N-30D 1 sr-int.txt SEMIANNUAL REPORT SCUDDER INTERNATIONAL FUND SCUDDER INVESTMENTS -------------------------------------------------------------------------------- EQUITY/GLOBAL -------------------------------------------------------------------------------- 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. Contents -------------------------------------------------------------------------------- 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 Scudder International Fund -------------------------------------------------------------------------------- Class AARP ticker symbol AINTX fund number 168 Class S ticker symbol SCINX fund number 068 -------------------------------------------------------------------------------- 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 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 -------------------------------------------------------------------------------- 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 Performance Update -------------------------------------------------------------------------------- February 28, 2001 -------------------------------------------------------------------------------- Growth of a $10,000 Investment -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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% -------------------------------------------------------------------------------- 5 year $ 16,653 66.53% 10.74% -------------------------------------------------------------------------------- 10 year $ 24,880 148.80% 9.54% -------------------------------------------------------------------------------- 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% -------------------------------------------------------------------------------- 6 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 ------------------------------------------------------------------------------------ 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 ------------------------------------------------------------------------------------
* 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 Portfolio Summary -------------------------------------------------------------------------------- February 28, 2001 -------------------------------------------------------------------------------- Geographical -------------------------------------------------------------------------------- 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% ------------------------------------ -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Ten Largest Equity Holdings -------------------------------------------------------------------------------- (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 Portfolio Management Discussion -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 Glossary of Investment Terms -------------------------------------------------------------------------------- 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 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 Investment Portfolio as of February 28, 2001 --------------------------------------------------------------------------------
Principal Amount (c) Value ($) ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- 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 $13,351,889) ............................. 10,250(b) 12,114,351 ----------- Shares ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- Common Stocks 94.2% ---------------------------------------------------------------------------------------------------- Australia 1.3% BHP Ltd. (Producer of petroleum, mineral and steel products) ............................................. 3,174,894 35,196,824 WMC Ltd. (Developer of mineral products) ....................... 4,561,074 19,163,874 ----------- 54,360,698 ----------- Belgium 0.6% Dexia Strip VVRR* (Provider of municipal lending services) ..... 8,015 74 Interbrew* (Operator of brewing business) ...................... 827,300 23,153,428 Interbrew Strip VVRR* .......................................... 622,500 5,748 ----------- 23,159,250 ----------- The accompanying notes are an integral part of the financial statements. 16 ---------------------------------------------------------------------------------------------------- Shares Value ($) ---------------------------------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------
* 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 Financial Statements -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Statement of Assets and Liabilities as of February 28, 2001
-------------------------------------------------------------------------------- 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 ---------------
The accompanying notes are an integral part of the financial statements. 23 --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------ Statement of Assets and Liabilities (continued) ------------------------------------------------------------------------------------------ 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 ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ 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) ----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 25 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Statements of Changes in Net Assets --------------------------------------------------------------------------------
Six Months Year Ended Ended February August 31, Increase (Decrease) in Net Assets 28, 2001 2000 ----------------------------------------------------------------------------------------- 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 --------------- ---------------
The accompanying notes are an integral part of the financial statements. 26 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
------------------------------------------------------------------------------------ 2001(a) 2000(b) ------------------------------------------------------------------------------------ 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 ------------------------------------------------------------------------------------
(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 -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements. Class S
---------------------------------------------------------------------------------- 2001(a) 2000(b) 1999(c) 1999(d) 1998(d) 1997(d) 1996(d) ---------------------------------------------------------------------------------- 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 ------------------------------------------------------------------------------------
(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 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 -------------------------------------------------------------------------------- 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 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 -------------------------------------------------------------------------------- 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 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:
Unpaid at Total February 28, Administrative Fees Aggregated 2001 ------------------------------------------------------------------------------------ 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 ------------- -------------
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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 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:
Six Months Ended Year Ended February 28, 2001 August 31, 2000 ------------------------------- ------------------------------- Shares sold Shares Dollars Shares Dollars -------------------------------------------------------------------------------- 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 ------------- ---------------
36 --------------------------------------------------------------------------------
Six Months Ended Year Ended February 28, 2001 August 31, 2000 ------------------------------- ------------------------------- Shares Dollars Shares Dollars 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 ------------- --------------
* 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 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 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 Investment Products and Services -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Scudder Funds -------------------------------------------------------------------------------- Money Market U.S. Growth Scudder U.S. Treasury Money Fund Value Scudder Cash Investment Trust Scudder Large Company Value Fund Scudder Money Market Series -- Scudder Value Fund Prime Reserve Shares Scudder Small Company Value Fund Premium Shares Managed Shares Growth Scudder Tax Free Money Fund Scudder Classic Growth Fund Scudder Capital Growth Fund Tax Free Scudder Large Company Growth Fund Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund Scudder Managed Municipal Bonds Scudder Development Fund Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund Scudder California Tax Free Fund Scudder 21st Century Growth Fund Scudder Massachusetts Tax Free Fund Scudder New York Tax Free Fund Global Equity Worldwide U.S. Income Scudder Global Fund Scudder Short Term Bond Fund Scudder International Fund Scudder GNMA Fund Scudder Global Discovery Fund Scudder Income Fund Scudder Emerging Markets Growth Fund Scudder 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 -------------------------------------------------------------------------------- Retirement Programs and Education Accounts -------------------------------------------------------------------------------- Retirement Programs Education Accounts Traditional IRA Education IRA Roth IRA UGMA/UTMA SEP-IRA IRA for Minors Inherited IRA Keogh Plan 401(k), 403(b) Plans Variable Annuities -------------------------------------------------------------------------------- Closed-End Funds -------------------------------------------------------------------------------- The Argentina Fund, Inc. Montgomery Street Income Securities, Inc. The Brazil Fund, Inc. Scudder Global High Income Fund, Inc. The Korea Fund, Inc. Scudder New Asia Fund, Inc.
Scudder funds are offered by prospectus only. For more complete information on any fund or variable annuity registered in your state, including information about a fund's objectives, strategies, risks, advisory fees, distribution charges, and other expenses, please order a free prospectus. Read the prospectus before investing in any fund to ensure the fund is appropriate for your goals and risk tolerance. There is no assurance that the objective of any fund will be achieved, and fund returns and net asset values fluctuate. Shares are redeemable at current net asset value, which may be more or less than their original cost. A money market mutual fund investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market mutual fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund. The services and products described should not be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. Scudder Investor Services, Inc. 41 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 -------------------------------------------------------------------------------- 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 Notes -------------------------------------------------------------------------------- Notes -------------------------------------------------------------------------------- Notes -------------------------------------------------------------------------------- Notes -------------------------------------------------------------------------------- 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 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] 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] 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
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
AS OF AS OF 2/28/01 12/29/00 ......................................................... 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 .........................................................
SCUDDER INTERNATIONAL FUND LIPPER RANKINGS AS OF 2/28/01* COMPARED WITH ALL OTHER FUNDS IN THE LIPPER INTERNATIONAL FUNDS CATEGORY
CLASS S ......................................................... 1-YEAR #409 of 700 funds ......................................................... 5-YEAR #44 of 312 funds ......................................................... 10-YEAR #13 of 56 funds .........................................................
DIVIDEND REVIEW DURING THE PERIOD, SCUDDER INTERNATIONAL FUND PAID THE FOLLOWING DIVIDENDS PER SHARE:
CLASS A ................................................ LONG-TERM CAPITAL GAIN $2.52 ................................................ SHORT-TERM CAPITAL GAIN $0.16 ................................................
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) [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.
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 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]
NOW (3/31/01) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO ------------- ------------ ---------- ----------- 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
(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 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 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 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 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.
HOLDINGS ON 2/28/01 COUNTRY PERCENT -------------------------------------------------------------------------- 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% --------------------------------------------------------------------------
*PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE. 8 PORTFOLIO OF INVESTMENTS SCUDDER INTERNATIONAL FUND Portfolio of Investments as of February 28, 2001
REPURCHASE AGREEMENTS--3.5% PRINCIPAL AMOUNT (C) VALUE --------------------------------------------------------------------------------------------------------------------------- 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
The accompanying notes are an integral part of the financial statements. 9 PORTFOLIO OF INVESTMENTS
SHARES VALUE --------------------------------------------------------------------------------------------------------------------------- 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
10 The accompanying notes are an integral part of the financial statements. PORTFOLIO OF INVESTMENTS
SHARES VALUE --------------------------------------------------------------------------------------------------------------------------- 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
The accompanying notes are an integral part of the financial statements. 11 PORTFOLIO OF INVESTMENTS
SHARES VALUE --------------------------------------------------------------------------------------------------------------------------- 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
12 The accompanying notes are an integral part of the financial statements. PORTFOLIO OF INVESTMENTS
SHARES VALUE --------------------------------------------------------------------------------------------------------------------------- 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
The accompanying notes are an integral part of the financial statements. 13 PORTFOLIO OF INVESTMENTS
SHARES VALUE --------------------------------------------------------------------------------------------------------------------------- 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
14 The accompanying notes are an integral part of the financial statements. PORTFOLIO OF INVESTMENTS
SHARES VALUE --------------------------------------------------------------------------------------------------------------------------- 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 --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 15 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. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES As of February 28, 2001 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 ------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 17 FINANCIAL STATEMENTS 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 --------------------------------------------------------------------------- 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) ---------------------------------------------------------------------------
18 The accompanying notes are an integral part of the financial statements. FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 2001 2000 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 -------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 19 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 A(A) ------------------------------------------- 2000(B) 2000(C) 1999(D) 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* ---------------------------------------------------------------------------------------------------------
(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
CLASS B ------------------- 2001(A) 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* ---------------------------------------------------------------------------------
(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 FINANCIAL HIGHLIGHTS
CLASS C ------------------- 2001(A) 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* ---------------------------------------------------------------------------------
(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
CLASS I ------------------- 2001(A) 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* ---------------------------------------------------------------------------------
(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 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 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 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 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:
UNPAID AT TOTAL FEBRUARY 28, ADMINISTRATIVE FEES AGGREGATED 2001 ---------------------------------------------------------------------------- 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 ========== ==========
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:
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 25 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:
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. 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 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:
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2001 AUGUST 31, 2000 ----------------------------- ------------------------------------ SHARES DOLLARS SHARES DOLLARS 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 --------------------------------------------------------------------------------------------
27 NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2001 AUGUST 31, 2000 ----------------------------- ------------------------------------ SHARES DOLLARS SHARES DOLLARS 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 --------------------------------------------------------------------------------------------
* 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 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 NOTES 30 NOTES 31 TRUSTEES&OFFICERS 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
............................................................................................. 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
[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