Scudder
Pacific
Opportunities
Fund
Annual Report
October 31, 1997
Pure No-Load(TM) Funds
Seeks long-term growth of capital through investment primarily in the equity
securities of Pacific Basin companies, excluding Japan.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER [IMAGE]
<PAGE>
In Brief
o The Southeast Asian currency and equity markets experienced a severe downturn
during the last quarter of the twelve-month period ended October 31, 1997.
o The devaluation of the Thai baht had a ripple effect, as one Southeast Asian
currency after another declined. The currency crisis and subsequent sky-high
interest rates had a powerful negative impact on equity markets in the region.
o For this period, Scudder Pacific Opportunities Fund returned -28.52%, slightly
better than the -30.52% return of the MSCI All Country Asia Free Index
(excluding Japan).
o While near-term prospects for growth have been revised downward, we believe
long-term growth in the Pacific Basin should continue to be fueled by a
combination of huge, growing domestic markets and emerging Asia's role as an
important production base for the developed world.
Table of Contents
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Glossary of Investment Terms
11 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
23 Report of Independent Accountants
24 Tax Information
25 Stockholder Meeting Results
28 Officers and Directors
29 Investment Products and Services
30 Scudder Solutions
2-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Letter from the Fund's President
Dear Shareholders,
Just as the prospects for Southeast Asia appeared to be turning positive,
the markets were roiled by the devaluation of the Thai baht on July 2. What was
initially perceived as a mild contagion spread quickly to other markets around
the globe, including the United States. While the effects on the region's
economy are still being sorted out, the Fund's return was slightly better than
its benchmark index.
As patient, long-term investors in the Pacific Basin, we believe that the
prosperity of this dynamic region is dependent on sound fiscal policies and
market-based reforms. Clearly, there is room for improvement in this area. In
the near-term, the investment environment appears uncertain and growth will
likely slow. However, turnarounds in the Pacific Basin have been led by the
investment markets and tend to be dramatic. In the months ahead, we will attempt
to position the Fund for a rebound by continuing with our individual stock
selection approach. For a further discussion of the market environment and your
Fund's activities during the period, please turn to page 4.
For those of you who are interested in new Scudder products, we recently
introduced Scudder International Growth and Income Fund, which pursues a
yield-oriented approach to investing in international equities. The Fund seeks
to provide long-term growth of capital plus current income. Investors who desire
international exposure but wish to take a conservative approach may appreciate
the Fund's emphasis on dividend-paying stocks of established companies listed on
foreign exchanges. For further information on this new fund, please turn to
page.
We appreciate your continued investment in Scudder Pacific Opportunities
Fund. If you have any questions about your investment, please call Scudder
Investor Relations at 1-800-225-2470, or visit our Internet Web site
(http://funds.scudder.com) for frequent updates on your Fund and other Scudder
products and services.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Pacific Opportunities Fund
3-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
PERFORMANCE UPDATE as of October 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/97 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------
1 Year $ 7,148 -28.52% -28.52%
Life of Fund* $ 9,653 -3.47% -.72%
- --------------------------------------------
MSCI ALL COUNTRY ASIA FREE INDEX
(EXCLUDING JAPAN)
- --------------------------------------------
1 Year $ 6,948 -30.52% -30.52%
Life of Fund* $ 12,871 28.71% 5.36%
- --------------------------------------------
* The Fund commenced operations on December 8, 1992.
Index comparisons begin December 31, 1992.
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
SCUDDER PACIFIC OPPORTUNITIES FUND
Year Amount
- ------------------------
12/92* $10,000
10/93 $13,542
10/94 $14,757
10/95 $13,174
10/96 $13,538
10/97 $ 9,677
MSCI ALL COUNTRY ASIA FREE INDEX
(EXCLUDING JAPAN)
Year Amount
- ------------------------
12/92* $10,000
10/93 $16,472
10/94 $19,062
10/95 $17,131
10/96 $18,525
10/97 $12,871
YEARLY PERIODS ENDED OCTOBER 31
The Morgan Stanley Capital International (MSCI) All Country Asia Free Index
is an unmanaged capitalization-weighted measure of stock markets in the Pacific
Region, excluding Japan. Index returns assume dividends reinvested and, unlike
Fund returns, do not reflect any fees or expenses.
- --------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- --------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED OCTOBER 31
1993* 1994 1995 1996 1997
-----------------------------------------------
NET ASSET VALUE... $ 16.21 $ 17.57 $ 15.59 $ 15.93 $ 11.38
INCOME DIVIDENDS.. $ -- $ .08 $ .10 $ .10 $ .01
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .01 $ -- $ -- $ --
FUND TOTAL
RETURN (%)........ 35.08 8.97 -10.73 2.76 -28.52
INDEX TOTAL
RETURN (%)........ 64.72 15.73 -10.14 8.15 -30.52
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return and
principal value will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than when purchased. If the Adviser had not maintained the
Fund's expenses, the total returns for the life of Fund period would have
been lower.
4-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1997
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 9% Cash Equivalents)
- ---------------------------------------------------------------------------
Hong Kong 30%
Taiwan 21%
Australia 13%
Indonesia 11%
New Zealand 8%
Malaysia 5%
India 4%
Philippines 3%
China 1%
Other 4%
- --------------------------------------
100%
- --------------------------------------
The Fund's three largest country
weightings were not hurt as much
by the downturn as other markets
in the region.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS
(Excludes 17% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 32%
Manufacturing 16%
Technology 12%
Consumer Staples 8%
Transportation 6%
Energy 6%
Construction 4%
Metals & Minerals 4%
Media 4%
Other 8%
- --------------------------------------
100%
- --------------------------------------
Significant weightings in the financial
and manufacturing sectors are representative
of the predominance of these companies in
the Pacific Basin.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(30% of Portfolio)
- --------------------------------------------------------------------------
1. COMMONWEALTH BANK OF AUSTRALIA
Bank in Australia
2. DELTA ELECTRONICS, INC.
Manufacturer of power supply equipment and
monitors in Taiwan
3. TELEVISION BROADCASTS, LTD.
Television broadcasting in Hong Kong
4. ASUSTEK COMPUTER INC.
Manufacturer of computer mainboards,
audio/video cards and network cards in Taiwan
5. ASIA PACIFIC RESOURCES INTERNATIONAL HOLDINGS LTD.
Manufacturer of rayon fiber for Asian textile markets
in Indonesia
6. NEW WORLD DEVELOPMENT CO., LTD.
Property investment and development, construction
and engineering, hotels and restaurants,
telecommunications in Hong Kong
7. FLETCHER CHALLENGE ENERGY LTD.
Oil and gas exploration and development in
New Zealand
8. HUTCHISON WHAMPOA, LTD.
Container terminal and real estate company in
Hong Kong
9. FLETCHER CHALLENGE BUILDING CORP.
Commercial, industrial and residential
construction in New Zealand
10. HSBC HOLDINGS LTD.
Bank holding company in Hong Kong
We pursue an individual stock
selection approach, which we believe
is the key to outperformance in the
Pacific Basin over the long term.
For more complete details about the Fund's investment portfolio, see page 11.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
5-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Portfolio Management Discussion
We asked Elizabeth J. Allan and Theresa M. Gusman, co-lead portfolio managers of
Scudder Pacific Opportunities Fund, to discuss the market environment and the
Fund's investment strategy for the twelve-month period ended October 31, 1997.
Q. How did the Fund perform over the twelve months?
A. The Fund returned -28.52%, which was better than the -30.52% return of the
Fund's benchmark, the unmanaged MSCI All Country Asia Free Index (excluding
Japan). Our sizable holdings in Taiwan, Australia, New Zealand, India, and
selected Hong Kong companies helped us weather the storm in Southeast Asia. We
trimmed our exposure in Indonesia, Malaysia, Singapore, and Korea in the third
quarter of 1997, which enabled the Fund to enter the most recent downturn with a
larger than usual cash position. This should allow us to take advantage of
attractive opportunities when the time is right.
Q. In July, the Thai baht, Indonesian rupiah, Malaysian ringgit, and the
Philippine peso plunged, and interest rates soared throughout the region. How
did this affect the investment markets?
A. This was not good news for the markets. Sharply higher interest rates
decreased the attractiveness of equities versus fixed income securities and
lowered growth expectations. Stocks fell in response led by the Philippines,
Indonesia, and Malaysia, and followed by Thailand (which had already fallen
sharply), Singapore, and Korea. Australia and India escaped the carnage
relatively unscathed during this difficult period, and the China block held up
through September (see chart).
Q. How long will this downturn last?
A. It's hard to tell. The duration of the slide in Asian equity and currency
markets will be determined by government and corporate responses to the crisis,
as well as the speed with which stock valuations adjust to the changing rules
for investment in the region. Clearly, proactive and pro- market responses will
enable economic and structural problems to be overcome, which could lead to a
quick rebound in the equity and currency markets. However, we are still looking
for leadership and concrete responses from policymakers in the region.
THE ORIGINAL BAR CHART CONTAINS A CHART HERE
BAR CHART TITLE:
Market Performance
10/31/96 to 10/31/97
BAR CHART DATA:
--------------------------------------------
India +18.05%
--------------------------------------------
China +10.69%
--------------------------------------------
Taiwan -1.81%
--------------------------------------------
New Zealand -4.80%
--------------------------------------------
Australia -6.73%
--------------------------------------------
Hong Kong -17.50%
--------------------------------------------
Singapore -32.18%
--------------------------------------------
Indonesia -41.08%
--------------------------------------------
Korea -44.77%
--------------------------------------------
Philippines -54.47%
--------------------------------------------
Malayasia 57.10%
--------------------------------------------
Thailand -68.46%
--------------------------------------------
Source: Morgan Stanley Capital International indices in U.S. dollars
6-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Q. What went wrong?
A. Thailand provides a good example of what went wrong. Rather than establish
proper monetary policy frameworks, improve banking sector supervision, introduce
deregulation and liberalization measures, improve corporate and banking sector
reporting, and undertake confidence-building initiatives, the Thai debacle was
marked by a spate of botched policy responses. Precious central bank reserves
were frittered away in defense of an indefensible currency, the financial system
nearly collapsed, and the IMF (International Monetary Fund) package likely will
prove inadequate. We liquidated our Thai holdings following an early March trip
to Bangkok during which we concluded that the economic crisis would
significantly worsen before it improved; currently we see no reason to return to
the market.
Q. You would think the lessons learned in Thailand would prompt its neighbors to
seize the opportunity created by market volatility to undertake necessary
reforms.
A. One would think so. We saw an important first step with the flotation of the
Indonesian, Malaysian, and Philippine currencies following the baht devaluation.
Unfortunately, the move toward market opening came to an abrupt halt in
Malaysia. On August 28, in an effort to restrict selling by foreigners, Prime
Minister Mahathir Mohamad introduced prohibitive trade settlement rules on the
100 Kuala Lumpur Stock Exchange (KLSE) index stocks, effectively putting capital
controls on equities. By subjecting Malaysia's most liquid stocks to delivery
before sale, bottlenecking the delivery process, and committing "billions of
ringgit...if necessary" to bolster share prices, Dr. Mahathir hoped to stabilize
stocks, thereby preventing the collapse of Malaysia's equity-market-geared
economy. The response of the global investment community was sudden and massive
capital flight, underscoring the futility of his effort.
On September 4 -- in a major policy reversal -- Malaysia lifted the trading
restrictions imposed the previous week, and announced a series of steps toward
restoring fiscal balance. For example, the massive Bakun project was put on hold
indefinitely, as well as Kuala Lumpur Linear City (the world's longest
building), a new airport, and several road projects. The previous day, Indonesia
announced that it would relax foreign ownership limits on equities, cut
government expenditures by postponing selected capital projects, accelerate
economic reform in an effort to stimulate export growth by reducing impediments
to low-cost production, and gradually lower interest rates. A similar "rescue
package" has since been introduced in the Philippines, and Singapore has
indicated that it too could move toward market-opening.
Q. Have any additional steps been taken to help stem the tide?
A. To date, policy measures have been largely inadequate, although IMF-related
policies in Indonesia are a step in the right direction. In our view, the window
to implement aggressive policy responses, reduce interest rates, and forestall
financial crises in Indonesia, Malaysia, the Philippines, and South Korea is
closing rapidly. The next "domino" to fall may be Singapore, where consumption
will be hurt by the negative wealth effect of the decline of the Malaysian
second board shares. In addition, the pristine reputation of the Singapore banks
7-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
and property companies may be damaged as the extent of their exposure to the
region is unveiled. Unlike Indonesia, Malaysia, and the Philippines, the
Singapore equity and currency markets have not yet begun to reflect the "bad
news" that we are expecting over the next several months.
Q. How did the events in Southeast Asia affect other markets in the Pacific,
such as Hong Kong and Japan?
A. Selling pressure has spilled over into Hong Kong, emerging Asia's most liquid
market, although it is economically sound due to its link with the Chinese
economic cycle. In addition, the Hong Kong dollar is unlikely to suffer a
devaluation in the near term. In north Asia, Korea continues to suffer the
aftereffects of gross capital misallocation, and Japan will hardly go unscathed
in both the banking and export sectors, as Asian growth slows. Taiwan remains a
bright spot due largely to its booming technology sector as well as Australia,
India, and New Zealand. These markets are marching to their own economic
drummers and offer extremely attractive valuations.
Q. How did you manage the portfolio in this volatile environment?
A. Now, more than ever, we are convinced that superior stock selection is the
key to superior performance. Our proprietary, forward-looking fundamental equity
research remains the cornerstone of the Fund's investment strategy. We look for
companies that are undervalued, fast-growing, exceptionally well managed
entities with dominant positions in clearly identifiable market niches and a
clear competitive advantage.
Q. Do you have some good examples of companies that met this criteria?
A. We have several, including selected Taiwanese technology companies, such as
ASE Test and Delta Electronics, which are among our top holdings. ASE Test is
one of the largest independent IC (integrated circuit) testers in the world. The
company is leveraged to the electronics "boom" and the trend toward outsourcing
testing. We believe ASE Test is poised for earnings per share growth of 35%-40%
per year over the next five years, and the stock is trading at 20 times
estimated 1998 earnings.
Delta Electronics is the leading producer of uninterruptible power supplies in
the world, with low-cost operations in China. We expect this well-managed,
niche-oriented electronic components producer to provide earnings per share
growth of 20%-25% per year, and the stock is trading at 17 times estimated 1998
earnings.
Q. Were there a few holdings that didn't work out as well as expected?
A. Yes. In a sense, we overstayed our welcome in selected banks and property
companies, particularly in Malaysia and Hong Kong, as the regional contagion
affected even the premier financial and property companies.
Q. What is Scudder's outlook for the Pacific Basin region?
A. In our view, the change in currency policies has altered the way Southeast
Asian economies and equity markets operate. We believe that the basis for
8-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
investment has shifted -- perhaps only for a one- or two-year period -- from
growth to value. We anticipate continued near-term weakness, as market
participants and stock valuations adjust to the changing rules for investment in
the region and government and corporate policies evolve.
Over the long-term, the case for investing in the Pacific Basin rests on rapid
growth and reasonable valuations relative to investment alternatives. This
region has been one of the fastest growing in the world over the past 20 years,
and we believe that growth will resume following an adjustment period. Growth
has been (and will continue to be) fueled by the combination of huge, growing
domestic markets and emerging Asia's role as an important production base for
the developed world.
Q. How do you expect your individual stock selection strategy will unfold over
the next several months?
A. We expect to place increased emphasis on valuation analyses based on cash
flow, non-property asset backing and "normalized" earnings (i.e. we expect
temporary shocks to earnings in the current environment, which may present
buying opportunities), as well as low debt levels and export-oriented companies
with local-currency costs. This approach should help us to determine the proper
re-entry price points for high-quality companies throughout the region, and
enable us to accumulate the shares of what we believe are the best industrial,
consumer-oriented, and natural resources companies in the Pacific Basin at
favorable prices.
Scudder Pacific
Opportunities Fund: A Team
Approach to Investing
Scudder Pacific Opportunities Fund is managed by a team of Scudder 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. They are supported by Scudder's large staff of
economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's 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 joined Scudder in 1987 as a member of the portfolio management team
concentrating in Asia. Co-Lead Portfolio Manager Theresa Gusman joined the
team in 1997 and shares responsibility with Ms. Allan in the Fund's day-to-day
management and investment strategies. Ms. Gusman joined Scudder in 1995 and
has 13 years of experience in Pacific Basin investments. Nicholas Bratt,
Portfolio Manager, has been a member of the Fund's team since 1992 and has
over 20 years of experience in global investing.
9-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
<TABLE>
<CAPTION>
Glossary of Investment Terms
<S> <C>
CURRENCY DEVALUATION A significant decline of a currency's value relative to other currencies,
such as the U.S. dollar. This may be prompted by trading or central bank
intervention (or the lack of intervention) in the currency markets. For U.S.
investors who are investing overseas, a devaluation of a foreign currency can
have the effect of reducing total return.
EXCHANGE RATE The price at which one country's currency can be exchanged into another
currency. Currencies represent a store of value in the economic, political,
and financial health of the home country. Changes in the value of a currency
can add to or subtract from an investor's total return in a foreign
investment.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected impact of management, products,
sales, and earnings on balance sheets and income statements. Distinct from
technical analysis, which evaluates the attractiveness of a stock based on
historical price and trading volume movements, rather than the financial
results of the underlying company.
LIQUIDITY A stock that is liquid has enough shares outstanding and a substantial enough
market capitalization to allow large purchases and sales to occur without
causing a significant change in its market price.
OVER/UNDER WEIGHTING Refers to the allocation of assets -- usually by sector, industry, or country
-- within a portfolio relative to a benchmark index (i.e., the MSCI All
Country Asia Free Index [excluding Japan]) or an investment universe.
PRICE-EARNINGS RATIO (P-E) (also A widely used gauge of a stock's valuation that indicates what investors are
"earnings multiple") paying for a company's earnings on a per share basis. Typically based on a
company's projected earnings for the next 12 months, a higher "earnings
multiple" indicates a higher expected growth rate and the potential for
greater price fluctuations.
TRANSPARENCY The degree to which investors can evaluate if a company is managed in the
interests of shareholders. Transparency is often not as strong in developing
markets where disclosure requirements may be less stringent, and
protectionism, subsidies, and cronyism may distort the business environment.
</TABLE>
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
10-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Investment Portfolio as of October 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount ($) (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 5.9%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/97 at 5.7%,
to be repurchased at $8,256,920 on 11/3/97, collateralized by a $8,108,000 -------------
U.S. Treasury Note, 6%, 5/31/98 (Cost $8,253,000) ................................... 8,253,000 8,253,000
-------------
Short Term Notes 10.7%
- ------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Discount Note, 11/3/97 (Cost $14,995,292) ............ 15,000,000 14,995,292
-------------
Bonds 0.1%
- ------------------------------------------------------------------------------------------------------------------------------
Malaysia 0.1% -------------
AMMB Holdings Berhad, 5%, 5/13/02 (Cost $249,060) ..................................... MYR 616,000 133,066
-------------
Convertible Bonds 1.3%
- ------------------------------------------------------------------------------------------------------------------------------
Cayman Islands 0.8%
APP Global Finance Ltd., 2%, 7/25/00 .................................................. 1,260,000 1,184,400
-------------
Philippines 0.5%
International Container Terminal, Inc., 1.75%, 3/13/04 ................................ 851,000 702,075
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $2,266,375) 1,886,475
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 82.0%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Australia 10.8%
Australia & New Zealand Banking Group Ltd. (General trading and savings bank) ......... 381,800 2,663,529
C R A Ltd. (Mining, manufacturing and development)* ................................... 112,900 1,373,567
Commonwealth Bank of Australia (Bank) ................................................. 487,832 5,609,161
QBE Insurance Group Ltd. (Commercial, industrial and individual insurance
underwriter) ........................................................................ 625,493 2,925,189
Woodside Petroleum Ltd. (Major oil and gas producer) .................................. 303,500 2,563,372
-------------
15,134,818
-------------
China 1.0%
Jiangsu Expressway Co., Ltd. (Builder and manager of the Shanghai-Nanjing
expressway)* ........................................................................ 3,608,000 835,326
Shenzhen Expressway Co. (Highway developer)* .......................................... 2,452,000 526,459
-------------
1,361,785
-------------
Hong Kong 24.7%
Cheung Kong Holdings Ltd. (Real estate company) ....................................... 412,000 2,877,579
China Light & Power Co., Ltd. (Electric utility) ...................................... 315,000 1,654,142
China Southern Airlines Co., Ltd. (Commercial airline service in southeast Asia)* ..... 4,460,000 2,004,592
Citic Pacific Ltd. (Diversified holding company) ...................................... 247,000 1,182,047
First Pacific Co., Ltd. (International management and investment company) ............. 2,309,849 1,463,915
Great Eagle Holdings Ltd. (Property development) ...................................... 757,000 1,155,351
</TABLE>
The accompanying notes are an integral part of the financial statements.
11-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Guoco Group Ltd. (Investment holding company) ......................................... 711,000 1,540,354
HSBC Holdings Ltd. (Bank holding company) ............................................. 146,190 3,299,509
Hutchison Whampoa, Ltd. (Container terminal and real estate company) .................. 526,000 3,656,794
Kerry Properties, Ltd. (Real estate company) .......................................... 1,582,888 3,275,717
Li & Fung Ltd. (Investment holding company, engaged in export trading) ................ 1,386,000 1,389,316
Liu Chong Hing Bank Ltd. (Commercial bank) ............................................ 333,000 439,320
New World Development Co., Ltd. (Property investment and development,
construction and engineering, hotels and restaurants, telecommunications) ........... 1,090,000 3,834,702
Sino Land Co. Warrants ................................................................ 800,000 1,035
Sino Land Co. Warrants (b) ............................................................ 36,400,000 0
Television Broadcasts, Ltd. (Television broadcasting) ................................. 1,878,000 5,222,399
Zhejiang Expressway Co., Ltd. (Road construction and management)* ..................... 8,334,000 1,606,116
-------------
34,602,888
-------------
India 3.8%
Bajaj Auto (GDR) (Maker of two and three wheel vehicles) .............................. 10,705 190,550
Crompton Greaves Ltd. (GDR) (Manufacturer of electrical equipment) .................... 922,689 1,891,512
HDFC Bank Ltd. (Corporate banking and financial services) ............................. 683,000 1,525,832
State Bank of India (GDR) (Bank) ...................................................... 91,300 1,679,920
-------------
5,287,814
-------------
Indonesia 9.2%
Asia Pacific Resources International Holdings Ltd. (Manufacturer of rayon
fiber for Asian textile markets, owner of world's leading paper pulp mill)* ......... 1,011,850 3,984,159
Astra International Inc. (Foreign registered) (Distributor of automobiles,
motorcycles and related spare parts) ................................................ 3,923,000 2,910,964
Gudang Garam (Foreign registered) (Cigarette producer) ................................ 1,078,000 3,050,097
Gulf Indonesia Resources Ltd. (Independent oil and gas producer)* ..................... 36,300 762,300
Indorama Synthetics (Foreign registered) (Producer of polyester fiber, yarn
and fabric) ......................................................................... 3,715,300 2,241,547
-------------
12,949,067
-------------
Korea 0.0%
Hyundai Engineering & Construction Co. (Leading general contractor) ................... 1,320 19,561
-------------
Malaysia 4.1%
Berjaya Sports Toto Berhad (Operator of betting pool, property developer) ............. 50,000 136,493
KFC Holdings (Malaysia) Berhad (Operator of fast-food restaurants) .................... 400,000 803,960
Malakoff Berhad (Cultivation and processing of natural rubber, oil palm and
cocoa) .............................................................................. 280,000 671,966
Malaysia Assurance Alliance Berhad (Multiline insurance company) ...................... 105,100 189,171
Malaysian Resources Corp. (Property development and investment) ....................... 437,000 259,565
Oriental Holdings Berhad (Investment holding company) ................................. 510,720 1,041,817
</TABLE>
The accompanying notes are an integral part of the financial statements.
12-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PPB Oil Palms Berhad (Refiner and marketer of palm oils and related products)* ........ 12,000 11,879
Tenaga Nasional Berhad (Electric power generator and distributor) ..................... 137,000 295,905
United Plantations Berhad (Cultivation and processing of oil palm, copra and
cocoa) .............................................................................. 1,650,000 2,276,886
-------------
5,687,642
-------------
New Zealand 6.3%
Air New Zealand Ltd. "B" (Scheduled commercial airline) ............................... 831,200 1,759,658
Fletcher Challenge Building Corp. (Commercial, industrial and residential
construction) ....................................................................... 1,125,700 3,399,447
Fletcher Challenge Energy Ltd. (Oil and gas exploration and development) .............. 179,500 807,894
Fletcher Challenge Energy Ltd. ........................................................ 644,500 2,889,345
-------------
8,856,344
-------------
Philippines 2.3%
Aboitiz Equity Ventures Inc. (Conglomerate: electricity, infrastructure,
shipbuilding)* ...................................................................... 13,309,270 435,508
First Philippine Holdings Corp. "B" (Holding company involved in electric power
distribution, construction services and passenger bus transportation) ............... 1,292,550 1,075,606
International Container Terminal Services, Inc. (Containerized cargo handling
firm)* .............................................................................. 6,860,300 1,354,643
Petron Corp. (Refiner and marketer of petroleum products) ............................. 3,379,200 357,461
-------------
3,223,218
-------------
Singapore 0.0%
Oversea-Chinese Banking Corp., Ltd. (Foreign registered) (Provider of banking
and financial services) ............................................................. 600 3,333
-------------
Taiwan 17.7%
ASE Test Ltd. (Testing services to semiconductor manufacturers)* ...................... 60,200 3,295,950
Acer Peripherals Inc. (Developer of computer peripherals and communication
products) (b) ....................................................................... 1,656,034 3,210,405
Asustek Computer Inc. (Manufacturer of computer mainboards, audio/video cards
and network cards)* ................................................................. 357,300 4,479,237
China Development Corp. (Leading venture capital firm and investment bank) ............ 1,113,125 3,146,961
Chung Hwa Pulp Corp. (Manufacturer of pulp and paper) ................................. 94,500 51,906
Compeq Manufacturing Co., Ltd. (Manufacturer of multi-layer double-sided printed
circuit boards) ..................................................................... 139,000 669,176
Delta Electronic Industrial (Manufacturer of power supply equipment) .................. 6,600 21,005
Delta Electronics, Inc. (Manufacturer of power supply equipment and monitors) (b) ..... 1,459,256 5,374,966
Far East Textile Ltd. (Manufacturer of natural and synthetic textile products) ........ 744,500 697,593
Hon Hai Precision Industry Co., Ltd. (Manufacturer of electronic connectors,
cable assemblies and memory chips)* ................................................. 129,000 546,010
Pacific Construction Co. (Land development and public works construction)* ............ 2,915,900 1,818,316
Synnex Technology International Corp. (GDR) (Retailer of personal computers and
peripherals)* ....................................................................... 87,400 1,525,130
-------------
24,836,655
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
United States 2.1%
Freeport McMoRan Copper & Gold, Inc. "A" (U.S. company mining in Indonesia) ........... 125,500 2,894,345
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $136,834,455) 114,857,470
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $162,598,182) (a) 140,125,303
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $164,850,995. At October 31,
1997, net unrealized depreciation for all securities based on tax cost was
$24,725,692. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $5,745,378 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$30,471,070
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $8,585,371 (5.83% 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 October 31, 1997 aggregated $9,926,725. These
securities may also have certain restrictions as to resale.
(c) Principal amount stated in U.S. dollars unless otherwise noted.
* Non-income producing security
Currency Abbreviations
MYR Malaysian Ringgits
The accompanying notes are an integral part of the financial statements.
14-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1997
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $162,598,182) ................ $ 140,125,303
Cash ................................................................. 804,363
Foreign currency holdings, at market (identified cost $6,321,995) .... 6,032,849
Receivables for investments sold ..................................... 610,430
Dividends and interest receivable .................................... 329,569
Receivables for Fund shares sold ..................................... 4,479,477
Foreign taxes recoverable ............................................ 20,929
Deferred organization expense ........................................ 1,141
Other assets ......................................................... 5,141
----------------
Total assets ......................................................... 152,409,202
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 4,431,272
Payable for Fund shares redeemed ..................................... 182,258
Accrued management fee ............................................... 156,290
Other payables and accrued expenses .................................. 362,690
----------------
Total liabilities .................................................... 5,132,510
--------------------------------------------------------------------------------------------
Net assets, at market value $ 147,276,692
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................. 2,615,133
Unrealized depreciation on:
Investments ....................................................... (22,472,879)
Foreign currency related transactions ............................. (298,947)
Accumulated net realized loss ........................................ (18,499,064)
Paid-in capital ...................................................... 185,932,449
--------------------------------------------------------------------------------------------
Net assets, at market value $ 147,276,692
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($147,276,692 / 12,936,930 shares of capital stock ----------------
outstanding, $.01 par value, 100,000,000 shares authorized) ....... $11.38
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Statement of Operations
year ended October 31, 1997
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $414,679) ................ $ 3,696,247
Interest (net of foreign taxes withheld of $2,011) ................... 1,227,337
-----------------
4,923,584
-----------------
Expenses:
Management fee ....................................................... 3,147,986
Services to shareholders ............................................. 1,256,944
Custodian and accounting fees ........................................ 728,892
Directors' fees and expenses ......................................... 63,485
Reports to shareholders .............................................. 113,001
Auditing ............................................................. 91,303
Registration fees .................................................... 68,864
Legal ................................................................ 15,259
Amortization of organization expenses ................................ 11,626
Other ................................................................ 52,698
-----------------
5,550,058
---------------------------------------------------------------------------------------------
Net investment loss (626,474)
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .......................................................... (1,244,368)
Foreign currency related transactions ................................ (548,236)
-----------------
(1,792,604)
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments .......................................................... (49,447,513)
Foreign currency related transactions ................................ (358,542)
-----------------
(49,806,055)
---------------------------------------------------------------------------------------------
Net loss on investment transactions (51,598,659)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (52,225,133)
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................... $ (626,474) $ 460,669
Net realized gain (loss) from investment transactions .......... (1,792,604) 2,141,153
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. (49,806,055) 9,929,700
-------------- --------------
Net increase (decrease) in net assets resulting from
operations .................................................. (52,225,133) 12,531,522
-------------- --------------
Distributions to shareholders from net investment income ....... (208,281) (2,376,933)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ...................................... 389,468,297 339,049,361
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................... 183,112 2,101,548
Cost of shares redeemed ........................................ (519,332,843) (405,479,114)
-------------- --------------
Net decrease in net assets from Fund share transactions ........ (129,681,434) (64,328,205)
-------------- --------------
Decrease in net assets ......................................... (182,114,848) (54,173,616)
Net assets at beginning of period .............................. 329,391,540 383,565,156
Net assets at end of period (including undistributed net -------------- --------------
investment income of $2,615,133, and $33,023, respectively) . $147,276,692 $329,391,540
-------------- --------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ...................... 20,682,798 24,595,415
-------------- --------------
Shares sold 24,241,782 20,929,794
Shares issued to shareholders in reinvestment of
distributions ............................................... 10,985 133,516
Shares redeemed ................................................ (31,998,635) (24,975,927)
-------------- --------------
Net decrease in Fund shares .................................... (7,745,868) (3,912,617)
-------------- --------------
Shares outstanding at end of period ............................ 12,936,930 20,682,798
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
December 8,
1992
(commencement
of operations) to
Years Ended October 31, October 31,
1997(a) 1996(a) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
Net asset value, beginning of period ..... $15.93 $15.59 $17.57 $16.21 $12.00
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ............. (.04) .02 .10 .04 .04
Net realized and unrealized gain
(loss) on investment transactions ..... (4.50) .42 (1.98) 1.41 4.17
-----------------------------------------------------------------------------
Total from investment operations ......... (4.54) .44 (1.88) 1.45 4.21
-----------------------------------------------------------------------------
Less distributions from:
Net investment income .................... (.01) (.10) (.10) (.08) --
Net realized gains on investment
transactions .......................... -- -- -- (.01) --
-----------------------------------------------------------------------------
Total distributions ...................... (.01) (.10) (.10) (.09) --
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net asset value, end of period ........... $11.38 $15.93 $15.59 $17.57 $16.21
- --------------------------------------------------------------------------------------------------------------------------
Total Return (%) ......................... (28.52) 2.76 (10.73) 8.97 35.08**
Ratios and Supplemental Data
Net assets, end of period
($ millions) .......................... 147 329 384 499 270
Ratio of operating expenses, net to
average daily net assets (%) .......... 1.94 1.75 1.74 1.81 1.75*
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .................. 1.94 1.75 1.74 1.81 2.90*
Ratio of net investment income
(loss) to average daily net
assets (%) ............................ (.22) .12 .65 .28 1.41*
Portfolio turnover rate (%) .............. 97.2 95.4 64.0 38.5 9.9*
Average commission rate paid (b) ......... $.0094 $.0148 -- -- --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for periods ending on or after October 31, 1996.
* Annualized
** Not annualized
18-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Pacific Opportunities Fund (the "Fund") is a non-diversified series of
Scudder International Fund, Inc. (the "Corporation"). The Corporation is
organized as a Maryland corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-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.
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.
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.
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 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.
19-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
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.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes, and no federal
income tax provision was required.
At October 31, 1997, the Fund had a net tax basis capital loss carryforward of
approximately $17,198,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2003 ($12,714,000), and October 31, 2005 ($4,484,000), the respective expiration
dates, whichever occurs first.
Distribution of Income and Gains. Distributions of net investment income are
made annually. During any particular year, 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 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 primarily relate to investments in passive foreign investment
companies and investments in certain securities sold at a loss. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
Other. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. All original issue discounts are accreted for both tax and
financial reporting purposes. Interest income is recorded on the accrual basis.
20-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
B. Purchases and Sales of Securities
For the year ended October 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $254,871,803 and
$399,103,521, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Management Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of 1.10% of the Fund's average daily net assets, computed and accrued daily and
payable monthly. For the year ended October 31, 1997, the fee pursuant to the
Agreement amounted to $3,147,986 of which $156,290 is unpaid at October 31,
1997.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close by the end of the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1997, the amount charged to the Fund by SSC aggregated
$1,057,225, of which $69,912 is unpaid at October 31, 1997.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans for the Fund. For the year ended October 31, 1997, the
amount charged to the Fund by STC aggregated $56,892, of which $3,816 is unpaid
at October 31, 1997.
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
October 31, 1997, the amount charged to the Fund by SFAC aggregated $192,884, of
which $27,593 is unpaid at October 31, 1997.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. For the period ended October
31, 1997, the Special Servicing Agreement expense charged to the Fund amounted
to $7,723.
21-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1997, Directors' fees and expenses aggregated $63,485.
D. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. Lines of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility 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 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 25 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
22-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and to the
Shareholders of Scudder Pacific Opportunities Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Pacific Opportunities Fund, including the investment portfolio, as of October
31, 1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the period
then ended, and for the period December 8, 1992 (commencement of operations) to
October 31, 1993. 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
October 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 Pacific Opportunities Fund as of October 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 four years in the period then ended, and for the period December 8, 1992
(commencement of operations) to October 31, 1993, in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 8, 1997
23-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Tax Information
The Fund paid foreign taxes of $416,690 and the Fund recognized $1,863,003 of
foreign source income during the taxable year ended October 31, 1997. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.0322 per
share of foreign taxes and $.145 of income from foreign sources as having been
paid in the taxable year ended October 31, 1997.
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 Scudder Fund account, please call a Scudder Service Representative at
1-800-225-5163.
24-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Stockholder Meeting Results
A Special Meeting of Stockholders (the "Meeting") of Scudder Pacific
Opportunities Fund (the "Fund") was held on October 27, 1997, at the offices of
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 certain 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 elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Paul Bancroft III 7,708,191 446,349
Sheryle J. Bolton 7,779,244 375,296
William T. Burgin 7,780,619 373,921
Thomas J. Devine 7,778,545 375,995
Keith R. Fox 7,713,522 441,018
William H. Gleysteen, Jr. 7,703,922 450,618
William H. Luers 7,777,307 377,233
Wilson Nolen 7,772,987 381,553
Daniel Pierce 7,779,240 375,300
Kathryn L. Quirk 7,694,131 460,409
2. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
7,626,875 315,729 211,936 643,763
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise. (Approved on December 2, 1997.)
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
7,388,060 652,763 365,392 673,196
25-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker Non-Votes*
-------------------- --- ------- ------- -----------------
<S> <C> <C> <C> <C>
4.1 Diversification 6,704,710 499,405 306,662 643,763
4.2 Borrowing 6,664,006 539,149 307,622 643,763
4.3 Senior securities 6,696,547 507,877 306,353 643,763
4.4 Purchase of commodities 6,700,919 503,683 306,175 643,763
4.5 Concentration 6,691,994 508,772 310,011 643,763
4.6 Underwriting of securities 6,702,170 502,020 306,587 643,763
4.7 Investment in real estate 6,712,281 495,881 302,615 643,763
4.8 Lending 6,698,965 450,945 360,867 643,763
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
7,774,028 136,387 244,125
* 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.
26-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
This Page
intentionally
left blank.
27-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Officers and Directors
Daniel Pierce*
Chairman of the Board and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Sheryle J. Bolton
Director; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin
Director; General Partner, Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; Consultant; Guest Scholar, Brookings Institute
William H. Luers
Director; President, The Metropolitan Museum of Art
Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and Assistant Secretary
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman Emeritus and Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Joyce E. Cornell*
Vice President
Richard W. Desmond*
Assistant Secretary
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
*Scudder, Stevens & Clark, Inc.
28-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
29-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
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-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. 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.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
31-SCUDDER PACIFIC OPPORTUNITIES FUND
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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