated circuits) ........................................ 5,250,000 8,601,236
-----------
21,540,999
-----------
United Kingdom 18.1%
ARM Holdings plc* (Designer of RISC microprocessors
and related technology) ..................................... 2,270,070 10,176,521
BOC Group plc (Producer of chemical products) .................. 3,019,758 44,716,777
BP Amoco plc (Provider of oil) ................................. 8,443,909 69,967,533
British Airways plc (Provider of passenger and cargo
airline services) ........................................... 4,228,209 24,595,230
British Telecom plc (Provider of telecommunication
services) ................................................... 1,593,988 13,138,879
Cable and Wireless plc (Provider of telecommunication
services) ................................................... 2,975,221 32,268,508
Compass Group plc* (Operator of an international
foodservice group) .......................................... 2,516,600 20,088,692
Diageo plc (Producer and distributor of food products) ......... 2,154,630 21,888,572
EMI Group plc (Producer of music recordings) ................... 4,575,621 32,290,016
GlaxoSmithKline plc (Manufacturer of
pharmaceutical products) .................................... 2,350,402 64,749,364
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
----------------------------------------------------------------------------------------------------
Shares Value ($)
----------------------------------------------------------------------------------------------------
Granada plc (Producer of television programs and
movies) ..................................................... 7,644,298 21,335,032
RMC Group plc (Produces and supplies building and
construction materials) ..................................... 475,531 5,208,378
Reed International plc (Publisher of scientific,
professional and business materials) ........................ 10,841,595 108,805,549
Reuters Group plc (Provider of international news and
information) ................................................ 3,793,230 58,529,120
Rio Tinto plc (Developer of mining products) ................... 2,968,256 54,728,045
Shell Transport & Trading Co. plc (Provider of oil) ............ 9,227,477 76,727,175
Vodafone Group plc (Provider of mobile
telecommunication services) ................................. 32,758,550 88,941,205
-----------
748,154,596
-----------
----------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $3,787,150,672) 3,906,720,614
----------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $4,026,423,356) (a) 4,144,791,526
----------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing.
** Repurchase agreements are fully collateralized by U.S. Treasury or Government
agency securities.
*** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $4,027,205,109. At February 28,
2001, net unrealized appreciation for all securities based on tax cost was
$117,586,417. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$526,550,665 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value of $408,964,248.
(b) Represents number of contracts. Each contract equals a nominal value of EUR
2,931.
(c) Principal amount stated in U.S. dollars unless otherwise noted.
Currency Abbreviation
----------------------------------
EUR Euro
GBP Great Britain Pound
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of February 28, 2001
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $4,026,423,356) .. $ 4,144,791,526
Cash ....................................................... 5,982
Foreign currency, at value (cost $2,521,775) ............... 2,522,166
Receivable for investments sold ............................ 24,881,524
Dividends receivable ....................................... 2,402,961
Interest receivable ........................................ 24,232
Receivable for Fund shares sold ............................ 6,508,729
Foreign taxes recoverable .................................. 4,803,901
---------------
Total assets ............................................... 4,185,941,021
Liabilities
--------------------------------------------------------------------------------
Payable for investments purchased .......................... 33,942,618
Payable for Fund shares redeemed ........................... 24,464,257
Accrued management fee ..................................... 2,336,161
Other accrued expenses and payables ........................ 1,175,249
---------------
Total liabilities .......................................... 61,918,285
---------------
Net assets, at value ....................................... $ 4,124,022,736
---------------
Net Assets
--------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income $ (7,900,195)
Net unrealized appreciation (depreciation) on:
Investments .............................................. 118,368,170
Foreign currency related transactions .................... (145,746)
Accumulated net realized gain (loss) ....................... (127,407,999)
Paid-in capital ............................................ 4,141,108,506
---------------
Net assets, at value ....................................... $ 4,124,022,736
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (continued)
------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value
------------------------------------------------------------------------------------------
Class AARP
Net Asset Value, offering and redemption price per share ($48,333,075 /
1,053,229 shares of capital stock outstanding, $.01 par value, 100,000,000 ----------
shares authorized) ........................................................ $ 45.89
----------
Class S
Net Asset Value, offering and redemption price per share ($4,012,877,718 /
87,469,354 shares of capital stock outstanding, $.01 par value, 200,000,000 ----------
shares authorized) ........................................................ $ 45.88
----------
Class A (formerly Class R)
Net Asset Value, offering and redemption price per share ($45,105,420 / 986,742
shares of capital stock outstanding, $.01 par value, 200,000,000 shares ----------
authorized) ............................................................... $ 45.71
----------
Maximum offering price per share ----------
(100 / 94.25 of $45.71) ................................................... $ 48.50
----------
Class B
Net Asset Value, offering and redemption price (subject to contingent deferred
sales charge) per share ($265,661 / 5,820 shares of capital stock ----------
outstanding, $.01 par value, 200,000,000 shares authorized) ............... $ 45.65
----------
Class C
Net Asset Value, offering and redemption price (subject to contingent deferred
sales charge) per share ($191,737 / 4,202 shares of capital stock ----------
outstanding, $.01 par value, 200,000,000 shares authorized) ............... $ 45.63
----------
Barrett International Shares
Net Asset Value, offering and redemption price per share ($17,248,210 / 374,758
shares of capital stock outstanding, $.01 par value, 100,000,000 shares ----------
authorized) ............................................................... $ 46.02
----------
Class I
Net Asset Value, offering and redemption price per share ($914.5 / 20 shares of ----------
capital stock outstanding, $.01 par value, 100,000,000 shares authorized) $ 45.73
----------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Statement of Operations for the six months ended February 28, 2001
------------------------------------------------------------------------------------------
Investment Income
-----------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $2,845,548) ...................... $ 11,621,804
Interest (net of foreign taxes withheld of $10,977) .......................... 5,799,321
-------------
Total Income ................................................................. 17,421,125
-------------
Expenses:
Management fee ............................................................... 15,040,968
Administrative fee ........................................................... 8,326,028
Adminstrative services fees .................................................. 53,244
Distribution services fees ................................................... 243
Directors' fees and expenses ................................................. 39,475
Other ........................................................................ 435,372
-------------
Total expenses ............................................................... 23,895,330
----------------------------------------------------------------------------------------------
Net investment income (loss) (6,474,205)
----------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
----------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................................. 36,057,296
Foreign currency related transactions (including foreign taxes of ............ (3,513,045)
773,067)
-------------
32,544,251
-------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................................. (807,607,235)
Foreign currency related transactions ........................................ 338,408
-------------
(807,268,827)
----------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (774,724,576)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(781,198,781)
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended February August 31,
Increase (Decrease) in Net Assets 28, 2001 2000
-----------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ...................... $ (6,474,205) $ 11,993,808
Net realized gain (loss) on investment transactions 32,544,251 635,576,729
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (807,268,827) (12,242,341)
Net increase (decrease) in net assets resulting ------------- ------------
from operations ................................ (781,198,781) 635,328,196
------------- ------------
Distributions to shareholders from:
Net investment income:
Class AARP ...................................... (58,132) --
--------------- ---------------
Class S ......................................... (4,154,339) (9,066,651)
--------------- ---------------
Barrett International Shares .................... (35,400) (83,506)
--------------- ---------------
Net realized gains:
Class AARP ...................................... (2,832,588) --
--------------- ---------------
Class S ......................................... (222,804,901) (489,044,063)
--------------- ---------------
Barrett International Shares .................... (1,054,123) (2,802,911)
--------------- ---------------
Class A (formerly Class R) ...................... (2,225,862) (3,204,448)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ......................... 2,800,738,550 4,961,467,887
Net assets acquired in tax-free reorganization .... -- 103,167,614
Reinvestment of distributions ..................... 219,201,169 464,101,472
Cost of shares redeemed ........................... (2,860,749,801) (4,318,525,427)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions.............................. 159,189,918 1,210,211,546
--------------- ---------------
Increase (decrease) in net assets ................. (855,174,208) 1,341,338,163
Net assets at beginning of period ................. 4,979,196,944 3,637,858,781
Net assets at end of period
(including accumulated distributions in excess
of net investment income of $7,900,195 and
undistributed net investment income of --------------- ---------------
$2,821,881, respectively) ...................... $ 4,124,022,736 $ 4,979,196,944
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class AARP
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2001(a) 2000(b)
------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $57.74 $57.26
------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (c) (.05) .01
------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment (9.06) .47
transactions
------------------------------------------------------------------------------------
Total from investment operations (9.11) .48
------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.06) --
------------------------------------------------------------------------------------
Net realized gains on investment transactions (2.68) --
------------------------------------------------------------------------------------
Total distributions (2.74) --
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Net asset value, end of period $45.89 $57.74
------------------------------------------------------------------------------------
Total Return (%) (16.08)** .84**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 48 71
------------------------------------------------------------------------------------
Ratio of expenses (%) 1.03(d)* 1.05*
------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.11)(e)** .30*
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 65* 83
------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended February 28, 2001.
(b) For the period from August 14, 2000 (commencement of sales of Class AARP
shares) to August 31, 2000.
(c) Based on monthly average shares outstanding during the period.
(d) The ratio of operating expenses includes a one-time reduction of certain
costs incurred in connection with the reorganization in fiscal 2000.
The ratio without this reduction was 1.06%
(e) The ratio for the six months ended February 28, 2001 has not been
annualized since the Fund believes it would not be appropriate because
the the Fund's dividend income is not earned ratably throughout the
fiscal year.
* Annualized
** Not annualized
27
<PAGE>
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class S
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
2001(a) 2000(b) 1999(c) 1999(d) 1998(d) 1997(d) 1996(d)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $57.73 $54.82 $50.07 $52.06 $48.07 $45.71 $39.72
------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income (loss) (g) (.07) .16 .20(f) .47(e) .43 .30 .38
------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investment
transactions (9.05) 9.38 7.20 3.10 9.16 4.53 7.19
------------------------------------------------------------------------------------
Total from
investment
operations (9.12) 9.54 7.40 3.57 9.59 4.83 7.57
------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.05) (.13) -- -- (.25) (1.28) (.40)
------------------------------------------------------------------------------------
Net realized gains
on investment
transactions (2.68) (6.50) (2.65) (5.56) (5.35) (1.19) (1.18)
------------------------------------------------------------------------------------
Total distributions (2.73) (6.63) (2.65) (5.56) (5.60) (2.47) (1.58)
------------------------------------------------------------------------------------
Net asset value, end $45.88 $57.73 $54.82 $50.07 $52.06 $48.07 $45.71
of period
------------------------------------------------------------------------------------
Total Return (%) (16.13)** 17.09 15.19** 7.18 21.57 10.74 19.25
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of
period ($ millions) 4,013 4,841 3,610 3,090 2,885 2,583 2,515
------------------------------------------------------------------------------------
Ratio of expenses (%) 1.06* 1.12 1.21* 1.17 1.18 1.15 1.14
------------------------------------------------------------------------------------
Ratio of net
investment income
(loss) (%) (.14)(h)** .25 .93* .92 .83 .64 .86
------------------------------------------------------------------------------------
Portfolio turnover
rate (%) 65* 83 82* 80 56 36 45
------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended February 28, 2001.
(b) For the year ended August 31, 2000.
(c) For the five months ended August 31, 1999. On June 7, 1999, the Fund
changed its fiscal year end from March 31 to August 31.
(d) For the years ended March 31.
(e) Net investment income per share includes non-recurring dividend income
amounting to $.09 per share.
(f) Net investment income per share includes non-recurring dividend income
amounting to $.02 per share.
(g) Based on monthly average shares outstanding during the period.
(h) The ratio for the six months ended February 28, 2001 has not been
annualized since the Fund believes it would not be appropriate because
the the Fund's dividend income is not earned ratably throughout the
fiscal year.
* Annualized ** Not annualized
28
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder International Fund (the "Fund") is a diversified series of Scudder
International Fund, Inc. (the "Corporation") which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company and is organized as a Maryland Corporation.
The Fund offers multiple classes of shares. On December 29, 2000 the Fund
commenced offering additional shares: Class B, Class C and Class I. In addition,
on December 29, 2000, Class R shares were redesignated as Class A. The seven
classes of shares provide investors with different purchase options. Class A
shares are offered to investors subject to an initial sales charge. Class B
shares are offered without an initial sales charge but are subject to higher
ongoing expenses than Class A and a contingent deferred sales charge payable
upon certain redemptions. Class B shares automatically convert to Class A shares
six years after issuance. Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses than Class A and a contingent
deferred sales charge payable upon certain redemptions within one year of
purchase. Class C shares do not convert to another class. Class I shares are
offered to a limited group of investors, are not subject to initial or deferred
sales charges and have lower ongoing expenses than other classes. Barrett
International Shares are offered to a limited group of investors and are not
subject to initial or deferred sales charges. Shares of Class AARP are
especially designed for members of AARP are not subject to initial or deferred
sales charges. Class S are not subject to initial or deferred sales charges.
After December 29, 2000, Class S shares are generally not available to new
investors. Certain detailed information for the Class A, B, C, I and Barrett
International Shares is provided separately and is available upon request.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares, except
that each class bears certain expenses unique to that class. Differences in
class expenses may result in payment of different per share dividends by class.
All shares of the Fund have equal rights with respect to voting subject to
class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which require
29
<PAGE>
--------------------------------------------------------------------------------
the use of management estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Fund, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchase and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That
30
<PAGE>
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.
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 is subject to a 0.20% Taiwan dollar income tax on foreign exchange gain
transactions.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually. Earnings and profits distributed to shareholders on redemption of Fund
shares may be utilized by the Fund, to the extent permissible, as part of the
Fund's dividends-paid deduction on its federal income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to investments
in forward contracts, passive foreign investment companies and foreign
denominated investments. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Divided income is recorded on the ex-dividend date. Certain dividends
31
<PAGE>
--------------------------------------------------------------------------------
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
B. Purchases and Sales of Securities
During the six months ended February 28, 2001, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,414,455,525 and
$1,522,812,959, respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement (the "Management
Agreement") with Zurich Scudder Investments, Inc., formerly Scudder Kemper
Investments, Inc., ("ZSI" or the "Advisor"), the Advisor directs the investments
of the Fund in accordance with its investment objectives, policies and
restrictions. The Advisor 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 Advisor provides certain
administrative services in accordance with the Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of 0.675% on the first $6,000,000,000 of average daily net assets, 0.625% on the
next $1,000,000,000 of such net assets, and 0.60% of such net assets in excess
of $7,000,000,000, computed and accrued daily and payable monthly. Accordingly,
for the six months ended February 28, 2001, the fees pursuant to the Management
Agreement amounted to $15,040,968, which was equivalent to an annualized
effective rate of 0.675% of the Fund's average daily net assets.
Administrative Fee. Under the Administrative Agreement ("Administrative
Agreement"), ZSI provides or pays others to provide substantially all of the
administrative services required by the Fund (other than those provided by ZSI
under its Management Agreement with the Fund, as described above), in exchange
for the payment by each class of the Fund of an administrative services fee (the
"Administrative Fee"). The Administrative Fee under the Administrative Agreement
for Class AARP, Class S, Class A and Barrett International Shares, for the
period September 1, 2000 through February 28, 2001, was equal to an annualized
effective rate of 0.375%, 0.375%, 0.375% and 0.375%, respectively, of average
daily net assets, computed and accrued daily and payable monthly. The
Administrative Fee for Class B, Class C and Class I, for the period December 29,
2000 through February 28, 2001, was
32
<PAGE>
equal to an annualized effective rate of 0.45%, 0.425% and 0.15%, respectively,
of the average daily net assets, computed and accrued daily and payable monthly.
Various third-party service providers, some of which are affiliated with ZSI,
provide certain services to the Fund under the Administrative Agreement. Scudder
Fund Accounting Corporation, a subsidiary of ZSI, computes the net asset value
for the Fund and maintains the accounting records of the Fund. Scudder Service
Corporation, also a subsidiary of ZSI, is the transfer, shareholder service and
dividend-paying agent for the shares of the Fund. Scudder Trust Company, an
affiliate of ZSI, provides subaccounting and recordkeeping services for
shareholders in certain retirement and employee benefit plans. In addition,
other service providers, not affliliated with ZSI provide certain services (i.e.
custody, legal, audit) to the Fund under the Administrative Agreement. ZSI pays
the service providers for the provision of their services to the Fund and pays
other Fund expenses, including insurance, registration, printing, postage and
other costs. Certain expenses of the Fund will not be borne by ZSI under the
Administrative Agreement, such as taxes, brokerage, interest and extraordinary
expense, and the fees and expenses of Independent Directors (including the fees
and expenses of their independent counsel). In return for the services provided,
each Fund will pay ZSI an Administrative Fee. For the six months ended February
28, 2001, the Administrative Fee was as follows:
<TABLE>
<CAPTION>
Unpaid at
Total February 28,
Administrative Fees Aggregated 2001
------------------------------------------------------------------------------------
<S> <C> <C>
Class AARP...................................... $ 109,569 $ 14,196
Class S......................................... 8,121,401 1,193,359
Barrett International Shares.................... 38,947 4,082
Class A......................................... 85,050 12,937
Class B......................................... 79 64
Class C......................................... 63 49
Class I......................................... -- --
------------- -------------
$ 8,355,109 $ 1,224,687
------------- -------------
</TABLE>
In addition, a one-time reduction of certain costs incurred in connection with
the reorganization in fiscal 2000 amounting to $14,986 on Class AARP and $14,095
on Class S is included in Administrative fee on the Statement of Operations.
33
<PAGE>
--------------------------------------------------------------------------------
Distribution Service Agreement. In accordance with Rule 12b-1 under the 1940
Act, Kemper Distributors, Inc. ("KDI"), a subsidiary of the Advisor, receives a
fee of 0.75% of average daily net assets of Classes B and C. Pursuant to the
agreement, KDI enters into related selling group agreements with various firms
at various rates for sales of Class B and C shares. For the period December 29,
2000 (commencement of sales) through February 28, 2001, the Distribution
Services Fees are as follows:
Unpaid at
Total February 28,
Distribution Services Fees Aggregated 2001
--------------------------------------------- --------------- ---------------
Class B................................ $ 132 $ 106
Class C................................ 111 88
--------------- --------------
$ 243 $ 194
--------------- --------------
Administrative Services Fees. Kemper Distributors, Inc. ("KDI"), an affiliate of
the Advisor, provides information and administrative services to Classes A, B
and C shareholders at an annual rate of up to 0.25% of average daily net assets
for the class. KDI in turn has various agreements with financial services firms
that provide these services and pays these fees based on assets of shareholder
accounts the firms service. For the six months ended February 28, 2001, the
Administrative Services Fees were as follows:
Unpaid at
Total February 28,
Administrative Services Fees Aggregated 2001
--------------------------------------------------------------------------------
Class A................................ $ 53,162 $ 18,229
Class B................................ 45 34
Class C................................ 37 28
--------------- ---------------
$ 53,244 $ 18,291
--------------- ---------------
Underwriting Agreement and Contingent Deferred Sales Charge. KDI is the
principal underwriter for Classes A, B and C. Underwriting commissions paid in
connection with the distribution of Class A shares for the six months ended
February 28, 2001 aggregated $2,961, of which none was paid to other firms.
In addition, KDI receives any contingent deferred sales charge (CDSC) from Class
B share redemptions occurring within six years of purchase and Class C share
redemptions occurring within one year of purchase. There is no such charge upon
redemption of any share appreciation or reinvested dividends. Contingent
deferred sales charges are based on declining rates, ranging from 4% to 1% for
Class B and 1% for Class C, of the value of the shares redeemed. For the period
December 29, 2000 (commencement of sales) to February 28, 2001, there were no
CDSC for Class B and Class C.
34
<PAGE>
--------------------------------------------------------------------------------
Directors' Fees and Expenses. The Fund pays each of its Directors not affiliated
with the Advisor an annual retainer plus specified amounts for attended board
and committee meetings. For the six months ended February 28, 2001, Directors'
fees and expenses aggregated $39,475.
Other Related Parties. AARP through its affiliates, monitors and approves the
AARP Investment Program from ZSI. The Advisor has agreed to pay a fee to AARP
and/or its affiliates in return for the use of the AARP trademark and services
relating to investments by AARP members in Class AARP shares of the Fund. This
fee is calculated on a daily basis as a percentage of the combined net assets of
the AARP classes of all funds managed by the Advisor. 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.
These amounts are used for the general purposes of AARP and its members.
D. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $1 billion
revolving credit facility with J.P. Morgan Chase & Co. for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Participants are
charged an annual commitment fee which is allocated, pro rata based upon net
assets, among each of the Participants. Interest is calculated based on the
market rates at the time of the borrowing. The Fund may borrow up to a maximum
of 33 percent of its net assets under the agreement.
E. Acquisition of Assets
On August 11, 2000, the Fund acquired all of the net assets of AARP
International Stock Fund and Scudder International Growth and Income Fund
pursuant to plans of reorganization approved by shareholders of the respective
funds on July 13, 2000. The acquisitions were accomplished by tax-free exchanges
of 1,206,125 shares of the Class AARP shares of the Fund for 3,476,954 shares of
AARP International Stock Fund and 595,597 shares of the Class S shares of the
Fund for 2,671,709 shares of Scudder International Growth and Income Fund
outstanding on August 11, 2000. AARP International Stock Fund's net assets at
that date ($69,063,164), including $322,150 of unrealized appreciation, and
Scudder International Growth and Income Fund's net assets at that date
($34,104,450), including $2,609,047 of unrealized appreciation, were combined
with those of the Fund. The aggregate
35
<PAGE>
nets assets of the Fund immediately before the acquisitions were $4,794,833,129.
The combined net assets of the Fund immediately following the acquisitions were
$4,898,000,743.
F. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 28, 2001 August 31, 2000
------------------------------- -------------------------------
Shares sold Shares Dollars Shares Dollars
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class AARP......... 237,409 $ 12,478,182 35,520*** $ 2,055,944***
Class S............ 53,666,630 2,724,046,858 77,162,962 4,904,586,415
Barrett............ 1,392 79,587 42,572 2,681,859
International
Shares..........
Class A*........... 1,262,333 63,581,217 798,157 52,143,669
Class B**.......... 5,892 280,229 -- --
Class C**.......... 5,634 271,477 -- --
Class I**.......... 20 1,000 -- --
-------------- ---------------
$2,800,738,550 $4,961,467,887
-------------- ---------------
Shares issued in tax-free reorganizations
--------------------------------------------------------------------------------
Class AARP......... -- $ -- 1,206,125 $ 69,063,164
Class S............ -- -- 595,597 34,104,450
------------- ---------------
$ -- $ 103,167,614
------------- ---------------
Shares issued to shareholders in reinvestment of distributions
--------------------------------------------------------------------------------
Class AARP......... 56,608 $ 2,774,904 -- $ --
Class S............ 4,240,132 213,289,802 7,566,454 458,569,993
Barrett............ 18,524 910,653 38,094 2,329,790
International
Shares..........
Class A*........... 45,561 2,225,810 54,936 3,201,689
------------- ---------------
$ 219,201,169 $ 464,101,472
------------- ---------------
</TABLE>
36
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 28, 2001 August 31, 2000
------------------------------- -------------------------------
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Shares redeemed
--------------------------------------------------------------------------------
Class AARP....... (467,373) $(24,274,184) (15,060)*** $(873,162)***
Class S.......... (54,286,888) (2,779,270,825) (67,322,438) (4,299,849,795)
Barrett (95,389) (4,863,452) (88,451) (5,541,896)
International
Shares........
Class A*......... (1,039,096) (52,268,949) (186,688) (12,260,574)
Class B**........ (72) (3,319)
Class C**........ (1,142) (69,072)
Class I**........ -- --
--------------- ----------------
$(2,860,749,801) $(4,318,525,427)
--------------- ----------------
Net increase (decrease)
--------------------------------------------------------------------------------
Class AARP....... (173,356) $ (9,021,098) 1,226,585*** $70,245,946***
Class S.......... 3,619,874 158,065,835 18,002,575 1,097,411,063
Barrett (72,473) (3,873,212) (7,785) (530,247)
International
Shares........
Class A*......... 268,798 13,538,078 666,405 43,084,784
Class B**........ 5,820 276,910 -- --
Class C**........ 4,202 202,405 -- --
Class I**........ 20 1,000 -- --
------------- --------------
$ 159,189,918 $1,210,211,546
------------- --------------
</TABLE>
* On December 29, 2000, Class R shares were redesignated as Class A.
** For the period from December 29, 2000 (commencement of sales of Class B,
Class C and Class I) to February 28, 2001.
*** For the period from August 14, 2000 (commencement of sales of Class AARP
shares) to August 31, 2000.
37
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and
to the Class AARP and Class S Shareholders of Scudder
International Fund:
In our opinion, the accompanying statement of assets and
liabilities, including the investment portfolio, and the related
statements of operations and of changes in net assets and the
Class AARP and Class S financial highlights present fairly, in
all material respects, the financial position of Scudder
International Fund (the "Fund") at February 28, 2001, the results
of its operations, the changes in its net assets, and the Class
AARP and Class S financial highlights for the periods indicated
therein, in conformity with accounting principles generally
accepted in the United States of America. These financial
statements and the Class AARP and Class S 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 February 28, 2001 by correspondence
with the custodian and brokers, provide a reasonable basis for
our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
April 20, 2001
38
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Linda C. Coughlin*
o President and Director
Henry P. Becton, Jr.
o Director; President, WGBH
Educational Foundation
Dawn-Marie Driscoll
o Director; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics, Bentley
College
Edgar R. Fiedler
o Director; Senior Fellow and
Economic Counsellor, The
Conference Board, Inc.
Keith R. Fox
o Director; General Partner,
The Exeter Group of Funds
Joan E. Spero
o Director; President, The Doris
Duke Charitable Foundation
Jean Gleason Stromberg
o Director; Consultant
Jean C. Tempel
o Director; Managing Director,
First Light Capital, LLC
Steven Zaleznick
o Director; President and
Chief Executive Officer,
AARP Services, Inc.
Thomas V. Bruns*
o Vice President
Irene T. Cheng*
o Vice President
Joyce E. Cornell*
o Vice President
Carol L. Franklin*
o Vice President
William F. Glavin*
o Vice President
Joan E. Gregory*
o Vice President
James E. Masur*
o Vice President
Howard S. Schneider*
o Vice President
Tien-Yu Sieh*
o Vice President
John Millette*
o Vice President and Secretary
Kathryn L. Quirk*
o Vice President and
Assistant Secretary
John R. Hebble*
o Treasurer
Brenda Lyons*
o Assistant Treasurer
Caroline Pearson*
o Assistant Secretary
*Zurich Scudder Investments, Inc.
39
<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 High Yield Opportunity Fund Scudder Gold Fund
Global Income Regional
Scudder Global Bond Fund Scudder Greater Europe Growth Fund
Scudder Emerging Markets Income Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Asset Allocation The Japan Fund, Inc.
Scudder Pathway Conservative Portfolio
Scudder Pathway Moderate Portfolio Industry Sector Funds
Scudder Pathway Growth Portfolio Scudder Health Care Fund
Scudder Technology Innovation 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
40
<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.
41
<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 --
myScudder.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.
42
<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 Scudder Investments
to PO Box 219669
Kansas City, MO
64121-9669
For AARP Investment Program Shareholders:
AARP Investment Program
from Scudder Investments
PO Box 219735
Kansas City, MO
64121-9735
43
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
About the Fund's Advisor
Zurich Scudder Investments, Inc., a leading global investment management firm,
is a member of the Zurich Financial Services Group. Zurich Scudder Investments
is one of the largest and most experienced investment management organizations
in the world, managing more than USD 370 billion in assets for corporate
clients, retirement and pension plans, insurance companies, mutual fund
investors, and individuals worldwide. Headquartered in New York, Zurich Scudder
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.
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is one of
the global leaders in the financial services industry, providing its customers
with products and solutions in the area of financial protection and asset
accumulation.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
AARP Investment Program
from Scudder Investments
PO Box 219735
Kansas City, MO 64121-9735
1-800-253-2277
aarp.scudder.com
Scudder Investments
PO Box 219669
Kansas City, MO 64121-9669
1-800-SCUDDER
myScudder.com
SCUDDER
INVESTMENTS
A member of [LOGO] Zurich Scudder Investments
<PAGE>
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED FEBRUARY 28, 2001
Seeking total return, a combination of capital growth and income, principally
through an internationally diversified portfolio of equity securities.
SCUDDER
INTERNATIONAL FUND
"Investors are rightly concerned that the weakness in the U.S. economy will
prove contagious; however, Europe's structural changes that we've discussed in
the past continue to occur at an accelerating pace."
[SCUDDER INVESTMENTS LOGO]
<PAGE>
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
TERMS TO KNOW
8
LARGEST HOLDINGS
9
PORTFOLIO OF INVESTMENTS
17
FINANCIAL STATEMENTS
20
FINANCIAL HIGHLIGHTS
22
NOTES TO
FINANCIAL STATEMENTS
29
REPORT OF
INDEPENDENT AUDITORS
AT A GLANCE
SCUDDER INTERNATIONAL FUND
TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28,
2001 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
Scudder International Fund Class A -16.2
Scudder International Fund Class B -16.57
Scudder International Fund Class C -16.58
Lipper International Funds Category Average* -16.47
</TABLE>
PERFORMANCE AND ANY RANKINGS/RATINGS THEREOF ARE HISTORICAL AND DO NOT GUARANTEE
FUTURE RESULTS. PERFORMANCE INCLUDES REINVESTMENT OF ALL DISTRIBUTIONS.
INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE WITH CHANGING MARKET CONDITIONS,
SO THAT WHEN REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. WHILE ALL SHARE CLASSES HAVE THE SAME UNDERLYING PORTFOLIO, THEIR
PERFORMANCE WILL DIFFER.
SCUDDER INTERNATIONAL FUND BEGAN OPERATIONS ON 6/18/53 WITH CLASS S SHARES,
WHICH CLOSED TO NEW INVESTORS ON 12/29/00 WHEN CLASS R SHARES WERE REDESIGNATED
AS CLASS A SHARES AND CLASS B AND C SHARES WERE MADE AVAILABLE. RETURNS FOR
CLASS A SHARES FROM CLASS R SHARE INCEPTION OF 8/2/99 TO 12/29/00 REFLECT CLASS
R SHARE PERFORMANCE ADJUSTED FOR THE MAXIMUM SALES CHARGE. ALL RETURNS PRIOR TO
8/2/99 FOR CLASS A SHARES, AND PRIOR TO 12/29/00 FOR CLASS B AND C SHARES,
REFLECT CLASS S SHARE PERFORMANCE DATING BACK TO 5/31/84, ADJUSTED FOR SALES
CHARGES AND HIGHER OPERATING EXPENSES. ANY RANKINGS/RATINGS ARE FOR CLASS S
SHARES; THEY DON'T REFLECT THESE ADJUSTMENTS AND MIGHT HAVE BEEN LOWER IF THEY
HAD.
*SOURCE: LIPPER, INC.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
2/28/01 12/29/00
.........................................................
<S> <C> <C> <C> <C>
SCUDDER INTERNATIONAL FUND
CLASS A $45.71 $50.47
.........................................................
SCUDDER INTERNATIONAL FUND
CLASS B $45.65 $50.14
.........................................................
SCUDDER INTERNATIONAL FUND
CLASS C $45.63 $50.14
.........................................................
</TABLE>
SCUDDER INTERNATIONAL FUND
LIPPER RANKINGS AS OF 2/28/01*
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER INTERNATIONAL FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS S
.........................................................
<S> <C> <C> <C>
1-YEAR #409 of 700 funds
.........................................................
5-YEAR #44 of 312 funds
.........................................................
10-YEAR #13 of 56 funds
.........................................................
</TABLE>
DIVIDEND REVIEW
DURING THE PERIOD, SCUDDER INTERNATIONAL FUND PAID THE FOLLOWING DIVIDENDS PER
SHARE:
<TABLE>
<CAPTION>
CLASS A
................................................
<S> <C> <C> <C>
LONG-TERM CAPITAL GAIN $2.52
................................................
SHORT-TERM CAPITAL GAIN $0.16
................................................
</TABLE>
INVESTMENT IN FOREIGN SECURITIES PRESENTS SPECIAL RISK CONSIDERATIONS INCLUDING
FLUCTUATING CURRENCY EXCHANGE RATES, GOVERNMENT REGULATIONS AND DIFFERENCES IN
LIQUIDITY.
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX(TM)
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc. Placement within the
BOX] Morningstar Equity Style Box(TM) is based on two
variables: relative median market capitalization
and relative price valuations (price-to-book and
price-to-earnings) of the fund's portfolio
holdings. These numbers are drawn from the fund's
portfolio holdings data most recently entered
into Morningstar's database and market conditions
as of February 28, 2001.
</TABLE>
<PAGE>
ECONOMIC OVERVIEW
ZURICH SCUDDER INVESTMENTS, INC., A LEADING GLOBAL INVESTMENT MANAGEMENT FIRM,
IS A MEMBER OF THE ZURICH FINANCIAL SERVICES GROUP. ZURICH SCUDDER INVESTMENTS
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
IN THE WORLD, MANAGING MORE THAN $360 BILLION IN ASSETS FOR CORPORATE CLIENTS,
RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND INVESTORS AND
INDIVIDUALS WORLDWIDE. HEADQUARTERED IN NEW YORK, ZURICH SCUDDER 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. HEADQUARTERED IN ZURICH, SWITZERLAND, ZURICH FINANCIAL
SERVICES GROUP IS ONE OF THE GLOBAL LEADERS IN THE FINANCIAL SERVICES INDUSTRY,
PROVIDING ITS CUSTOMERS WITH PRODUCTS AND SOLUTIONS IN THE AREA OF FINANCIAL
PROTECTION AND ASSET ACCUMULATION.
DEAR SHAREHOLDER:
The investment world never presents us with total clarity. Even so, there are
moments when the uncertainties appear to be greater than usual. This is one of
those moments. The global economy is slowing, investors are unsure of the extent
to which the Federal Reserve Board will cut interest rates and market
leadership -- long resident in growth and technology stocks -- has become less
certain.
One understandable response is to seek shelter in safer investments such as
money market funds. Yet over time, stocks have provided the strongest long-term
returns. As a result, it is precisely at moments such as this when staying calm
and remaining focused on the long-term record of stocks can be of the greatest
value for investors.
Despite an environment of turbulent stock prices, we are not concerned about
the long-term outlook for the economy and markets. Although risks certainly
continue to exist, we feel that the four points enumerated below can help
investors develop the wherewithal to cope with the recent volatility.
INTEREST RATE BACKDROP POSITIVE
Investors who fret about the uncertainty of the economic outlook seem to be
forgetting one key issue: Interest rates are falling. The Fed cut rates by half
a percentage point on March 20, and it is clear that they are prepared to make
additional rate cuts as necessary. Other central banks around the world are
following suit. We believe that these cuts will ultimately have a positive
effect on the economy after the usual time lag. We see important evidence for
this assertion in the bond market, where investment-grade, high-yield, and other
types of non-government bonds have all found buyers since the first Fed rate cut
in January. Additionally, lending has ticked up and consumers have responded to
lower mortgage rates with an avalanche of refinancing applications. Another bit
of evidence comes from the stock market, where basic materials, consumer
cyclicals, and small-cap companies have all perked up.
This is a classic signal that the market sees the potential for a recovery
later in the year. We continue to expect that the next few months will be
difficult for the economy, but also believe that the worst will be over around
mid-year.
INFLATION NOT A CRITICAL LONG-RUN CONCERN
January inflation readings came in above expectations, prompting many analysts
to become concerned that long-dormant inflation is reawakening. We don't believe
this to be the case, however, and the much tamer February inflation statistics
support our view. Long-term forces that contributed to stable prices during the
90s -- such as deregulation, globalization and technology -- are still firmly in
place. In addition, the combination of slowing global growth and excess
production capacity will reduce the ability of companies to raise prices. The
cyclical peaks in inflation have been falling for 20 years, and we expect the
next peak -- which may not occur for another five years -- to be well below the
current peak of 4 percent.
THE TECHNOLOGY REVOLUTION STILL HAS FAR TO RUN
The crash in the Internet sector and the financial difficulties of many
telecommunications companies will not mark the end of the current technological
revolution, but simply its evolution to another phase. Companies that satisfy
customers will prosper, and those that employ new technologies will be more
efficient than ever. This will result in productivity gains and competitive
advantage for the most well-managed firms. It is difficult to predict the exact
beneficiaries of this next phase, but they will exist. We therefore disagree
with those who pronounce the demise of the technology miracle. We maintain our
view that this is a huge revolution that will raise productivity and provide
exciting investment opportunities in many "old economy" companies that stand to
reap the benefits of the innovations.
REFORMS CONTINUE IN EUROPE
Europe has undertaken the reform process somewhat grudgingly, but reforms have
been instituted nonetheless. Privatization has swept major industries,
politicians have chipped away at labor protections (making labor markets more
flexible) and tax code reform has become more
3
<PAGE>
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (3/31/01) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 4.90 5.80 6.30 5.20
Prime rate (2) 8.20 9.50 9.00 7.75
Inflation rate (3)* 3.50 3.40 3.30 1.60
The U.S. dollar (4) 8.80 8.40 0.50 -0.10
Capital goods orders (5)* 2.80 15.20 8.40 5.60
Industrial production (5)* 1.20 5.90 5.90 3.30
Employment growth (6) 0.90 1.90 2.30 2.50
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
*DATA AS OF 2/28/01.
SOURCE: ECONOMICS DEPARTMENT, ZURICH SCUDDER INVESTMENTS, INC.
ECONOMIC OVERVIEW
widespread as deep cuts in Germany have forced other countries to compete.
Mergers occur with greater ease and capital markets have become more open. So
far, these changes have had a significant impact on the region's economy, but
not on the relative returns of European assets. Dollar-based investors have been
further disadvantaged by the poor performance of the euro over the past two
years. However, we believe that as the long-term effects of these changes are
recognized, investors will respond in a positive fashion.
STAY THE COURSE
These positive themes, while important for the market's long-term outlook, do
not mean that stock prices will rebound next week, or even next month. Indeed,
risks are still plentiful: The U.S. dollar is vulnerable due to the large trade
deficit, both consumers and corporations continue to carry high levels of debt,
and instability in Japan is a threat to the entire global economy. However, we
believe that the factors we describe above will, over time, provide a positive
underpinning for diversified portfolios of stocks and bonds. This point is
particularly important for investors who bought stocks or stock funds to help
achieve their long-term goals, but who are now questioning whether to reduce or
even eliminate positions due to the market's fluctuations. Although we expect
that volatility will continue to affect market performance in the weeks and
months ahead, investors who have withstood the market's decline so far may miss
the long-term benefit of these trends if they move out of stocks now. We
therefore believe that the best option for long-term investors is to stay the
course even if the turbulence in the stock market continues.
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF ZURICH SCUDDER
INVESTMENTS, INC. ECONOMICS GROUP AS OF MARCH 16, 2001, AND MAY NOT ACTUALLY
COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS
INTENDED AS AN INVESTMENT RECOMMENDATION.
TO OBTAIN A PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO YOUR FINANCIAL
REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048. THE PROSPECTUS
CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND EXPENSES.
PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE>
PERFORMANCE UPDATE
[CHENG PHOTO]
LEAD PORTFOLIO MANAGER IRENE CHENG JOINED ZURICH SCUDDER INVESTMENTS, INC. IN
1993. PRIOR TO THAT, SHE WORKED IN MERCHANT BANKING AS AN EQUITY ANALYST, AND IN
OPERATIONS, FINANCE AND CORPORATE PLANNING. CHENG RECEIVED A BACHELOR'S DEGREE
SUMMA CUM LAUDE FROM HARVARD/RADCLIFFE COLLEGE, A MASTER'S DEGREE FROM THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY AND AN M.B.A. FROM HARVARD BUSINESS
SCHOOL.
[SLENDEBROEK PHOTO]
A NATIVE OF THE NETHERLANDS, PORTFOLIO MANAGER MARC SLENDEBROEK JOINED ZURICH
SCUDDER INVESTMENTS, INC. IN 1994. HE FOCUSES ON THE EUROPEAN COMPONENT OF THE
PORTFOLIO AND ALSO SERVES AS A PORTFOLIO MANAGER FOR KEMPER NEW EUROPE FUND.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
THE PAST SIX MONTHS CONTINUED TO BE A CHALLENGE FOR INVESTORS IN INTERNATIONAL
EQUITIES. ALTHOUGH FOREIGN STOCKS ARE GENERALLY EXPECTED TO PROVIDE INVESTORS
WITH A MEASURE OF PORTFOLIO DIVERSIFICATION, PROBLEMS IN THE UNITED STATES,
PARTICULARLY HIGH MARKET VOLATILITY AND SLOWER ECONOMIC GROWTH, NEGATIVELY
AFFECTED MARKETS AROUND THE WORLD. IN THE FOLLOWING INTERVIEW, LEAD PORTFOLIO
MANAGER IRENE CHENG AND PORTFOLIO MANAGER MARC SLENDEBROEK DISCUSS SCUDDER
INTERNATIONAL FUND'S STRATEGY IN LIGHT OF THIS MARKET ENVIRONMENT DURING THE
SIX-MONTH PERIOD ENDED FEBRUARY 28, 2001.
Q WILL YOU PROVIDE DETAILS ON THE CHALLENGES FACING INTERNATIONAL MARKETS
OVER THE PAST SIX MONTHS?
A Markets abroad were affected by many of the same factors that have hit us
so hard at home: slowing technology sales, rising energy prices and fears of
what slower growth in the United States could mean for the global economy.
Virtually all of the major global markets posted losses over the period, and
currency exchange rates were generally unfavorable for dollar-based investors.
As was the case in the United States, volatility was high, and most technology
stocks fell sharply.
Q NOTING THAT SCUDDER INTERNATIONAL FUND CURRENTLY HOLDS 76 PERCENT OF NET
ASSETS IN EUROPE, WHAT IS YOUR VIEW ON THE DEVELOPMENTS TAKING PLACE THERE?
A Europe's poor stock market performance obscures the important trends that
should support the region's economy over the long term. Investors are rightly
concerned that the weakness in the U.S. economy will prove contagious; however,
Europe's structural changes continue to occur at an accelerating pace. For
instance, de-regulation and restructuring are sweeping some of the region's most
important industries; labor markets are growing more flexible; and tax-code
reform is becoming more widespread as deep cuts in Germany have forced other
countries to compete in kind. We are also encouraged by the fact that barriers
to merger and acquisition activity are falling and that more companies are
gaining access to financing (i.e., borrowing money and selling stock) in the
capital markets.
So far, these changes have had an important impact on Europe's economy, but
this has yet to translate into strong relative performance for the region's
markets. The good news is that this discrepancy raises the possibility of
stronger European stock market performance once investors recognize the
implications of these changes. In light of our positive long-term outlook, we
are taking advantage of the attractive valuations created by market volatility
to buy shares of companies that we expect to be in a position to benefit from
these trends.
Q GIVEN THAT YOU ARE CURRENTLY UNDERWEIGHT JAPAN, IS YOUR OUTLOOK FOR JAPAN
LESS OPTIMISTIC?
A Faltering economic growth, concerns about the health of the banking system
and a lack of meaningful reform caused stock
5
<PAGE>
PERFORMANCE UPDATE
prices -- and the yen -- to suffer substantial declines throughout the period.
While we believe it will take a long time to resolve these issues, there are
signs that much-needed structural reform is on the horizon. The rapidly
deteriorating state of public finances is forcing the government to acknowledge
that its options with regard to additional fiscal stimulus (spending) packages
are extremely limited. Even within this climate, we are still finding
opportunities in well-managed companies that we believe are poised for strong
earnings growth. In many cases, this potential has resulted from meaningful
restructuring initiatives. We believe that the key for successful investing in
Japan has been -- and will continue to be -- a research-intensive, "bottom-up"
(i.e., company-focused) approach.
Q HOW DID SCUDDER INTERNATIONAL FUND PERFORM DURING THE PERIOD?
A The fund's total return for the six-month period ended February 28, 2001,
was -16.20 percent (A shares unadjusted for sales charges). In contrast, its
unmanaged benchmark -- the MSCI EAFE + Canada Index -- returned -15.40 percent.
One primary detractor from performance was our position in a number of
technology and telecommunications stocks that suffered as the sharp downturn of
the U.S. economy and other global stock markets significantly affected
technology-spending plans by major corporations.
Despite these setbacks, we remain confident in the long-term effectiveness of
our stock selection process. Utilizing our large team of economists and stock
analysts, we integrate broad global themes, country analysis and individual
company assessment into our investment pro-cess. When evaluating individual
companies, we examine a wide range of factors, including their products,
earnings, financial strength, management and competition. Most important, we
look for companies or industries that are experiencing positive fundamental
changes. We believe that this approach enables us to find the companies best
positioned to capitalize on the favorable long-term trends we see unfolding in
the global economy. The success of this approach is evidenced in our historical
performance. While past performance is no guarantee of future results, over
time, this process has contributed to strong results for the fund. It has
outperformed its benchmark over the three-, five-, and 10-year periods and has
also finished in the top quartile of international funds over all three
intervals, according to Lipper, Inc. Additionally, as of the date of this
report, the fund sports an Overall Morningstar Rating(TM) of four stars from
Morningstar, Inc.*
* SOURCE: MORNINGSTAR, INC. THIS RATING REFLECTS RATINGS OF 4 STARS FOR THE 3-,
5-AND 10-YEAR PERIODS ENDING 2/28/01. FOR THESE TIME PERIODS, THERE WERE
1,278,797 AND 158 U.S.-DOMICILED FUNDS, RESPECTIVELY, IN THE INTERNATIONAL
EQUITY ASSET CLASS. RATINGS ARE FOR CLASS S SHARES.
MORNINGSTAR CALCULATES A MORNINGSTAR RATING(TM) METRIC EACH MONTH FROM THE
FUND'S 3-, 5- AND 10-YEAR LOAD-ADJUSTED RETURNS IN EXCESS OF THE 90-DAY U.S.
T-BILL, AND THEN ADJUSTS THIS EXCESS RETURN FOR RISK. EACH FUND IS RATED
EXCLUSIVELY AGAINST U.S.-DOMICILED FUNDS WITHIN ITS ASSET CLASS. THE OVERALL
MORNINGSTAR RATING(TM) FOR A FUND IS DERIVED FROM A WEIGHTED AVERAGE OF ITS
3-, 5- AND 10-YEAR MORNINGSTAR RATING(TM) METRICS. THE TOP 10% OF FUNDS IN AN
ASSET CLASS RECEIVE 5 STARS, AND THE NEXT 22.5% RECEIVE 4 STARS.
Q HOW HAS YOUR PREVIOUSLY REPORTED MOVE TOWARD A GROWTH AND VALUE "BARBELL"
PLAYED OUT?
A At the beginning of 2000, the fund held an overweight position in the
technology sector, which translated into a bias toward growth stocks (at the
expense of value) for the portfolio. Due to more pronounced volatility, we
shifted to a more neutral stance during the third and fourth calendar quarters,
giving the fund more balance between growth and value. We accomplished this by
decreasing our weighting in the technology sector -- where we are now
underweight -- and increasing our exposure to pharmaceuticals, utilities,
financials and consumer staples. This gave the portfolio a larger weighting in
"defensive" stocks that have traditionally held up better in down markets and
helped support performance when the fund's remaining weighting in technology
continued to decline.
The fund's underweighting in technology reflects our cautious projections for
the European telecommunications equipment market. We anticipate that increasing
competition among equipment vendors and the weak financial position of telecom
operators -- which are the equipment companies' largest customers -- will
pressure the performance of these stocks despite strong expectations for demand.
Our remaining holdings in the tech sector include companies that we believe are
of the highest quality, such as Sony (Japan), NTT DoCoMo (Japan) and Alcatel
(France).
6
<PAGE>
PERFORMANCE UPDATE
Q HOW DID THE REPOSITIONING AFFECT THE FUND'S WEIGHTING AMONG REGIONS?
A The shift toward a more balanced portfolio resulted in further cutbacks in
Japan, where weak macroeconomic fundamentals and the continued unwinding of
cross-shareholdings (Japanese stocks owned by other publicly traded Japanese
companies) overshadowed attractive valuations and encouraging developments at
the corporate level. We reduced allocations in Japanese holdings, including
electronic components distributor and manufacturer Murata. While we still
believe Murata is a solid long-term investment based on its strong competitive
position, positive cash flows and earnings momentum, we are concerned about the
market's recent decline in demand and recent reports of larger-than-expected
inventory. The proceeds of such sales were redeployed into Europe, where we
increased positions in such companies as Reed International, the world's leading
publisher and information provider. We're interested in Reed's recent
acquisition of Harcourt's education and scientific journal businesses combined
with their Internet distribution potential. From a regional perspective, we lean
in favor of Europe over Japan based on our views regarding the economic outlook
in both areas.
Q WHAT IS YOUR OUTLOOK FOR THE INTERNATIONAL STOCK MARKETS?
A We anticipate that the environment for overseas equities will remain
challenging in the months ahead. As the markets wrestle with the peculiar
combination of falling short-term interest rates and declining corporate
earnings, it is likely that the high volatility we have witnessed in global
markets during the past year will persist. International markets are under
pressure on a variety of fronts, the most important of which is the economic
slowdown in the United States and its potential effects on corporate earnings
worldwide. In this uncertain environment, our security selection will remain
focused on companies and industries that are undergoing positive change and that
we believe will be able to perform well regardless of the direction of the
global economy.
TERMS TO KNOW
DEFENSIVE SECURITIES Stocks and bonds that are more conservative than average
and that tend to perform better than the overall market when that market is
weak. Often, noncyclical stocks are used to establish a defensive position,
since they tend not to be as severely affected as the rest of the market during
economic slowdowns.
GROWTH STOCK Stock of a company that has displayed above-average earnings
growth and is expected to continue to increase profits faster than the overall
market. Stocks of such companies usually trade at higher valuations and
experience more price volatility than the market as a whole. Distinct from value
stock.
RESTRUCTURING The implementation of major corporate changes aimed at greater
efficiency and adaptation to changing markets. Cost-cutting initiatives, debt
retirement, management realignments and the sale of noncore businesses are all
developments frequently associated with corporate restructuring.
VALUE STOCK A stock whose price does not fully reflect the company's intrinsic
value, as indicated by price-to-earnings ratio, price-to-book-value ratio,
dividend yield or some other valuation measure, relative to its industry or the
market overall. Value stocks tend to display less price volatility and may carry
higher dividend yields than growth stocks.
WEIGHTING (OVER/UNDER) The allocation of assets -- usually in terms of sectors,
industries or countries -- within a portfolio relative to the portfolio's
benchmark index or investment universe.
7
<PAGE>
LARGEST HOLDINGS
SCUDDER INTERNATIONAL FUND'S TOP 10 HOLDINGS*
Following is a list of the top 10 holdings in the fund as of February 28, 2001,
and the percentage of the fund's total portfolio on February 28, 2001.
<TABLE>
<CAPTION>
HOLDINGS ON 2/28/01 COUNTRY PERCENT
--------------------------------------------------------------------------
<S> <C> <C> <C>
1. AVENTIS France 3%
--------------------------------------------------------------------------
2. REED INTERNATIONAL United Kingdom 3%
--------------------------------------------------------------------------
3. TOTAL FINA ELF France 2%
--------------------------------------------------------------------------
4. E.ON Germany 2%
--------------------------------------------------------------------------
5. BAYER Germany 2%
--------------------------------------------------------------------------
6. VODAFONE GROUP United Kingdom 2%
--------------------------------------------------------------------------
7. NESTLE Switzerland 2%
--------------------------------------------------------------------------
8. SHELL TRANSPORT & TRADING United Kingdom 2%
--------------------------------------------------------------------------
9. ASSICURAZIONI GENERALI Italy 2%
--------------------------------------------------------------------------
10. BP AMOCO United Kingdom 2%
--------------------------------------------------------------------------
</TABLE>
*PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
8
<PAGE>
PORTFOLIO OF INVESTMENTS
SCUDDER INTERNATIONAL FUND
Portfolio of Investments as of February 28, 2001
<TABLE>
<CAPTION>
REPURCHASE AGREEMENTS--3.5% PRINCIPAL AMOUNT (C) VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salomon Smith Barney, 5.45%, to be
repurchased at $144,081,809 on
03/01/2001**
(Cost $144,060,000) $144,060,000 $ 144,060,000
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--2.0%
---------------------------------------------------------------------------------------------------------------------------
Colgate Palmolive, 5.44***,
03/30/2001 7,000,000 6,969,550
Federal Home Loan Bank Discount Note,
4.95%***, 03/01/2001 40,000,000 40,000,000
Verizon Network Funding, 5.50%***,
04/03/2001 35,000,000 34,825,146
--------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $81,794,696) 81,794,696
--------------------------------------------------------------------------------
CONVERTIBLE BONDS--0.0%
---------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM
British Aerospace plc, 7.45%,
11/29/2003
(PRODUCER OF MILITARY AIRCRAFTS)
(Cost $66,099) GBP 88,051 101,865
--------------------------------------------------------------------------------
PARTICIPATING LOAN NOTES--0.3%
---------------------------------------------------------------------------------------------------------------------------
LUXEMBOURG
(b) Eurotunnel Finance Ltd., Step-up
Coupon, 1% to 12/31/2005, 1% plus
26.45% of net available cash flow
to 04/30/2040
(Cost $13,351,889) 10,250(b) 12,114,351
--------------------------------------------------------------------------------
COMMON STOCKS--94.2% SHARES
---------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--1.3%
BHP Ltd.
(PRODUCER OF PETROLEUM, MINERAL
AND STEEL PRODUCTS) 3,174,894 35,196,824
WMC Ltd.
(DEVELOPER OF MINERAL PRODUCTS) 4,561,074 19,163,874
--------------------------------------------------------------------------------
54,360,698
---------------------------------------------------------------------------------------------------------------------------
BELGIUM--0.6%
Dexia Strip VVRR*
(PROVIDER OF MUNICIPAL LENDING
SERVICES) 8,015 74
Interbrew*
(OPERATOR OF BREWING BUSINESS) 827,300 23,153,428
Interbrew Strip VVRR* 622,500 5,748
--------------------------------------------------------------------------------
23,159,250
---------------------------------------------------------------------------------------------------------------------------
CANADA--2.3%
Canadian National Railway Co.
(OPERATOR OF RAILROADS) 1,557,078 58,541,187
Celestica Inc.*
(PROVIDER OF SERVICES TO ORIGINAL
EQUIPMENT MANUFACTURERS) 160,300 7,854,700
Nortel Networks Corp.
(PROVIDER OF TELEPHONE, DATA AND
WIRELESS PRODUCTS FOR THE
INTERNET) 1,559,609 28,837,170
--------------------------------------------------------------------------------
95,233,057
</TABLE>
The accompanying notes are an integral part of the financial statements. 9
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DENMARK--0.4%
Infineon Technologies AG
(MANUFACTURER AND MARKETER OF
SEMICONDUCTORS) 506,925 $ 16,897,297
--------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
FRANCE--17.5%
AXA SA
(PROVIDER OF INSURANCE, FINANCE
AND REAL ESTATE SERVICES) 260,513 33,002,728
Accor SA
(OPERATOR OF HOTELS, TRAVEL
AGENCIES AND RESTAURANTS) 382,913 15,093,592
Alcatel SA
(MANUFACTURER OF TRANSPORTATION,
TELECOMMUNICATION AND ENERGY
EQUIPMENT) 680,018 26,559,941
Aventis SA
(MANUFACTURER OF LIFE SCIENCE
PRODUCTS) 1,453,595 117,843,129
BNP Paribas SA
(PROVIDER OF BANKING SERVICES) 492,086 40,347,841
Bouygues SA
(DEVELOPER OF LARGE PUBLIC
PROJECTS, REAL ESTATE, OFF-SHORE
OIL PLATFORMS AND ENERGY
NETWORKS) 722,438 28,276,804
Christian Dior SA
(MANUFACTURER OF LUXURY PRODUCTS) 633,936 27,610,713
Compagnie Generale d'Industrie et de
Participations
(PRODUCER OF AUTOMOBILE
COMPONENTS, DIAGNOSTIC EQUIPMENT
AND ABRASIVE PELLETS) 212,783 11,886,627
Credit Lyonnais SA
(PROVIDER OF DIVERSIFIED BANKING
SERVICES) 1,010,969 35,313,479
Etablissements Economiques du Casino
Guichard-Perrachon SA (pfd.)
(OPERATOR OF SUPERMARKETS AND
CONVENIENCE STORES) 450,360 29,919,680
Eurotunnel SA*
(DESIGNER, FINANCIER AND
CONSTRUCTOR OF EUROTUNNEL) 24,681,677 24,385,113
France Telecom SA
(PROVIDER OF TELECOMMUNICATION
SERVICES) 260,981 15,591,199
Pinault-Printemps-Redoute SA
(OPERATOR OF DEPARTMENT STORES) 105,558 21,355,014
Rhodia SA
(MANUFACTURER OF DRUG AND
CHEMICAL PRODUCTS) 2,286,734 32,833,137
Schneider Electric SA
(MANUFACTURER OF ELECTRONIC
COMPONENTS AND AUTOMATED
MANUFACTURING SYSTEMS) 660,894 43,326,787
Societe BIC SA
(MANUFACTURER OF OFFICE SUPPLIES) 414,998 17,703,303
Suez Lyonnaise des Eaux SA
(PROVIDER OF WATER AND ELECTRIC
UTILITY SERVICES) 383,402 63,722,559
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Fina Elf SA
(EXPLORER OF OIL AND NATURAL GAS) 700,909 $ 99,342,789
Vivendi Universal SA
(PROVIDER OF VARIOUS PUBLIC
SERVICES) 634,057 40,162,316
--------------------------------------------------------------------------------
724,276,751
---------------------------------------------------------------------------------------------------------------------------
GERMANY--14.8%
Allianz AG
(PROVIDER OF MULTI-LINE INSURANCE
SERVICES) 129,515 42,991,767
BASF AG
(PRODUCER OF CHEMICAL PRODUCTS) 326,364 14,705,791
Bayer AG
(PRODUCER OF CHEMICAL PRODUCTS) 1,855,373 90,626,088
Bayerische Hypo-und Vereinsbank AG
(PROVIDER OF BANKING SERVICES) 820,505 50,760,088
Celanese AG
(MANUFACTURER AND DISTRIBUTOR OF
INDUSTRIAL CHEMICALS) 95,341 1,721,047
Commerzbank AG
(PROVIDER OF BANKING SERVICES) 578,818 15,338,760
Deutsche Bank AG
(Registered)
(PROVIDER OF FINANCIAL SERVICES) 590,238 49,049,661
Deutsche Post AG*
(Registered)
(PROVIDER OF MAIL DELIVERY) 1,044,266 22,379,615
Deutsche Telekom AG
(Registered)
(PROVIDER OF TELECOMMUNICATION
SERVICES) 652,944 15,916,449
Dresdner Bank AG
(PROVIDER OF BANKING SERVICES) 992,518 41,056,577
E.On AG
(DISTRIBUTOR OF OIL AND
CHEMICALS) 1,823,850 93,464,875
Ergo Versicherungs Gruppe AG
(PROVIDER OF INSURANCE SERVICES) 214,903 32,641,846
Heidelberger Druckmaschinen AG
(MANUFACTURER OF COMMERCIAL
PRINTING PRESSES) 119,282 7,599,593
KarstadtQuelle AG
(OPERATOR OF DEPARTMENT STORES) 82,469 2,908,844
Metro AG
(OPERATOR OF BUILDING, CLOTHING,
ELECTRONIC AND FOOD STORES) 597,400 28,821,584
Muenchener Rueckversicherungs-
Gesellschaft AG
(Registered)
(PROVIDER OF FINANCIAL AND
INSURANCE SERVICES) 111,094 36,128,197
Preussag AG
(PROVIDER OF A DIVERSE ARRAY OF
SERVICES) 375,452 14,282,952
ProSieben Sat.1 Media AG (pfd.)
(PRODUCER OF TELEVISION
PROGRAMMING AND OPERATOR OF
INTERNET WEB SITES) 338,830 9,072,901
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SAP AG -- VORZUG (Pfd.)
(MANUFACTURER OF COMPUTER
SOFTWARE) 119,983 $ 18,944,457
Siemens AG
(DEVELOPER OF ELECTRICAL
PRODUCTS) 206,210 24,028,984
--------------------------------------------------------------------------------
612,440,076
---------------------------------------------------------------------------------------------------------------------------
HONG KONG--1.1%
China Mobile (Hong Kong) Ltd.*
(PROVIDER OF CELLULAR
TELECOMMUNICATION SERVICES) 3,846,000 21,005,346
Hutchison Whampoa Ltd
(PROVIDER OF INVESTMENT SERVICES) 1,690,300 20,045,481
MTR Corp., Ltd.*
(PROVIDER OF PUBLIC TRANSPORT
SERVICES) 2,438,000 4,485,352
--------------------------------------------------------------------------------
45,536,179
---------------------------------------------------------------------------------------------------------------------------
ITALY--6.0%
Alleanza Assicurazioni SpA
(PROVIDER OF LIFE INSURANCE
SERVICES) 1,440,400 21,705,490
Assicurazioni Generali SpA
(PROVIDER OF INSURANCE AND
FINANCIAL SERVICES) 2,012,200 70,323,967
Banca Intesa SpA
(PROVIDER OF BANKING SERVICES) 11,668,959 49,131,869
Holding di Partecipazioni Industriali
SpA
(OPERATOR OF A DIVERSE HOLDING
COMPANY) 2,530,450 9,112,314
Mediobanca SpA
(PROVIDER OF BANKING SERVICES) 5,445,400 60,436,678
Riunione Adriatica di Sicurta SpA
(PROVIDER OF INSURANCE SERVICES) 2,772,450 37,861,536
--------------------------------------------------------------------------------
248,571,854
---------------------------------------------------------------------------------------------------------------------------
JAPAN--16.9%
Advantest Corp.
(PRODUCER OF MEASURING
INSTRUMENTS AND SEMICONDUCTOR
TESTING DEVICES) 135,200 15,478,720
Chugai Pharmaceutical Co., Ltd.
(PRODUCER OF PHARMACEUTICALS) 1,956,000 28,054,648
DDI Corp.
(PROVIDER OF TELECOMMUNICATION
SERVICES) 2,033 8,652,537
Daiwa Securities Group, Inc.
(PROVIDER OF BROKERAGE AND OTHER
FINANCIAL SERVICES) 2,489,000 22,690,832
East Japan Railway Co.
(OPERATOR OF RAILROAD SERVICES) 5,672 31,816,888
Matsushita Electric Industrial Co.,
Ltd.
(MANUFACTURER OF CONSUMER
ELECTRONIC PRODUCTS) 2,719,000 51,149,047
Mitsubishi Estate Co., Ltd.
(PROVIDER OF REAL ESTATE
SERVICES) 3,752,000 36,887,640
Mitsui Fudosan Co., Ltd.
(PROVIDER OF REAL ESTATE
SERVICES) 4,396,000 42,395,880
Mizuho Holdings, Inc.
(PROVIDER OF FINANCIAL SERVICES) 7,440 45,597,549
Murata Manufacturing Co., Ltd.
(MANUFACTURER OF CERAMIC APPLIED
ELECTRONIC COMPUTERS) 234,600 19,430,184
NEC Corp.
(MANUFACTURER OF
TELECOMMUNICATION AND COMPUTER
EQUIPMENT) 2,111,000 34,302,852
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NTT DoCoMo, Inc.
(PROVIDER OF TELECOMMUNICATION
SERVICES AND EQUIPMENT) 2,729 $ 47,155,856
Nissan Motor Co., Ltd.*
(MANUFACTURER OF MOTOR VEHICLES) 5,271,000 33,919,612
Nomura Securities Co., Ltd.
(PROVIDER OF FINANCIAL SERVICES) 2,494,000 48,933,180
Rohm Co., Ltd.
(DEVELOPER OF LINEAR ICS AND
SEMICONDUCTORS) 64,300 10,399,217
Sakura Bank, Ltd.
(PROVIDER OF BANKING SERVICES) 7,116,000 42,097,549
Sankyo Co., Ltd.
(MANUFACTURER OF PHARMACEUTICAL
PRODUCTS) 1,630,000 33,923,647
Sharp Corp.
(MANUFACTURER OF CONSUMER AND
INDUSTRIAL ELECTRONICS) 3,517,000 44,785,768
Sony Corp. (ADR)
(MANUFACTURER OF CONSUMER AND
INDUSTRIAL ELECTRONIC EQUIPMENT) 133,400 9,539,434
Sony Corp. 354,500 25,498,170
Sumitomo Electric Industries Ltd.
(MANUFACTURER OF ELECTRIC WIRES
AND CABLES) 2,098,000 25,090,994
Toshiba Corp.
(MANUFACTURER OF ELECTRIC
MACHINERY) 2,907,000 16,207,737
Yamanouchi Pharmaceutical Co., Ltd.
(MANUFACTURER OF PHARMACEUTICAL
PRODUCTS) 738,000 27,577,630
--------------------------------------------------------------------------------
701,585,571
---------------------------------------------------------------------------------------------------------------------------
NETHERLANDS--6.8%
ABN AMRO Holding NV
(PROVIDER OF FINANCIAL SERVICES) 1,360,090 30,014,553
Akzo Nobel NV
(PRODUCER AND MARKETER OF
HEALTHCARE PRODUCTS, COATINGS,
CHEMICALS AND FIBERS) 507,110 24,676,248
ASM Lithography Holding NV
(DEVELOPER, MANUFACTURER AND
MARKETER OF PHOTOLITHOGRAPHY
PROJECTIONS SYSTEMS) 832,500 18,225,612
Elsevier NV
(INTERNATIONAL PUBLISHER OF
SCIENTIFIC, PROFESSIONAL,
BUSINESS, AND CONSUMER
INFORMATION BOOKS) 1,013,940 14,342,913
Equant NV*
(PROVIDER OF INTERNATIONAL DATA
NETWORK SERVICES) 646,800 17,856,960
Fortis (NL) NV
(PROVIDER OF BANKING AND
INSURANCE SERVICES) 506,800 14,712,466
Gucci Group NV (New York Shares)
(DESIGNER AND PRODUCER OF
PERSONAL LUXURY ACCESSORIES AND
APPAREL) 406,880 35,752,546
Heineken NV
(PRODUCER OF BEER AND SOFT
DRINKS) 840,700 46,614,431
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ING Groep NV
(PROVIDER OF INSURANCE AND
FINANCIAL SERVICES) 329,300 $ 22,819,638
Unilever NV
(MANUFACTURER OF BRANDED AND
PACKAGED CONSUMER GOODS) 497,100 28,159,482
VNU NV
(PROVIDER OF INTERNATIONAL
PUBLISHING SERVICES) 467,520 19,900,659
--------------------------------------------------------------------------------
287,551,560
---------------------------------------------------------------------------------------------------------------------------
SINGAPORE--0.1%
Chartered Semiconductor Manufacturing
Ltd. (ADR)*
(PROVIDER OF WAFER FABRICATION
SERVICES TO SEMICONDUCTOR
SUPPLIERS) 205,400 6,007,950
--------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
SPAIN--1.2%
Repsol YPF, SA
(MANUFACTURER OF CRUDE OIL AND
NATURAL GAS) 405,681 6,929,832
Telefonica SA
(PROVIDER OF TELECOMMUNICATION
SERVICES) 2,462,987 42,186,388
--------------------------------------------------------------------------------
49,116,220
---------------------------------------------------------------------------------------------------------------------------
SWEDEN--0.4%
Telefonaktiebolaget LM Ericsson AB
"B"
(PRODUCER OF ADVANCED SYSTEMS AND
PRODUCTS FOR WIRED AND MOBILE
COMMUNICATIONS) 1,850,180 15,461,219
--------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
SWITZERLAND--6.2%
Nestle SA
(Registered)
(PRODUCER OF FOOD AND BEVERAGE
PRODUCTS) 36,641 80,427,182
Roche Holding AG
(MANUFACTURER OF PHARMACEUTICAL
AND CHEMICAL PRODUCTS) 3,286 28,339,462
STMicroelectronics NV
(MANUFACTURER OF SEMICONDUCTOR
INTEGRATED CIRCUITS) 451,288 14,251,029
Swiss Re
(Registered)
(PROVIDER OF LIFE INSURANCE
SERVICES) 10,710 22,507,870
Serono SA "B"
(DEVELOPER AND MARKETER OF
BIOTECHNOLOGY PRODUCTS) 56,822 46,690,893
UBS AG
(Registered)
(PROVIDER OF BANKING AND ASSET
MANAGEMENT SERVICES) 405,567 64,610,901
--------------------------------------------------------------------------------
256,827,337
---------------------------------------------------------------------------------------------------------------------------
TAIWAN--0.5%
GigaMedia Ltd.*
(PROVIDER OF BROADBAND INTERNET
ACCESS SERVICES AND CONTENT) 382,327 967,765
Hon Hai Precision Industry Co., Ltd.
(MANUFACTURER OF ELECTRONIC
PRODUCTS) 120 746
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taiwan Semiconductor Manufacturing
Co.
(MANUFACTURER OF INTEGRATED
CIRCUITS) 4,303,000 $ 11,971,252
United Microelectronics Corp., Ltd.
(MANUFACTURER OF INTEGRATED
CIRCUITS) 5,250,000 8,601,236
--------------------------------------------------------------------------------
21,540,999
---------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--18.1%
ARM Holdings plc*
(DESIGNER OF RISC MICROPROCESSORS
AND RELATED TECHNOLOGY) 2,270,070 10,176,521
BOC Group plc
(PRODUCER OF CHEMICAL PRODUCTS) 3,019,758 44,716,777
BP Amoco plc
(PROVIDER OF OIL) 8,443,909 69,967,533
British Airways plc
(PROVIDER OF PASSENGER AND CARGO
AIRLINE SERVICES) 4,228,209 24,595,230
British Telecom plc
(PROVIDER OF TELECOMMUNICATION
SERVICES) 1,593,988 13,138,879
Cable and Wireless plc
(PROVIDER OF TELECOMMUNICATION
SERVICES) 2,975,221 32,268,508
Compass Group plc*
(OPERATOR OF AN INTERNATIONAL
FOODSERVICE GROUP) 2,516,600 20,088,692
Diageo plc
(PRODUCER AND DISTRIBUTOR OF FOOD
PRODUCTS) 2,154,630 21,888,572
EMI Group plc
(PRODUCER OF MUSIC RECORDINGS) 4,575,621 32,290,016
GlaxoSmithKline plc
(MANUFACTURER OF PHARMACEUTICAL
PRODUCTS) 2,350,402 64,749,364
Granada plc
(PRODUCER OF TELEVISION PROGRAMS
AND MOVIES) 7,644,298 21,335,032
RMC Group plc
(PRODUCES AND SUPPLIES BUILDING
AND CONSTRUCTION MATERIALS) 475,531 5,208,378
Reed International plc
(PUBLISHER OF SCIENTIFIC,
PROFESSIONAL AND BUSINESS
MATERIALS) 10,841,595 108,805,549
Reuters Group plc
(PROVIDER OF INTERNATIONAL NEWS
AND INFORMATION) 3,793,230 58,529,120
Rio Tinto plc
(DEVELOPER OF MINING PRODUCTS) 2,968,256 54,728,045
Shell Transport & Trading Co. plc
(PROVIDER OF OIL) 9,227,477 76,727,175
Vodafone Group plc
(PROVIDER OF MOBILE
TELECOMMUNICATION SERVICES) 32,758,550 88,941,205
--------------------------------------------------------------------------------
748,154,596
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,787,150,672) 3,906,720,614
--------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $4,026,423,356)(a) $4,144,791,526
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE>
PORTFOLIO OF INVESTMENTS
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
*** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $4,027,205,109. At February
28, 2001, net unrealized appreciation for all securities based on tax cost
was $117,586,417. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value over
tax cost of $526,550,665 and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over value of
$408,964,248.
(b) Represents number of contracts. Each contract equals a nominal value of
EUR 2,931.
(c) Principal amount stated in U.S. dollars unless otherwise noted.
Currency Abbreviation
EUR Euro
GBP Great Britain Pound
16 The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
As of February 28, 2001
<TABLE>
<S> <C>
ASSETS
------------------------------------------------------------------------------
Investments in securities, at value (cost $4,026,423,356) $4,144,791,526
------------------------------------------------------------------------------
Cash 5,982
------------------------------------------------------------------------------
Foreign currency, at value (cost $2,521,775) 2,522,166
------------------------------------------------------------------------------
Receivable for investments sold 24,881,524
------------------------------------------------------------------------------
Dividends receivable 2,402,961
------------------------------------------------------------------------------
Interest receivable 24,232
------------------------------------------------------------------------------
Receivable for Fund shares sold 6,508,729
------------------------------------------------------------------------------
Foreign taxes recoverable 4,803,901
------------------------------------------------------------------------------
TOTAL ASSETS 4,185,941,021
------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------
Payable for investments purchased 33,942,618
------------------------------------------------------------------------------
Payable for Fund shares redeemed 24,464,257
------------------------------------------------------------------------------
Accrued management fee 2,336,161
------------------------------------------------------------------------------
Other accrued expenses and payables 1,175,249
------------------------------------------------------------------------------
Total liabilities 61,918,285
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $4,124,022,736
------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income $ (7,900,195)
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 118,368,170
------------------------------------------------------------------------------
Foreign currency related transactions (145,746)
------------------------------------------------------------------------------
Accumulated net realized gain (loss) (127,407,999)
------------------------------------------------------------------------------
Paid-in capital 4,141,108,506
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $4,124,022,736
------------------------------------------------------------------------------
NET ASSET VALUE
------------------------------------------------------------------------------
CLASS AARP
Net Asset Value, offering and redemption price per share
($48,333,075 / 1,053,229 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares
authorized) $45.89
------------------------------------------------------------------------------
CLASS S
Net Asset Value, offering and redemption price per share
($4,012,877,718 / 87,469,354 shares of capital stock
outstanding, $.01 par value, 200,000,000 shares
authorized) $45.88
------------------------------------------------------------------------------
CLASS A (FORMERLY CLASS R)
Net Asset Value, offering and redemption price per share
($45,105,420 / 986,742 shares of capital stock
outstanding, $.01 par value, 200,000,000 shares
authorized) $45.71
------------------------------------------------------------------------------
Maximum offering price per share (100 / 94.25 of $45.71) $48.50
------------------------------------------------------------------------------
CLASS B
Net Asset Value, offering and redemption price (subject to
contingent deferred sales charge) per share ($265,661 /
5,820 shares of capital stock outstanding, $.01 par value,
200,000,000 shares authorized) $45.65
------------------------------------------------------------------------------
CLASS C
Net Asset Value, offering and redemption price (subject to
contingent deferred sales charge) per share ($191,737 /
4,202 shares of capital stock outstanding, $.01 par value,
200,000,000 shares authorized) $45.63
------------------------------------------------------------------------------
BARRETT INTERNATIONAL SHARES
Net Asset Value, offering and redemption price per share
($17,248,210 / 374,758 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares
authorized) $46.02
------------------------------------------------------------------------------
CLASS I
Net Asset Value, offering and redemption price per share
($914.5 / 20 shares of capital stock outstanding, $.01 par
value, 100,000,000 shares authorized) $45.73
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the six months ended February 28, 2001
<TABLE>
<S> <C>
INVESTMENT INCOME
---------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $2,845,548) $ 11,621,804
---------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $10,977) 5,799,321
---------------------------------------------------------------------------
Total Income 17,421,125
---------------------------------------------------------------------------
Expenses:
Management fee 15,040,968
---------------------------------------------------------------------------
Administrative fee 8,326,028
---------------------------------------------------------------------------
Administrative services fees 53,244
---------------------------------------------------------------------------
Distribution services fees 243
---------------------------------------------------------------------------
Directors' fees and expenses 39,475
---------------------------------------------------------------------------
Other 435,372
---------------------------------------------------------------------------
Total expenses 23,895,330
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (6,474,205)
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
---------------------------------------------------------------------------
Net realized gain (loss) from:
Investments 36,057,296
---------------------------------------------------------------------------
Foreign currency related transactions (including foreign
taxes of $773,067) (3,513,045)
---------------------------------------------------------------------------
32,544,251
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (807,607,235)
---------------------------------------------------------------------------
Foreign currency related transactions 338,408
---------------------------------------------------------------------------
(807,268,827)
---------------------------------------------------------------------------
Net gain (loss) on investment transactions (774,724,576)
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $(781,198,781)
---------------------------------------------------------------------------
</TABLE>
18 The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
2001 2000
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
-------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ (6,474,205) 11,993,808
-------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 32,544,251 635,576,729
-------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (807,268,827) (12,242,341)
-------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (781,198,781) 635,328,196
-------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income:
Class AARP (58,132) --
-------------------------------------------------------------------------------------------------
Class S (4,154,339) (9,066,651)
-------------------------------------------------------------------------------------------------
Barrett International Shares (35,400) (83,506)
-------------------------------------------------------------------------------------------------
Net realized gains:
Class AARP (2,832,588) --
-------------------------------------------------------------------------------------------------
Class S (222,804,901) (489,044,063)
-------------------------------------------------------------------------------------------------
Barrett International Shares (1,054,123) (2,802,911)
-------------------------------------------------------------------------------------------------
Class A (formerly Class R) (2,225,862) (3,204,448)
-------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 2,800,738,550 4,961,467,887
-------------------------------------------------------------------------------------------------
Net assets acquired in tax-free reorganization -- 103,167,614
-------------------------------------------------------------------------------------------------
Reinvestment of distributions 219,201,169 464,101,472
-------------------------------------------------------------------------------------------------
Cost of shares redeemed (2,860,749,801) (4,318,525,427)
-------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 159,189,918 1,210,211,546
-------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS (855,174,208) 1,341,338,163
-------------------------------------------------------------------------------------------------
Net assets at beginning of period 4,979,196,944 3,637,858,781
-------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including accumulated
distributions in excess of net investment income of
$7,900,195 and undistributed net investment income of
$2,821,881, respectively) $ 4,124,022,736 4,979,196,944
-------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 19
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A(A)
-------------------------------------------
2000(B) 2000(C) 1999(D)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $57.54 54.78 53.33
---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (e) (.16) .06 (.02)
---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions (8.99) 9.20 1.47
---------------------------------------------------------------------------------------------------------
Total from investment operations (9.15) 9.26 1.45
---------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment transactions (2.68) (6.50) --
---------------------------------------------------------------------------------------------------------
Net asset value, end of period $45.71 57.54 54.78
---------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (16.20)(F)** 16.58 2.72**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 45 41 2.8
---------------------------------------------------------------------------------------------------------
Ratio of expenses (%) 1.31* 1.47 1.63*
---------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.27)(g)** .09 (.09)**
---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 65* 83 82*
---------------------------------------------------------------------------------------------------------
</TABLE>
(a) On December 29, 2000, Class R shares were redesignated as Class A.
(b) For the six months ended February 28, 2001.
(c) For the year ended August 31, 2000.
(d) For the period from August 2, 1999 (commencement of sales of Class R Shares)
to August 31, 1999.
(e) Based on monthly average shares outstanding during the period.
(f) Total return does not reflect the effect of sales charges.
(g) The ratio for the six months ended February 28, 2001 has not been annualized
since the Fund believes it would not be appropriate because the Fund's
dividend income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
<TABLE>
<CAPTION>
CLASS B
-------------------
2001(A)
<S> <C>
PER SHARE OPERATING PERFORMANCE
---------------------------------------------------------------------------------
Net asset value, beginning of period $50.14
---------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (b) (.08)
---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions (4.41)
---------------------------------------------------------------------------------
Total from investment operations (4.49)
---------------------------------------------------------------------------------
Net asset value, end of period $45.65
---------------------------------------------------------------------------------
TOTAL RETURN (%) (C) (8.95)**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------
Net assets, end of period ($ millions) .3
---------------------------------------------------------------------------------
Ratio of expenses (%) 2.14*
---------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.20)(d)**
---------------------------------------------------------------------------------
Portfolio turnover rate (%) 65*
---------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 29, 2000 (commencement of sales of Class B) to
February 28, 2001.
(b) Based on monthly average shares outstanding during the period.
(c) Total return does not reflect the effect of sales charges.
(d) The ratio for the six months ended February 28, 2001 has not been annualized
since the Fund believes it would not be appropriate because the Fund's
dividend income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
20
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
-------------------
2001(A)
<S> <C>
PER SHARE OPERATING PERFORMANCE
---------------------------------------------------------------------------------
Net asset value, beginning of period $50.14
---------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (b) (.11)
---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions (4.40)
---------------------------------------------------------------------------------
Total from investment operations (4.51)
---------------------------------------------------------------------------------
Net asset value, end of period $45.63
---------------------------------------------------------------------------------
TOTAL RETURN (%) (C) (8.99)**
Ratios to Average Net Assets and Supplemental Data
---------------------------------------------------------------------------------
Net assets, end of period ($ millions) .2
---------------------------------------------------------------------------------
Ratio of expenses (%) 2.11*
---------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.23)(d)**
---------------------------------------------------------------------------------
Portfolio turnover rate (%) 65*
---------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 29, 2000 (commencement of sales of Class C) to
February 28, 2001.
(b) Based on monthly average shares outstanding during the period.
(c) Total return does not reflect the effect of sales charges.
(d) The ratio for the period ended February 28, 2001 has not been annualized
since the Fund believes it would not be appropriate because the Fund's
dividend income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
<TABLE>
<CAPTION>
CLASS I
-------------------
2001(A)
<S> <C>
PER SHARE OPERATING PERFORMANCE
---------------------------------------------------------------------------------
Net asset value, beginning of period $50.14
---------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (b) (.04)
---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions (4.37)
---------------------------------------------------------------------------------
Total from investment operations (4.41)
---------------------------------------------------------------------------------
Total distributions
---------------------------------------------------------------------------------
Net asset value, end of period $45.73
---------------------------------------------------------------------------------
TOTAL RETURN (%) (8.80)**
Ratios to Average Net Assets and Supplemental Data
---------------------------------------------------------------------------------
Net assets, end of period ($ thousands) .9
---------------------------------------------------------------------------------
Ratio of expenses (%) .84*
---------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.09)(c)**
---------------------------------------------------------------------------------
Portfolio turnover rate (%) 65*
---------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 29, 2000 (commencement of sales of Class I) to
February 28, 2001.
(b) Based on monthly average shares outstanding during the period.
(c) The ratio for the period ended February 28, 2001 has not been annualized
since the Fund believes it would not be appropriate because the Fund's
dividend income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. SIGNIFICANT
ACCOUNTING POLICIES Scudder International Fund (the "Fund") is a
diversified series of Scudder International Fund,
Inc. (the "Corporation") which is registered under
the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment
company and is organized as a Maryland Corporation.
The Fund offers multiple classes of shares. On
December 29, 2000 the Fund commenced offering
additional shares: Class B, Class C and Class I. In
addition, on December 29, 2000, Class R shares were
redesignated as Class A. The seven classes of
shares provide investors with different purchase
options. Class A shares are offered to investors
subject to an initial sales charge. Class B shares
are offered without an initial sales charge but are
subject to higher ongoing expenses than Class A and
a contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses
than Class A and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert to another
class. Class I shares are offered to a limited
group of investors, are not subject to initial or
deferred sales charges and have lower ongoing
expenses than other classes. Barrett International
Shares are offered to a limited group of investors
and are not subject to initial or deferred sales
charges. Shares of Class AARP are especially
designed for members of AARP are not subject to
initial or deferred sales charges. Class S are not
subject to initial or deferred sales charges. After
December 29, 2000, Class S shares are generally not
available to new investors. Certain detailed
information for the Class AARP, Class S and Barrett
International Shares is provided separately and is
available upon request.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares, except that each class bears
certain expenses unique to that class. Differences
in class expenses may result in payment of
different per share dividends by class. All shares
of the Fund have equal rights with respect to
voting subject to class-specific arrangements.
The Fund's financial statements are prepared in
accordance with accounting principles generally
accepted in the United States of America, which
require the use of management estimates. The
policies described below are followed consistently
by the Fund in the preparation of its financial
statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
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
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
price, or if no sale occurred, at the calculated
mean between the most recent bid and asked
quotations on such market. If there are no such bid
and asked quotations, the most recent bid quotation
shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Fund, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Directors.
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
exchange rates at period end. Purchase and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
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 is subject to a 0.20% Taiwan dollar income
tax on foreign exchange gain transactions.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually. Earnings and profits distributed
to shareholders on redemption of Fund shares may be
utilized by the Fund, to the extent permissible, as
part of the Fund's dividends-paid deduction on its
federal income tax return.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax
regulations, which may differ from accounting
principles generally accepted in the United States
of America. These differences primarily relate to
investments in forward contracts, passive foreign
investment companies and foreign denominated
investments. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Divided income is recorded on
the ex-dividend date. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as soon as the Fund is
informed of such dividends. Realized gains and
losses from investment transactions are recorded on
an identified cost basis.
--------------------------------------------------------------------------------
2 PURCHASES AND SALES
OF SECURITIES During the six months ended February 28, 2001,
purchases and sales of investment securities
(excluding short-term investments) aggregated
$1,414,455,525 and $1,522,812,959, respectively.
--------------------------------------------------------------------------------
3 RELATED PARTIES MANAGEMENT AGREEMENT. Under the Investment
Management Agreement (the "Management Agreement")
with Zurich Scudder Investments, Inc., formerly
Scudder Kemper Investments, Inc., ("ZSI" or the
"Advisor"), the Advisor directs the investments of
the Fund in accordance with its investment
objectives, policies and restrictions. The Advisor
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 Advisor provides
certain administrative services in accordance with
the Management Agreement. The management fee
payable under the Management Agreement is equal to
an annual rate of 0.675% on the first
$6,000,000,000 of average daily net assets, 0.625%
on the next $1,000,000,000 of such net assets, and
0.60% of such net assets in excess of
$7,000,000,000, computed and accrued daily and
payable monthly. Accordingly, for the six months
ended February 28, 2001, the fees pursuant to the
Management Agreement amounted to $15,040,968, which
was equivalent to an annualized effective rate of
0.675% of the Fund's average daily net assets.
ADMINISTRATIVE FEE. Under the Administrative
Agreement ("Administrative Agreement"), ZSI
provides or pays others to provide substantially
all of the administrative services required by the
Fund (other than those provided by ZSI under its
Management Agreement with the Fund, as described
above), in exchange for the payment by each class
of the Fund of an administrative services fee (the
"Administrative Fee"). The Administrative Fee under
the Administrative Agreement for Class AARP, Class
S, Class A and Barrett International Shares, for
the period September 1, 2000 through February 28,
2001, was equal to an annualized effective rate of
0.375%, 0.375%, 0.375% and 0.375%, respectively, of
average daily net assets, computed and accrued
daily and payable monthly. The Administrative Fee
for Class B, Class C and Class I, for the period
December 29, 2000 through February 28, 2001, was
equal to an annualized
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
effective rate of 0.45%, 0.425% and 0.15%,
respectively, of the average daily net assets,
computed and accrued daily and payable monthly.
Various third-party service providers, some of
which are affiliated with ZSI, provide certain
services to the Fund under the Administrative
Agreement. Scudder Fund Accounting Corporation, a
subsidiary of ZSI, computes the net asset value for
the Fund and maintains the accounting records of
the Fund. Scudder Service Corporation, also a
subsidiary of ZSI, is the transfer, shareholder
service and dividend-paying agent for the shares of
the Fund. Scudder Trust Company, an affiliate of
ZSI, provides subaccounting and recordkeeping
services for shareholders in certain retirement and
employee benefit plans. In addition, other service
providers, not affiliated with ZSI provide certain
services (i.e. custody, legal, audit) to the Fund
under the Administrative Agreement. ZSI pays the
service providers for the provision of their
services to the Fund and pays other Fund expenses,
including insurance, registration, printing,
postage and other costs. Certain expenses of the
Fund will not be borne by ZSI under the
Administrative Agreement, such as taxes, brokerage,
interest and extraordinary expense, and the fees
and expenses of Independent Directors (including
the fees and expenses of their independent
counsel). In return for the services provided, each
Fund will pay ZSI an Administrative Fee. For the
six months ended February 28, 2001, the
Administrative Fee was as follows:
<TABLE>
<CAPTION>
UNPAID AT
TOTAL FEBRUARY 28,
ADMINISTRATIVE FEES AGGREGATED 2001
----------------------------------------------------------------------------
<S> <C> <C>
Class AARP $ 109,569 $ 14,196
Class S 8,121,401 1,193,359
Barrett International Shares 38,947 4,082
Class A 85,050 12,937
Class B 79 64
Class C 63 49
Class I -- --
---------- ----------
$8,355,109 $1,224,687
========== ==========
</TABLE>
In addition, a one time reduction of certain costs
incurred in connection with the reorganization in
Fiscal 2000 amounting to $14,986 on Class AARP and
$14,095 on Class S is included in Administrative
fee on the Statement of Operations.
DISTRIBUTION SERVICE AGREEMENT. In accordance with
Rule 12b-1 under the 1940 Act, Kemper Distributors,
Inc. ("KDI"), a subsidiary of the Advisor, receives
a fee of 0.75% of average daily net assets of
Classes B and C. Pursuant to the agreement, KDI
enters into related selling group agreements with
various firms at various rates for sales of Class B
and C shares. For the period December 29, 2000
(commencement of sales) through February 28, 2001,
the Distribution Services Fees are as follows:
<TABLE>
<CAPTION>
UNPAID AT
TOTAL FEBRUARY 28,
DISTRIBUTION SERVICES FEES AGGREGATED 2001
----------------------------------------------------------------------------
<S> <C> <C>
Class B $132 $106
Class C 111 88
---- ----
$243 $194
==== ====
</TABLE>
ADMINISTRATIVE SERVICES FEES. Kemper Distributors,
Inc. ("KDI"), an affiliate of the Advisor, provides
information and administrative services to Classes
A, B
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
and C shareholders at an annual rate of up to 0.25%
of average daily net assets for the class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
fees based on assets of shareholder accounts the
firms service. For the six months ended February
28, 2001, the Administrative Services fees were as
follows:
<TABLE>
<CAPTION>
UNPAID AT
TOTAL FEBRUARY 28,
ADMINISTRATIVE SERVICES FEES AGGREGATED 2001
----------------------------------------------------------------------------
<S> <C> <C>
Class A $53,162 $18,229
Class B 45 34
Class C 37 28
------- -------
$53,244 $18,291
======= =======
</TABLE>
UNDERWRITING AGREEMENT AND CONTINGENT DEFERRED
SALES CHARGE. KDI is the principal underwriter for
Classes A, B and C. Underwriting commissions paid
in connection with the distribution of Class A
shares for the six months ended February 28, 2001
aggregated $2,961, of which none was paid to other
firms.
In addition, KDI receives any contingent deferred
sales charge (CDSC) from Class B share redemptions
occurring within six years of purchase and Class C
share redemptions occurring within one year of
purchase. There is no such charge upon redemption
of any share appreciation or reinvested dividends.
Contingent deferred sales charges are based on
declining rates, ranging from 4% to 1% for Class B
and 1% for Class C, of the value of the shares
redeemed. For the period December 29, 2000
(commencement of sales) to February 28, 2001, there
were no CDSC for Class B and Class C.
DIRECTORS' FEES AND EXPENSES. The Fund pays each of
its Directors not affiliated with the Advisor an
annual retainer plus specified amounts for attended
board and committee meetings. For the six months
ended February 28, 2001, Directors' fees and
expenses aggregated $39,475.
OTHER RELATED PARTIES. AARP through its affiliates,
monitors and approves the AARP Investment Program
from ZSI. The Advisor has agreed to pay a fee to
AARP and/or its affiliates in return for the use of
the AARP trademark and services relating to
investments by AARP members in Class AARP shares of
the Fund. This fee is calculated on a daily basis
as a percentage of the combined net assets of the
AARP classes of all funds managed by the Advisor.
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.
These amounts are used for the general purposes of
AARP and its members.
--------------------------------------------------------------------------------
4 LINE OF CREDIT The Fund and several affiliated Funds (the
"Participants") share in a $1 billion revolving
credit facility with J.P. Morgan Chase & Co. 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.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
5 ACQUISITION OF ASSETS On August 11, 2000, the Fund acquired all of the
net assets of AARP International Stock Fund and
Scudder International Growth and Income Fund
pursuant to plans of reorganization approved by
shareholders of the respective funds on July 13,
2000. The acquisitions were accomplished by
tax-free exchanges of 1,206,125 shares of the Class
AARP shares of the Fund for 3,476,954 shares of
AARP International Stock Fund and 595,597 shares of
the Class S shares of the Fund for 2,671,709 shares
of Scudder International Growth and Income Fund
outstanding on August 11, 2000. AARP International
Stock Fund's net assets at that date ($69,063,164),
including $322,150 of unrealized appreciation, and
Scudder International Growth and Income Fund's net
assets at that date ($34,104,450), including
$2,609,047 of unrealized appreciation, were
combined with those of the Fund. The aggregate nets
assets of the Fund immediately before the
acquisitions were $4,794,833,129. The combined net
assets of the Fund immediately following the
acquisitions were $4,898,000,743.
--------------------------------------------------------------------------------
6 SHARE TRANSACTIONS The following table summarizes shares of capital
stock and dollar activity in the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2001 AUGUST 31, 2000
----------------------------- ------------------------------------
SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C> <C>
SHARES SOLD
--------------------------------------------------------------------------------------------
Class AARP 237,409 $ 12,478,182 35,520*** $ 2,055,944***
--------------------------------------------------------------------------------------------
Class S 53,666,630 2,724,046,858 77,162,962 4,904,586,415
--------------------------------------------------------------------------------------------
Barrett
International Shares 1,392 79,587 42,572 2,681,859
--------------------------------------------------------------------------------------------
Class A* 1,262,333 63,581,217 798,157 52,143,669
--------------------------------------------------------------------------------------------
Class B** 5,892 280,229 -- --
--------------------------------------------------------------------------------------------
Class C** 5,634 271,477 -- --
--------------------------------------------------------------------------------------------
Class I** 20 1,000 -- --
--------------------------------------------------------------------------------------------
$ 2,800,738,550 $ 4,961,467,887
--------------------------------------------------------------------------------------------
SHARES ISSUED IN TAX-FREE REORGANIZATIONS
--------------------------------------------------------------------------------------------
Class AARP -- $ -- 1,206,125 $ 69,063,164
--------------------------------------------------------------------------------------------
Class S -- -- 595,597 34,104,450
--------------------------------------------------------------------------------------------
$ -- $ 103,167,614
--------------------------------------------------------------------------------------------
SHARES ISSUED TO SHAREHOLDERS IN REINVESTMENT OF DISTRIBUTIONS
--------------------------------------------------------------------------------------------
Class AARP 56,608 $ 2,774,904 -- $ --
--------------------------------------------------------------------------------------------
Class S 4,240,132 213,289,802 7,566,454 458,569,993
--------------------------------------------------------------------------------------------
Barrett
International Shares 18,524 910,653 38,094 2,329,790
--------------------------------------------------------------------------------------------
Class A* 45,561 2,225,810 54,936 3,201,689
--------------------------------------------------------------------------------------------
$ 219,201,169 $ 464,101,472
--------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2001 AUGUST 31, 2000
----------------------------- ------------------------------------
SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C> <C>
SHARES REDEEMED
--------------------------------------------------------------------------------------------
Class AARP (467,373) $ (24,274,184) (15,060)*** $ (873,162)***
--------------------------------------------------------------------------------------------
Class S (54,286,888) (2,779,270,825) (67,322,438) (4,299,849,795)
--------------------------------------------------------------------------------------------
Barrett
International Shares (95,389) (4,863,452) (88,451) (5,541,896)
--------------------------------------------------------------------------------------------
Class A* (1,039,096) (52,268,949) (186,688) (12,260,574)
--------------------------------------------------------------------------------------------
Class B** (72) (3,319)
--------------------------------------------------------------------------------------------
Class C** (1,142) (69,072)
--------------------------------------------------------------------------------------------
Class I** -- --
--------------------------------------------------------------------------------------------
$(2,860,749,801) $(4,318,525,427)
--------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
--------------------------------------------------------------------------------------------
Class AARP (173,356) $ (9,021,098) 1,226,585*** $ 70,245,946***
--------------------------------------------------------------------------------------------
Class S 3,619,874 158,065,835 18,002,575 1,097,411,063
--------------------------------------------------------------------------------------------
Barrett
International Shares (75,473) (3,873,212) (7,785) (530,247)
--------------------------------------------------------------------------------------------
Class A* 268,798 13,538,078 666,405 43,084,784
--------------------------------------------------------------------------------------------
Class B** 5,820 276,910 -- --
--------------------------------------------------------------------------------------------
Class C** 4,202 202,405 -- --
--------------------------------------------------------------------------------------------
Class I** 20 1,000 -- --
--------------------------------------------------------------------------------------------
$ 159,189,918 $ 1,210,211,546
--------------------------------------------------------------------------------------------
</TABLE>
* On December 29, 2000, Class R shares were
redesignated as Class A.
** For the period from December 29, 2000
(commencement of sales of Class B, Class C and
Class I) to February 28, 2001.
*** For the period from August 14, 2000
(commencement of sales of Class AARP shares) to
August 31, 2000.
28
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS OF SCUDDER INTERNATIONAL FUND,
INC. AND TO THE CLASS A, B, C AND I SHAREHOLDERS OF SCUDDER INTERNATIONAL FUND:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the Class A, B, C and I financial highlights
present fairly, in all material respects, the financial position of Scudder
International Fund (the "Fund") at February 28, 2001, the results of its
operations, the changes in its net assets, and the Class A, B, C and I financial
highlights for the periods indicated therein, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and Class A, B, C and I 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 February 28, 2001 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 20, 2001
29
<PAGE>
NOTES
30
<PAGE>
NOTES
31
<PAGE>
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
HENRY P. BECTON, JR. THOMAS V. BRUNS M. ISABLE SALTZMAN
Trustee Vice President Vice President
LINDA C. COUGHLIN JOYCE CORNELL HOWARD SCHNEIDER
Chairperson, Trustee Vice President Vice President
& President
SUSAN DAHL TIEN-YU SIEH
DAWN-MARIE DRISCOLL Vice President Vice President
Trustee
CAROL L. FRANKLIN JOHN MILLETTE
EDGAR R. FIELDER Vice President Vice President & Secretary
Trustee
WILLIAM F. GLAVIN KATHRYN L. QUIRK
KEITH FOX Vice President Vice President &
Trustee Assistant Secretary
WILLIAM E. HOLZER
JOAN E. SPERO Vice President JOHN R. HEBBLE
Trustee Treasurer
JAMES E. MASUR
JEAN GLEASON STROMBERG Vice President BRENDA LYONS
Trustee Assistant Treasurer
GERALD J. MORAN
JEAN C. TEMPEL Vice President CAROLINE PEARSON
Trustee Assistant Secretary
PAUL ROGERS
STEVEN ZALEZNICK Vice President
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL DECHERT
Ten Post Office Square South
Boston, MA 02909
.............................................................................................
SHAREHOLDER SERVICE AND SCUDDER SERVICE COMPANY
TRANSFER AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
CUSTODIAN BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
.............................................................................................
INDEPENDENT AUDITORS PRICEWATERHOUSECOOPERS LLP
160 Federal Street
Boston, MA 02110
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
[SCUDDER INVESTMENTS LOGO]
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Scudder International Fund prospectus.
SIF - 3 (4/27/01) 11890
</TEXT>
</DOCUMENT>