(logo)
SCUDDER
(logo)
FUND, INC.
Annual Report
December 31, 1997
A closed-end investment company seeking long-term capital appreciation through
investment primarily in the equity securities of Asian companies.
<PAGE>
Scudder New Asia Fund, Inc.
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Investment objective and policies
o long-term capital appreciation through investment primarily in the equity
securities of Asian companies
Investment characteristics
o a closed-end investment company investing in a broad spectrum of Asian
companies and industries
o a vehicle for international diversification through participation in Asian
stock markets
General Information
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Executive offices
Scudder New Asia Fund, Inc.
345 Park Avenue
New York, NY 10154
For Fund Information: 1-800-349-4281
Transfer agent, registrar and dividend
reinvestment plan agent
For account information: 1-800-426-5523
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Custodian
Brown Brothers Harriman & Co.
Legal counsel
Dechert Price & Rhoads
Independent Accountants
Coopers & Lybrand L.L.P.
New York Stock Exchange Symbol -- SAF
Contents
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In Brief ..................................3
Letter to Shareholders ....................3
Other Information .........................6
Investment Summary ........................7
Portfolio Summary .........................8
Investment Portfolio.......................9
Financial Statements......................16
Financial Highlights......................19
Notes to Financial Statements.............20
Report of Independent Accountants.........25
Tax Information ..........................26
Dividend Reinvestment and Cash
Purchase Plan..........................27
Stockholder Meeting Results...............29
Directors and Officers ...................31
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This report is sent to the shareholders of Scudder New Asia Fund, Inc. for their
information. It is not a prospectus, circular, or representation intended for
use in the purchase or sale of shares of the Fund or of any securities mentioned
in the report.
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2
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Scudder New Asia Fund, Inc.
In Brief
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o In a difficult and rapidly changing environment, Scudder New Asia Fund
declined less than nearly every Asian market in 1997.
o For the 12-month period ended December 31, 1997, the Fund's New York Stock
Exchange shares declined 18.05%, which compares to the Fund's unmanaged
composite benchmark (75% MSCI All Country Asia Free Index and 25% MSCI Japan
Index) return of negative 36.10%.
o Although Asian economies face a painful restructuring period, we believe the
stock markets should rebound in advance of full economic recovery.
Letter to Shareholders
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Dear Shareholders:
As you are undoubtedly aware, it has been a disastrous year for Asian stock
markets. However, we take some consolation from the fact that the Fund declined
less than the overall Asian market during this difficult period. For the 12
months ended December 31, 1997, the Fund's publicly traded shares declined
18.05% and net asset value shares declined 21.89% while Thailand declined 77%,
Indonesia declined 74%, Malaysia declined 68%, and Korea declined 67% in U.S.
dollar terms. Although the environment has been especially unforgiving, we
believe the Fund's relative performance during this period is significant, and
is consistent with building solid long-term performance in varying market
conditions.
In particular, we think the Fund benefited from its closed-end structure during
Asia's financial crisis. This structure allowed us to focus on investment
opportunitites created by the crisis. In our opinion, the closed-end structure
is appropriate for this portfolio during volatile periods, and should benefit
shareholders in the long term. Furthermore, the closed-end structure allows us
to seek attractive opportunities by maintaining overweight positions in less
liquid and more volatile markets, which may not be appropriate in an open-end
fund.
Portfolio Strategy
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE.
BAR CHART TITLE:
Market Performance
One-year total return through 12/31/97
BAR CHART DATA:
--------------------------------------------
Pakistan 28.11%
Sri Lanka 13.14%
India 11.27%
Taiwan -6.29%
Hong Kong -23.29%
Japan -23.67%
China -32.19%
Singapore -40.46%
Philippines -62.59%
Korea -66.67%
Malaysia -68.13%
Indonesia -73.92%
Thailand -76.75%
Source: Morgan Stanley Capital International indices in U.S. dollars
Throughout the year we continued with our individual stock selection approach
that emphasizes companies with solid fundamentals and attractive valuations. As
the crisis deepened in the second half of 1997, we decreased our exposure to
companies that we believed would be most at risk. We underweighted holdings in
some of the worst performing markets, namely Thailand and South Korea. We also
decreased holdings in Malaysian stocks at mid-year, and trimmed back our
Indonesian position in the fourth quarter, as conditions there deteriorated
3
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faster than expected. Stock picks in Taiwan and Japan, notably in technology and
blue chip companies, performed relatively well. Asustek Computer and ASE Test
both rose nearly 50% from the point of initial purchase. In Japan, blue-chip
favorites such as Nintendo and Sony were up more than 50% in local terms, as was
Minebea, a bearings manufacturer that stands to benefit from restructuring. Our
disappointments included all holdings in Malaysia and property-related companies
in Hong Kong. The Fund remained underweighted in both areas relative to the
respective indices.
Year in Review
What brought about the crisis in Southeast Asia? In a nutshell, greater
integration of Asian economies into the global economy is causing countries in
the region to undergo a wrenching shift away from planned capital allocation
toward something closer to a market-based allocation model. Systems based on
planned capital allocation were popular in Asia because the role model was
Japan, Asia's original economic miracle. This system was put into place in Japan
following World War II, as Japan's leaders sought to mobilize limited capital as
efficiently as possible to raise the country from the rubble of defeat. Market
allocation was seen as too slow and haphazard. Government ministries, through
the medium of the banks, channeled money to the most crucial industries and
projects.
The system worked well at the time. However, when we "fast forward" to the
`nineties, we see that the system, widely copied in Asia, has degenerated into
what we might call "crony capitalism." The line between providing capital to the
most crucial projects and those run by friends and political supporters of the
government grew increasingly fuzzy. No real oversight was ever established
because the government was allocating capital. And, crucially, there was no bond
market to provide discipline. The symptoms of "crony capitalism" in Asia are
well known: ego projects, overcapacity in manufacturing, galloping real estate
markets, and excessive leverage, particularly in foreign currencies.
Unfortunately, when policymakers and their families and friends are the
beneficiaries, only a crisis of this magnitude can force changes.
There had been the sense in Asia that somehow everyone would enjoy the benefits
of global capitalism and at the same time protect themselves from the risks.
This approach seemed to work well for a while, but with greater capital market
integration, global capitalism is even-handed and unforgiving. The currency
crisis of the summer sent the message that there is no place to hide.
Policy Response Provides the Key
Asian policymakers, like someone newly diagnosed with a serious disease, have
been in denial about the seriousness of their situation. In many instances,
responses have been of the "window dressing" variety, rather than tough new
policies involving bank closures, businesses going bust, and private investors
losing money. Recently there have been signs that the danger of this
pseudo-response is finally understood. Indonesia's finance minister spoke of the
need for greater transparency in Asian business dealings, and implicitly
criticized the interference of cronies in the workings of his own economy.
Further, Malaysia's Prime Minister admitted that policy in the region had been
flawed and that the gangrenous parts of the body have to be amputated -- the bad
parts of the economic system must die.
What Would Make Us Bullish?
The picture is not pretty. Quite simply, we need to see, in each country, a
clear change in policy such that inefficiency will no longer be protected.
Concretely this would mean establishing proper monetary and fiscal policy
frameworks, providing for effective banking sector supervision, introducing
deregulation and liberalization measures, and improving corporate and
statistical transparency. On the other hand, a reversal toward re-regulating and
becoming less open to market forces would have a severely negative effect. The
path to economic recovery will take time. The speed with which crucial policy
measures are implemented -- with or without the IMF's (International Monetary
Fund) guidance -- will determine the duration of each country's recovery period.
4
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Each country must find its own way and a positive outcome is by no means
assured.
The main risk is that the medicine proves as painful as the disease. Foreign
direct investment will slow with foreign portfolio inflows reversing. Countries
will have to grow a surplus by slashing imports, letting their currencies sink
and permitting economies to slow sharply. People will suffer and not just the
fat cats; political instability is a real risk in some countries. When we begin
to see these developments, real change from crony capitalism to market
capitalism will occur. Once countries get through this painful transition
period, their economies and stock markets should be poised for vibrant and
sustainable growth.
How do we Manage the Fund Until Then?
"Crisis" written in Chinese includes the characters for 'danger' and
'opportunity.' Our portfolio strategy reflects both concepts. In response to the
danger, we seek to conserve capital by maintaining a defensive cash weighting
and looking for defensive stocks and, in some cases, convertible bonds with good
yields. Our stock selection policy continues to be geared toward sound
fundamentals, as the basis for investment in Asia has shifted from growth to
value. We are looking for "survivor" companies with a solid balance sheet,
healthy cash flow, and non-property asset backing.
In this environment, we think the most attractive companies are those which can
also benefit from the new, lower currency levels. Ideal companies are U.S.
dollar-earners with local currency costs and little or no debt. Already very
competitive, they are even more formidable thanks to currency devaluations. Such
companies include globally cost-competitive producers of commodities such as
paper, synthetic textile fibers, gas and palm oil, as well as non-commodity
electronics producers. In Japan, we are sticking with seasoned multinationals as
well as potential beneficiaries of balance sheet restructurings. We anticipate
that these companies will hold up well throughout the transition period and
beyond. In the months ahead we will put more emphasis on the second half of the
Chinese word for "crisis" -- opportunity. As the environment settles we will
look very selectively for more excellent companies at bargain sale prices.
For now, investing in Asia is only for the brave, but as time goes by and the
developments discussed above unfold, we believe the risks will become fewer and
the opportunities greater. We do not know when the definitive market turnaround
will come, but when it does come, we expect it will be dramatic.
Respectfully,
/s/Nicholas Bratt /s/Daniel Pierce
Nicholas Bratt Daniel Pierce
President Chairman of the Board
Note: Effective December 31, 1997, Mr. Nicholas Bratt resigned from the Board of
Directors of the Fund, although he continues to serve as an officer of the Fund.
The Board wishes to thank Mr. Bratt for his years of service as Fund Director.
5
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Scudder New Asia Fund, Inc.
Other Information
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Investment Manager
The investment manager of Scudder New Asia Fund, Inc. (the "Fund") is Scudder
Kemper Investments, Inc., one of the most experienced investment management and
investment counsel firms in the United States. Established in 1919, the firm
provides investment counsel for individuals, investment companies and
institutions. Scudder has offices throughout the United States and subsidiaries
in London and in Tokyo.
Scudder has been a leader in international investment management for over 40
years. It manages Scudder International Fund, which was initially incorporated
in Canada in 1953 as the first foreign investment company registered with the
U.S. Securities and Exchange Commission. Scudder's investment company clients
include nine other open-end investment companies which invest primarily in
foreign securities.
In addition to the Fund, Scudder also manages the assets of six other
closed-end investment companies which invest in foreign securities: The
Argentina Fund, The Brazil Fund, The Korea Fund, Scudder Global High Income
Fund, Inc., Scudder New Europe Fund and Scudder Spain and Portugal Fund, Inc.
are traded on the New York Stock Exchange.
A Team Approach to Investing
Scudder New Asia Fund, Inc. is managed by a team of Scudder Kemper investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by the Adviser's large
staff of economists, research analysts, traders, and other investment
specialists who work in the Adviser's offices across the United States and
abroad. We believe our team approach benefits Fund investors by bringing
together many disciplines and leveraging its extensive resources.
Co-Lead Portfolio Manager Elizabeth J. Allan assumed responsibility for the
Fund's day-to-day management and investment strategies in February 1994. Ms.
Allan, who has been a member of the Fund's team since its inception in 1987, has
13 years of Pacific Basin research and investment management experience. Theresa
Gusman, who became Co-Lead Portfolio Manager in 1997, helps set the Fund's
general investment strategies. Ms. Gusman, who joined Scudder in 1995 and the
Fund's team in 1996, has 14 years of experience working in the investment
industry. Nicholas Bratt, Portfolio Manager, has been a member of the Fund's
team since 1987 and helps set the Fund's general investment strategies. Mr.
Bratt has over 21 years of experience in worldwide investing, including 20 years
of experience as a portfolio manager, and has been at Scudder since 1976.
Dividend Reinvestment Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan offers you a
convenient way to have your dividends and capital gain distributions reinvested
in shares of the Fund. You may obtain more detailed information by requesting a
copy of the Plan from the Plan Agent. All correspondence (including
notifications) should be directed to: Scudder New Asia Fund Dividend
Reinvestment and Cash Purchase Plan, c/o State Street Bank and Trust Company,
P.O. Box 8200, Boston, MA 02266-8200, (800) 426-5523.
Net Asset Value
The Fund's NAV is published every Monday in The Wall Street Journal under the
heading "Closed End Funds." The Fund's NAV is also published in The New York
Times and Barron's.
As a service to overseas shareholders, the Fund's NAV is listed daily in The
Financial Times ("FT"). For your information the NAV of the Fund and other
Scudder managed closed-end funds can be found in the "FT Managed Funds Service"
section under the heading "other offshore funds" below the Scudder Kemper
Investments, Inc. banner.
6
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SCUDDER NEW ASIA FUND, INC.
INVESTMENT SUMMARY AS OF DECEMBER 31, 1997
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HISTORICAL
INFORMATION TOTAL RETURN (%)
LIFE OF FUND --------------------------------------------
MARKET VALUE NET ASSET VALUE (a)
------------------- --------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------- --------------------
QUARTERLY -18.48 -- -19.37 --
ONE YEAR 18.05 -18.05 -21.89 -21.89
THREE YEAR -28.31 -10.50 -21.48 -7.75
FIVE YEAR 5.55 1.09 18.89 3.52
TEN YEAR* 207.78 11.90 119.62 8.19
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PER SHARE INFORMATION AND RETURNS (A)
YEARLY PERIODS ENDED DECEMBER 31
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) with the exact
data points listed in the table below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
--------------------------------------------------------------------------------
NET ASSET VALUE... $12.04 $16.36 $13.44 $14.94 $14.73 $25.06 $17.44 $15.29 $15.26 $11.28
INCOME DIVIDENDS.. $ .05 $ -- $ .08 $ .08 $ .08 $ .32 $ .23 $ -- $ .02 $ .18
CAPITAL GAINS
DISTRIBUTIONS..... $ -- 1.38 $ 2.11 $ .11 $ .43 $ .08 $ 4.20 $ 1.67 $ .33 $ .39
TOTAL RETURN (%).. 11.78 47.84 -2.77 12.54 1.94 73.32 -11.67 -2.96 2.46 -21.89
</TABLE>
(a) Total investment returns reflect changes in net asset value per share
during each period and assumes that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE FUND.
7
<PAGE>
SCUDDER NEW ASIA FUND, INC.
PORTFOLIO SUMMARY AS OF DECEMBER 31, 1997
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DIVERSIFICATION
Common Stocks 83%
Cash Equivalents 8%
Convertible Bonds 7%
Preferred Stock 1%
Limited Partnership 1%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
Geographical breakdown of the Fund's equity securities
- --------------------------------------------------------
Japan 33%
India 18%
Hong Kong 15%
Taiwan 15%
China 5%
Indonesia 4%
Philippines 3%
Malaysia 3%
United States 2%
Other 2%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
Sector breakdown of the Fund's equity securities
- --------------------------------------------------------
Technology 22%
Financial 16%
Consumer Staples 12%
Manufacturing 11%
Consumer Discretionary 11%
Durables 9%
Service Industries 3%
Media 3%
Construction 3%
Other 10%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
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TEN LARGEST EQUITY HOLDINGS (28% of Portfolio)
1. NINTENDO CO., LTD.
Game equipment manufacturer in Japan
2. SONY CORP.
Consumer electronic products manufacturer in Japan
3. ASUSTEK COMPUTER INC.
Manufacturer of computer mainboards, audio/video cards and network cards
in Taiwan
4. MINEBEA CO., LTD.
Manufacturer of bearings, electronic equipment and machinery parts in
Japan
5. HOUSING DEVELOPMENT FINANCE CORP., LTD,
Housing finance provider to individuals, corporations and developers in
India
6. DELTA ELECTRONICS, INC.
Manufacturer of power supply equipment and monitors in Taiwan
7. UNI-CHARM CO., LTD.
Leading manufacturer of sanitary napkins and paper diapers in Japan
8. INFOSYS TECHNOLOGIES LTD.
Financial and industrial software developer in India
9. ASE TEST LTD.
Provider of testing services to semiconductor manufacturers in Taiwan
10. HERO HONDA MOTORS LTD.
Manufacturer of motorized two wheelers in India
8
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[SCUDDER NEW ASIA FUND, INC. LOGO]
Investment Portfolio as of December 31, 1997
<TABLE>
<CAPTION>
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Principal Market
Amount(c) Value($)
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<S> <C> <C>
REPURCHASE AGREEMENTS -- 8.2%
United States 8,349,000 Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 12/31/97 at 6.5% to be repurchased at $8,352,015
on 1/2/98, collateralized by a $6,551,000 U.S. Treasury
Bond, 8.125%, 8/15/21 (Cost $8,349,000) ................... 8,349,000
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CONVERTIBLE BONDS -- 7.3%
CHINA 1.7% 1,995,000 Qingling Motors Co., 3.5%, 1/22/02 (Producer of Isuzu
light duty and pickup trucks and minibuses) ............... 1,775,550
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INDONESIA 2.7% 833,000 APP Global Finance Ltd., 2%, 7/25/00 (Pulp and paper
producer) ................................................. 699,720
9,816,000 Asia Pulp & Paper Company Ltd., Zero Coupon, 11/18/12
(Pulp and paper producer) ................................. 1,987,736
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2,687,456
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JAPAN 2.9% JPY 149,000,000 Minebea Co., Ltd., 0.65%, 3/31/05 (Leading manufacturer
of miniature bearings) .................................... 1,637,802
JPY 189,000,000 Softbank Corp., Zero Coupon, 3/31/00 (Computer software
wholesaler) ............................................... 1,346,381
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2,984,183
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TOTAL CONVERTIBLE BONDS (Cost $8,237,126) ................... 7,447,189
---------
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LIMITED PARTNERSHIP -- 0.6%
Units
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JAPAN 1 JAFCO #6 Investment Enterprise Partnership (Venture
capital company)(Cost $773,606)(b) ........................ 614,720
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PREFERRED STOCKS--- 1.0%
Shares
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PHILIPPINES 23,100 Philippine Long Distance Telephone Co.
(Telecommunications services) (Cost $1,147,386) .......... 1,059,713
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</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Investment Portfolio
<TABLE>
<CAPTION>
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Market
Shares Value($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 82.9%
CHINA 2.8% 760,000 Guangdong Kelon Electric Holdings, Ltd. (Refrigerator
manufacturer) ............................................. 784,617
2,411,000 Jiangsu Expressway Co., Ltd.* (Builder and manager of the
Shanghai-Nanjing expressway) .............................. 497,819
2,044,000 Shenzhen Expressway Co.* (Highway developer) ................ 395,664
600,000 Shenzhen Fangda Co., Ltd. "B" (Manufacturer of metal
curtains and walls for shop fronts) ....................... 689,121
2,157,000 Zhejiang Expressway Co., Ltd.* (Road construction and
management) ............................................... 437,023
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2,804,244
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HONG KONG 14.0% 209,000 China Light & Power Co., Ltd. (Electric utility) ............ 1,159,763
131,000 Citic Pacific Ltd. (Diversified holding company) ............ 522,377
1,320,000 Cosco Pacific Ltd. (Investment holding company) ............. 1,073,171
317,000 Great Eagle Holdings Ltd. (Property development) ............ 443,857
63,400 Great Eagle Holdings Warrants* .............................. 8,182
269,000 Guoco Group Ltd. (Investment holding company) ............... 659,569
53,860 HSBC Holdings Ltd. (Bank holding company) ................... 1,327,560
234,000 Hutchison Whampoa, Ltd. (Container terminal and real
estate company) ........................................... 1,464,576
90,297 Kerry Properties, Ltd. (Real estate company) ................ 149,155
974,000 Li & Fung Ltd. (Investment holding company, engaged in
export trading) ........................................... 1,363,776
5,092,000 Moulin International Holding Ltd. (Manufacturer of optical
products) ................................................. 611,119
382,000 New World Development Co., Ltd. (Property investment
and development, construction and engineering, hotels
and restaurants, telecommunications) ...................... 1,321,151
1,548,000 QPL International Holdings Ltd. (Manufacturer of
leadframes and integrated circuits) ....................... 689,199
1,046,200 Shangri-La Asia Ltd. (Hotel and property holding company) ... 884,322
458,000 Television Broadcasts, Ltd. (Television broadcasting) ....... 1,306,207
456,000 VTech Holdings Ltd. (Manufacturer of consumer electronic
products) ................................................. 1,344,638
----------
14,328,622
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Investment Portfolio
<TABLE>
<CAPTION>
================================================================================================================
Market
Shares Value($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDIA 16.3% 26,200 Aptech Ltd. (India's second largest information technology
training company) ......................................... 364,260
3,613 Bajaj Auto (GDR) (Maker of two and three wheel vehicles)
506,150 Crompton Greaves Ltd. (Manufacturer of electrical ........... 72,531
equipment) ................................................ 384,132
321,500 Digital Equipment (India) Ltd. (Manufacturer of computers
and software) ............................................. 1,135,912
84,550 Hero Honda Motors Ltd. (Manufacturer of motorized two
wheelers) ................................................. 1,990,268
35,200 Housing Development Finance Corp. Ltd. (Housing
finance provider to individuals, corporations and
developers) ............................................... 2,763,469
947,600 ICICI Banking Corp.* (Bank) ................................. 1,021,329
52,600 Indian Hotels & Resorts Co., Ltd. (GDR) (Hotel operator) .... 1,004,660
2,104,500 Indorama Synthetics (Producer of polyester yarn, fibers and
fabric) ................................................... 937,459
1,124,600 Indorama Synthetics ......................................... 286,888
80,400 Infosys Technologies Ltd. (Financial and industrial software
developer) ................................................ 2,528,395
6,400 Madras Cements Ltd. (Cement producer) ....................... 746,939
171,800 Mahanagar Telephone Nigam Ltd. (Telecommunication
services in Delhi and Bombay) ............................. 1,130,724
130 Mahindra & Mahindra Ltd. (Manufacturer of automobiles,
farm equipment and automotive components) ................. 1,066
34,000 NIIT Ltd. (Designer and distributor of computer software) ... 589,796
146,200 TVS Suzuki Ltd. (Manufacturer of motorcycles and mopeds) .... 1,654,074
----------
16,611,902
----------
INDONESIA 1.4% 228,100 Asia Pacific Resources International Holdings Ltd.*
(Manufacturer of rayon fiber for Asian textile markets,
owner of world's leading paper pulp mill) ................. 427,688
1,853,000 Astra International, Inc. (Distributor of automobiles and
related parts) ............................................ 480,095
24,500 Gulf Indonesia Resources Ltd.* (Independent oil and gas
producer) ................................................. 539,000
97,500 United Tractors (Heavy equipment assembler and
distributor) .............................................. 11,523
----------
1,458,306
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Investment Portfolio
<TABLE>
<CAPTION>
================================================================================================================
Market
Shares Value($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN 27.2% 36,000 Ariake Japan Co., Ltd. (Leading maker of natural seasonings
made from meat extracts) .................................. 1,171,965
143,000 Asahi Bank Ltd. (Commercial bank) ........................... 580,544
47,960 FCC Co., Ltd. (Manufacturer of motorcycle and automobile
clutches) ................................................. 506,969
20,200 Fuji Software Inc. (Software developer) ..................... 691,643
116,000 Fujitsu Ltd. (Leading manufacturer of computers) ............ 1,243,968
48,000 Honda Motor Co., Ltd. (Leading automobile and
motorcycle manufacturer) .................................. 1,761,164
110,000 Industrial Bank of Japan, Ltd. (Commercial bank and trust
company) .................................................. 783,608
507,000 Long-Term Credit Bank of Japan (Commercial bank) ............ 811,666
126,000 Minebea Co., Ltd. (Manufacturer of bearings, electronic
equipment and machinery parts) ............................ 1,351,206
118,000 NEC Corp. (Manufacturer of telecommunication and
computer equipment) ....................................... 1,256,377
45,200 Nidec Corp. (Manufacturer of small-scale motors for hard
disc drives) .............................................. 1,904,251
43,000 Nintendo Co., Ltd. (Game equipment manufacturer) ............ 4,216,009
57,000 Nomura Securities Co., Ltd. (Financial advisor, securities
broker and underwriter) ................................... 759,709
15,000 Ryohin Keikaku Co., Ltd. (Wholesaler and retailer of
clothing, household goods and foodstuffs) ................. 988,127
29,000 Sony Corp. (Consumer electronic products manufacturer) ...... 2,576,791
12,800 Sony Corp. (ADR) ............................................ 1,161,600
11,900 Square Co., Ltd. (Producer of software for video games) ..... 329,973
60,000 Sumitomo Electric Industries, Ltd. (Leading manufacturer
of electric wires and cables) ............................. 818,077
94,000 Sumitomo Trust & Banking (Commercial Bank) .................. 488,181
21,000 TDK Corp. (Manufacturer of magnetic tapes and floppy
discs) .................................................... 1,582,842
78,000 Uni-Charm Co., Ltd. (Leading manufacturer of sanitary
napkins and paper diapers) ................................ 2,760,322
----------
27,744,992
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Investment Portfolio
<TABLE>
<CAPTION>
================================================================================================================
Market
Shares Value($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
KOREA 1.1% 18,240 Pohang Iron & Steel Co., Ltd. (Leading steel producer) ...... 493,933
26,780 Sindo Ricoh Co.* (Manufacturer of office equipment) ......... 647,776
---------
1,141,709
---------
MALAYSIA 2.3% 450,000 Guinness Anchor (Brewery) ................................... 555,341
110,000 Malakoff Bethad (Independent power producer) ................ 229,078
55,500 Malaysia Assurance Alliance Bethad (Multiline insurance
company) .................................................. 63,641
188,160 Oriental Holdings Bethad (Investment holding company) ....... 230,272
205,000 Tenaga Nasional Berhad (Electric power generator and
distributor) .............................................. 437,460
820,000 United Plantations Berhad (Cultivation and processing of
oil palm, copra and cocoa) ................................ 847,513
---------
2,363,305
---------
PHILIPPINES 1.6% 3,249,300 Aboitiz Equity Ventures Inc.* (Conglomerate: electricity,
infrastructure, shipbuilding) ............................. 101,089
1,247,900
First Philippine Holdings Corp. "B" (Holding company
involved in electric power distribution, construction .....
3,313,125 services and passenger bus transportation) ............. 970,589
International Container Terminal Services, Inc.*
2,254,500 (Containerized cargo handling firm) ...................... 409,028
Petron Corp. (Refiner and marketer of petroleum
products) ................................................ 186,483
---------
1,667,189
---------
TAIWAN 14.2% 35,400 ASE Test Ltd.* (Provider of testing services to semiconductor
manufacturers) ............................................ 2,314,275
714,844 Acer Peripherals, Inc. (Developer and distributor of
computer peripherals) ..................................... 1,336,567
191,100 Asustek Computer Inc.* (Manufacturer of computer
mainboards, audio/video cards and network cards) .......... 3,028,313
634,875 China Development Corp. (Leading venture capital firm
and investment bank) ...................................... 1,809,759
186,000 Compeq Manufacturing Co., Ltd.* (Manufacturer of
multi-layer double-sided printed circuit boards) .......... 1,071,816
4,600 Delta Electronics, Inc. (Manufacturer of power supply
equipment) ................................................ 18,330
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Investment Portfolio
<TABLE>
<CAPTION>
=================================================================================================================
Market
Shares Value($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
696,585 Delta Electronics (Entitlement Certificate) (Manufacturer of
power supply equipment and monitors) ...................... 2,743,637
207,000 Hon Hai Precision Industry Co., Ltd.* (Manufacturer of
electronic connectors, cable assemblies and memory
chips) .................................................... 1,046,897
1,720,500 Pacific Construction Co. (Land development and public
works construction) ....................................... 1,181,278
-----------
14,550,872
-----------
THAILAND 0.4% 32,100 PTT Exploration and Production Co., Ltd. (Foreign
registered) (Petroleum refinery) .......................... 381,005
-----------
UNITED STATES 1.6% 106,400 Freeport McMoRan Copper & Gold, Inc. "A" (U.S. company
mining in Indonesia)....................................... 1,629,250
-----------
TOTAL COMMON Stocks (Cost $95,381,009) ...................... 84,681,396
-----------
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO-100.0%
(Cost $113,888,127)(a) .................................... 102,152,018
===========
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $114,613,027. At December 31,
1997, net unrealized depreciation for all securities based on tax cost was
$12,461,009. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $9,157,961 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$21,618,970.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $614,720 (0.60% of net assets). Their
values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at December 31, 1997 aggregated $773,606. These securities may
also have certain restrictions as to resale.
(c) Principal amount is stated in U.S. dollars unless otherwise noted.
Currency abbreviations
------------------------------
JPY Japanese Yen
TWD Taiwanese Dollar
USD United States Dollar
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Investment Portfolio
================================================================================
- --------------------------------------------------------------------------------
Transactions in written options during the year ended December 31, 1997 were:
Options on Currencies
----------------------------------
Japanese Yen Premiums
(000's) Received ($)
----------------------------------
Outstanding at
December 31, 1996.................. 1,132,780 218,627
Written............................ 651,582 104,253
Closed............................. (1,784,362) (322,880)
----------------------------------
Outstanding at
December 31, 1997.................. -- --
========== ========
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Financial Statements
<TABLE>
<CAPTION>
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $113,888,127) .......................... $102,152,018
Foreign currency holdings, at market (identified cost $604,649) ................ 601,241
Receivables:
Investments sold ............................................................ 827,549
Dividends and interest ...................................................... 196,519
Foreign taxes recoverable ...................................................... 8,268
Unrealized appreciation on forward currency exchange contracts ................. 424,028
Other assets ................................................................... 3,213
------------
Total assets ............................................................. 104,212,836
LIABILITIES
Payables:
Investments purchased ....................................................... $1,114,809
Dividends payable ........................................................... 3,856,424
Accrued management fee ...................................................... 107,885
Other payables and accrued expenses ......................................... 267,550
Total liabilities ........................................................ 5,346,668
------------
Net assets, at market value .................................................... $ 98,866,168
NET ASSETS ============
Net assets consist of:
Accumulated net realized gain (loss) ........................................ $ (8,646,928)
Net unrealized appreciation (depreciation) on:
Investments .............................................................. (11,736,109)
Foreign currency related transactions .................................... 423,638
Paid-in capital ............................................................. 118,825,567
------------
Net assets, at market value .................................................... $ 98,866,168
NET ASSET VALUE per share (98,866,168 [division sign] 8,764,601 shares of
common stock issued and outstanding, $.01 par value, 50,000,000 shares
authorized) ................................................................. $11.28
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Financial Statements
<TABLE>
<CAPTION>
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of taxes withheld of $153,123) ......................... $ 1,626,640
Interest (net of taxes withheld of $1,578) ............................ 493,712
------------
2,120,352
Expenses:
Management fee ........................................................ $ 1,607,932
Custodian and accounting fees ......................................... 598,608
Directors' fees and expenses .......................................... 90,218
Reports to shareholders ............................................... 65,194
Auditing .............................................................. 79,134
Services to shareholders .............................................. 45,973
Legal ................................................................. 9,268
Other ................................................................. 30,181 2,526,508
------------ ------------
Net investment income (loss) ............................................... (406,156)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments (net of India tax $20,151 )................................ (2,424,025)
Options ............................................................... 508,619
Foreign currency related transactions ................................. (393,351) (2,308,757)
------------
Net unrealized appreciation (depreciation) during the period on:
Investments (net of India tax $611,120) ............................... (27,378,014)
Written options ....................................................... (187,815)
Foreign currency related transactions ................................. 424,038 (27,141,791)
------------ ------------
Net gain (loss) on investment transactions ............................ (29,450,548)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................ $(29,856,704)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Financial Statements
<TABLE>
<CAPTION>
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss ................................................... $ (406,156) $ (368,050)
Net realized gain (loss) from investment transactions ................. (2,308,757) 4,534,972
Net unrealized appreciation (depreciation) on investment transactions
during the period .................................................. (27,141,791) (1,423,972)
------------ ------------
Net increase (decrease) in net assets resulting from operations .......... (29,856,704) 2,742,950
------------ ------------
Distributions to shareholders:
In excess of net investment income .................................... (1,577,342) (174,619)
------------ ------------
From net realized gain from investment transactions ................... -- (2,882,677)
------------ ------------
In excess of net realized gain from investment transactions ........... (3,417,049) --
------------ ------------
Reinvestment of distributions ............................................ 353,577 810,268
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ........................................ (34,497,518) 495,922
Net assets at beginning of period ........................................ 133,363,686 132,867,764
------------ ------------
NET ASSETS AT END OF PERIOD (including accumulated distributions in excess
of net investment income of $1,473,352 for December 31, 1996) ......... $ 98,866,168 $133,363,686
============ ============
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period ................................ 8,737,037 8,688,394
Shares issued to shareholders in reinvestment of distributions ........ 27,564 48,643
------------ ------------
Shares outstanding at end of period ...................................... 8,764,601 8,737,037
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Financial Highlights
================================================================================
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD (a) AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS AND MARKET PRICE DATA.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........... $ 15.26 $ 15.29 $17.44 $ 25.06 $14.73
------- ------- ------ ------- ------
Income from investment operations:
Net investment income (loss)................. (.05) (.04) (.01) .05 .10
Net realized and unrealized gain (loss)
on investments............................. (3.36) .36 (.47) (3.21) 10.63
------- ------- ------ ------- ------
Total from investment operations............... (3.41) .32 (.48) (3.16) 10.73
------- ------- ------ ------- ------
Dilution resulting from rights offering........ -- -- -- (.03) --
------- ------- ------ ------- ------
Less Distributions:
From net investment income................... -- -- -- -- (.15)
In excess of net investment income........... (.18) (.02) -- (.23) (.17)
From net realized gains on investments....... -- (.33) (1.51) (4.20) --
In excess of net realized gains
on investments............................. (.39) -- (.16) -- (.08)
------- ------- ------ ------- ------
Total distributions............................ (.57) (.35) (1.67) (4.43) (.40)
------- ------- ------ ------- ------
Net asset value, end of period................. $ 11.28 $ 15.26 $15.29 $ 17.44 $25.06
======= ======= ====== ======= ======
Market value, end of period.................... $ 9.69 $ 12.50 $14.50 $ 16.16(c) $27.38
======= ======= ====== ======= ======
TOTAL RETURN
Per share market value (%)................... (18.05) (11.56) (.66) (25.10) 95.71
Per share net asset value (%)(b)............. (21.89) 2.46 (2.96) (11.67) 73.32
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)....... 99 133 133 147 178
Ratio of operating expenses
to average net assets (%).................. 1.90 1.87 1.74 1.67 1.71
Ratio of net investment income (loss)
to average net assets (%).................. (.31) (.27) (.07) .21 .56
Portfolio turnover rate (%).................. 116.6 88.5 58.1 81.6 10.3
Average commission rate paid (d)............. $ .0073 $ .0106 $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assumes that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market.
(c) Market value of $20.38 has been reduced to reflect a distribution of $4.22
per share payable on January 17, 1995, relating to a due bill which entitles
individuals who purchased shares prior to January 18, 1995, the ex date of
the dividend, to be reimbursed by the seller in the amount of the
distribution.
(d) Average commission rate paid per share of common and preferred securities is
calculated for periods ending on or after December 31, 1996.
- --------------------------------------------------------------------------------
19
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Notes to Financial Statements
================================================================================
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder New Asia Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles 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. Portfolio 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 System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the most recent bid quotation.
Securities which are not quoted on the Nasdaq System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
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 shall be used.
Portfolio debt securities other than money market securities are valued by
pricing agents approved by the officers of the Fund, which 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.
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period the Fund purchased put options and wrote call options on Japanese Yen as
a hedge against potential adverse price movements in the value of portfolio
assets.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid
20
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Notes to Financial Statements
================================================================================
and asked price or at the most recent asked price (bid for purchased options) if
no bid and asked price are available. Over-the-counter written or purchased
options are valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
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, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding Taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized
21
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Notes to Financial Statements
================================================================================
and unrealized gains and losses which represent the difference between the value
of the forward contract to buy and the forward contract to sell are included in
net realized and unrealized gain (loss) from foreign currency related
transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
TAXATION. 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. The
Fund accordingly paid no U.S. federal income taxes, and no federal income tax
provision was required.
In addition, from November 1, 1997 through December 31, 1997, the Fund incurred
approximately $8,035,155 of net realized capital losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
arising in the fiscal year ending December 31, 1998.
Net realized gains of the Fund derived in India are subject to certain non U.S.
taxes.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. Distributions of net realized gains from investment transactions
in excess of available capital loss carryforwards, which would be taxable to the
Fund if not distributed, will be distributed to shareholders annually. An
additional distribution may be made to the extent necessary to avoid the payment
of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to investments in Passive Foreign Investment
Companies, foreign denominated investments and certain securities sold at a
loss. As a result, net investment income 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.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
OTHER. Investment security transactions are accounted for on a trade-date basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. Distributions to shareholders are recorded on the
ex-dividend date except in situations where, under New York Stock Exchange
rules, the ex-dividend date is deferred until after the payment date.
B. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $144,464,635 and
$154,726,971, respectively.
22
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Notes to Financial Statements
================================================================================
C. RELATED PARTIES
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Directors and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper the Fund has agreed to pay
the Adviser a fee equal to an annual rate of 1.25% of the first $75,000,000 of
average weekly net assets of the Fund, 1.15% of the next $125,000,000 and 1.10%
of the excess over $200,000,000, payable monthly. As manager of the assets of
the Fund, the Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and restrictions. The Adviser determines the
securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser shall provide certain administrative services in
accordance with the Management Agreement. For the year ended December 31, 1997,
the fee pursuant to these agreements amounted to $1,607,932, which is
equivalent to an annual effective rate of 1.21% of the Fund's average daily net
assets.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
December 31,1997, the amount charged to the Fund by SFAC aggregated $135,273,
of which $8,461 is unpaid at December 31, 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, provides
shareholder communications services for the Fund. For the year ended December
31, 1997 the amount charged by SSC aggregated $15,000, of which $1,250 is
unpaid at December 31, 1997.
The Fund pays each Director not affiliated with the Adviser, $6,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended December 31, 1997, Directors' fees and expenses aggregated $90,218.
23
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Notes to Financial Statements
================================================================================
D. COMMITMENTS
As of December 31, 1997, the Fund had entered into the following foreign
currency exchange contracts resulting in net unrealized appreciation of
$424,028.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
-------------------------- --------------------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
TWD 329,916,669 USD 10,327,000 5/18/98 424,028
=======
</TABLE>
E. INVESTING IN FOREIGN MARKETS
Investing in foreign markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid,
subject to government ownership controls, delayed settlements, and their prices
more volatile than those of securities of comparable U.S. companies.
Foreign investment in the securities markets of several foreign countries is
restricted or controlled in varying degrees. These restrictions may limit
investment in certain foreign countries. In addition, the repatriation of both
investment income and capital from some foreign countries may be subject to
restrictions.
24
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Report of Independent Accountants
================================================================================
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SCUDDER NEW ASIA FUND, INC.:
We have audited the accompanying statement of assets and liabilities of Scudder
New Asia Fund, Inc., including the investment portfolio, as of December 31,
1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder New Asia Fund, Inc. as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P
February 19, 1998
25
<PAGE>
[SCUDDER NEW ASIA FUND, INC. LOGO]
Tax Information
================================================================================
By now shareholders for whom year end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid distributions of $0.39 per share from long-term capital gains
during its year ended December 31, 1997, of which 56.44% represents 20% rate
gains. Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$3,304,759 as a long-term capital gain dividend for the fiscal year ended
December 31, 1997, of which 63.03% represents 20% rate gains.
Due to the nature of its investments, the Fund pays a variety of foreign taxes
throughout the year. As in prior years, the Fund intends to make an election
under section 853 of the Internal Revenue Code. This election will allow
shareholders to treat their proportionate share of foreign taxes paid by the
Fund as having been paid directly by them. Additionally, shareholders will be
required to report their proportionate share of such taxes paid as gross income
(in addition to other amounts of reportable distributions paid by the Fund).
The total amount of income received by the Fund from sources within foreign
countries and possessions of the United States for its year ended December 31,
1997 was $0.076 per share (representing a total of $661,792). The total amount
of taxes paid by the Fund to such countries was $0.018 per share (representing a
total of $154,701). The following table provides a breakdown by country of
ordinary income dividends and foreign taxes paid by the Fund in 1997:
1997 Foreign Tax Credit Tables
------------------------------
Country Foreign Income Foreign Taxes
------- -------------- -------------
China 1.69% --%
Hong Kong 12.31 --
Indonesia 7.74 28.99
India 3.99 0.61
Japan 8.66 16.76
Korea 0.67 3.63
Malaysia 2.32 16.05
Philippines 0.88 2.90
Singapore 1.23 8.29
Taiwan 1.86 16.07
Thailand 0.94 0.81
United Kingdom 2.17 5.89
United States 55.54 --
------ ------
100.00% 100.00%
====== ======
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call (800) 426-5523.
26
<PAGE>
Scudder New Asia Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
================================================================================
- --------------------------------------------------------------------------------
The Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
you an automatic way to reinvest your dividends and capital gains distributions
in shares of the Fund. The Plan also provides for cash investments in Fund
shares of $100 to $3,000 semiannually through State Street Bank and Trust
Company, the Plan Agent. Note that the Fund's share price for purposes of the
Plan is calculated net of due-bills, if applicable.
Automatic Participation
Each shareholder of record is automatically a participant in the Plan unless
the shareholder has instructed the Plan Agent in writing otherwise. Such a
notice must be received by the Plan Agent not less than 10 days prior to the
record date for a dividend or distribution in order to be effective with respect
to that dividend or distribution. A notice which is not received by that time
will be effective only with respect to subsequent dividends and distributions.
Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in dollars mailed directly to the
shareholder by State Street Bank and Trust Company, as dividend paying agent.
Shares Held by a Nominee
If your shares are held in the name of a brokerage firm, bank, or other
nominee as the shareholder of record, please consult your nominee (or any
successor nominee) to determine whether it is participating in the Plan on your
behalf. Many nominees are generally authorized to receive cash dividends unless
they are specifically instructed by a client to reinvest. If you would like your
nominee to participate in the Plan on your behalf, you should give your nominee
instructions to that effect as soon as possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution (the "Valuation Date") equals or exceeds net asset value per share
on that date, the Fund will issue new shares to participants at the greater of
the following on the Valuation Date: (a) net asset value, or (b) 95% of the
market price. The Valuation Date will be the dividend or distribution payment
date or, if that date is not a New York Stock Exchange trading date, the next
preceding trading date. If the net asset value exceeds the market price of Fund
shares at such time, participants in the Plan are considered to have elected to
receive shares of stock from the Fund, valued at market price, on the Valuation
Date. In either case, for Federal income tax purposes, the shareholder receives
a distribution equal to the market value on Valuation Date of new shares issued.
State and local taxes may also apply. If the Fund should declare an income
dividend or net capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Voluntary Cash Purchases
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, semiannually, in any amount from $100 to $3,000, for
investment in the Fund's shares. The Plan Agent will use all such monies
received from participants to purchase Fund shares in the open market on or
about February 15 and August 15. Any voluntary cash payments received more than
30 days prior to these dates will be returned by the Plan Agent, and interest
will not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately ten days before February 15, or
27
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
August 15, as the case may be. A participant may withdraw a voluntary cash
payment by written notice, if the notice is received by the Plan Agent notless
than 48 hours before such payment is to be invested.
Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by participants for personal and tax records. Shares in the account of
each plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each participant will be able to vote those
shares purchased pursuant to the Plan at a shareholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting dividends or
distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage commissions with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, participants will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of any
dividends or capital gains distributions payable only in cash.
Costs for Cash Purchases
With respect to purchases of Fund shares from voluntary cash payments, the
Plan Agent will charge $0.75 for each such purchase for a participant. Each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases of Fund shares in connection
with voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, because the Plan Agent will be purchasing stock
for all participants in blocks and prorating the lower commission thus
attainable.
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the Plan.
Notice of the termination will be sent to the participants of the Plan at least
30 days before the record date for a dividend or distribution. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by giving at least 30 days' written notice to participants in
the Plan.
A participant may terminate his account under the Plan by written notice to
the Plan Agent. If the written notice is received 10 days before the record day
of any distribution, it will be effective immediately. If received after that
date, it will be effective as soon as possible after the reinvestment of the
dividend or distribution.
If a participant elects to sell his shares before the Plan is terminated, the
Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: Scudder New Asia Fund Dividend Reinvestment and Cash Purchase Plan,
c/o State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200,
(617) 328-5000, ext. 6406.
28
<PAGE>
Scudder New Asia Fund, Inc.
Stockholder Meeting Results
================================================================================
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders (the "Meeting") of Scudder New Asia Fund,
Inc. ("Fund") was held on October 21, 1997, at the offices of Scudder Kemper
Investments, Inc. (formerly Scudder Stevens & Clark, Inc.), 25th Floor, 345 Park
Avenue (at 51st Street), New York, New York 10154. At the Meeting, as adjourned
and reconvened, the following matters were voted upon by the stockholders (the
resulting votes for each matter are presented below). With regard to these
proposals, it was recommended that the Meeting be reconvened in order to provide
stockholders with an additional opportunity to return their proxies. The date of
the reconvened meeting at which the matters were decided is noted after the
proposed matter.
1. To approve the new Investment Management, Advisory and Administration
Agreement between the Fund and Scudder Kemper Investments, Inc.
(Approved on October 22, 1997.)
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
5,448,802 567,783 99,926 0
2. To elect Directors. (Approved on October 22, 1997.)
Director: Number of Votes:
--------- ----------------
For Withheld
--- --------
Robert J. Callander 5,957,677 158,834
Kathryn L. Quirk 5,961,672 154,840
Continuing Directors
--------------------
Paul Bancroft, III
Nicholas Bratt
Thomas J. Devine
William H. Gleysteen
Wilson Nolen
Hugh T. Patrick
Daniel Pierce
29
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants. (Approved on October 22, 1997.)
Number of Votes:
----------------
For Against Abstain
--- ------- -------
5,715,644 46,117 354,750
- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
30
<PAGE>
Scudder New Asia Fund, Inc
Directors and Officers
================================================================================
- --------------------------------------------------------------------------------
DANIEL PIERCE*
Chairman of the Board and Director
NICHOLAS BRATT*
President
PAUL BANCROFT III
Director
ROBERT J. CALLANDER
Director
THOMAS J. DEVINE
Director
WILLIAM H. GLEYSTEEN, JR.
Director
DR. WILSON NOLEN
Director
HUGH T. PATRICK
Director
KATHRYN L. QUIRK*
Director, Vice President & Assistant Secretary
JAMES W. MORLEY
Honorary Director
ROBERT G. STONE, JR.
Honorary Director
ELIZABETH J. ALLAN*
Vice President
BRUCE GOLDFARB*
Vice President and Assistant Secretary
THERESA GUSMAN*
Vice PresidenT
JUDITH HANNAWAY*
Vice President
JERARD K. HARTMAN*
Vice President
THOMAS F. McDONOUGH*
Vice President, Secretary and Assistant Treasurer
EDWARD J. O'CONNELL*
Vice President and Assistant Treasurer
* Scudder Kemper Investments, Inc.
31
