Scudder
Pacific
Opportunities
Fund
Semiannual Report
April 30, 1998
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 (logo)
<PAGE>
Scudder Pacific Opportunities Fund
- --------------------------------------------------------------------------------
Total Net Assets as of
Date of Inception: 12/8/92 4/30/98: $154.4 million Ticker Symbol: SCOPX
- --------------------------------------------------------------------------------
o The downturn in Southeast Asian currency and equity markets continued through
the end of 1997. Several of the hardest-hit markets, however, experienced
dramatic recoveries in early 1998, spurred by the announcement of IMF-imposed
reform packages.
o Even though the Scudder Pacific Opportunities Fund returned -4.88% for the
six-month period ended April 30, 1998, it performed relatively well compared to
the -10.75% for the MSCI All Country Asia Free Index (excluding Japan).
o The Fund's roughly 17% cash position at October 31, 1997, which helped dampen
the effects of the downturn during the final tumultuous months of 1997, was put
to work in early 1998 through investments in China, Hong Kong, the Philippines,
Korea, and India.
Table of Contents
3 Letter from the Fund's President 16 Financial Statements
4 Performance Update 19 Financial Highlights
5 Portfolio Summary 20 Notes to Financial Statements
6 Portfolio Management Discussion 25 Report of Independent Accountants
10 Glossary of Investment Terms 29 Investment Products and Services
11 Investment Portfolio 30 Scudder Solutions
2 - Scudder Pacific Opportunities Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
While many Pacific region markets posted sharp rebounds during the first
calendar quarter of 1998, market returns were disappointing for the six-month
period ended April 30, 1998. Against this challenging backdrop, Scudder Pacific
Opportunities Fund performed relatively well and was ranked among the top 12% of
82 Pacific (excluding Japan) funds according to Lipper Analytical Services for
the six-month period. Longer term, the Fund outperformed the average return of
funds in this category for the trailing 12-month period.
While the near-term outlook for the Pacific Basin is murky, the area's
longer-term potential is substantial. The Fund's management team remains focused
on finding well-run companies with good long-term potential at reasonable
prices. Over time, this approach has the potential to provide investors with
attractive returns.
Our views on the Asia situation are discussed by Elizabeth Allan, Theresa
Gusman, and Nick Bratt on page 6 of this report.
At the beginning of 1998, your Fund's investment adviser changed its name
to Scudder Kemper Investments, Inc. from Scudder, Stevens & Clark, Inc.,
reflecting the acquisition of a majority interest in Scudder by Zurich Insurance
Company, and the combining of Scudder's business with that of Zurich Kemper
Investments, Inc. We think this combination is very positive, and will provide
your Fund's manager with expanded resources.
For those of you who are interested in new Scudder products, April 6th
marked the debut of our latest entrant in the growth and income category,
Scudder Real Estate Investment Fund. In addition, we will add another fund in
this category on July 17, Scudder Dividend & Growth Fund. For further
information on these new funds, please call 1-800-225-2470.
Thank you for your continued investment in Scudder Pacific Opportunities
Fund. If you have any questions about your Fund, please call Scudder Investor
Relations at the number above, or visit our web site at
http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Pacific Opportunities Fund
3 - Scudder Pacific Opportunities Fund
<PAGE>
PERFORMANCE UPDATE as of April 30, 1998
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Ended Growth of Average
4/30/98 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------
1 Year $ 6,649 -33.51% -33.51%
5 Year $ 8,354 -16.46% -3.53%
Life of Fund* $ 9,182 -8.18% -1.57%
- --------------------------------------------
MSCI ALL COUNTRY ASIA FREE INDEX
(EXCLUDING JAPAN)
- --------------------------------------------
1 Year $ 6,211 -37.89% -37.89%
5 Year $ 9,645 -3.55% -.72%
Life of Fund* $ 11,487 14.87% 2.63%
- --------------------------------------------
* 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
'93 $11,019
'94 $13,498
'95 $12,811
'96 $14,490
'97 $13,844
'98 $ 9,205
MSCI ALL COUNTRY ASIA FREE INDEX
(EXCLUDING JAPAN)
Year Amount
- ------------------------
12/92* $10,000
'93 $11,910
'94 $16,806
'95 $16,185
'96 $19,974
'97 $18,496
'98 $11,487
YEARLY PERIODS ENDED APRIL 30
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.
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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 APRIL 30
1993* 1994 1995 1996 1997 1998
---------------------------------------------------------
NET ASSET VALUE... $ 13.19 $ 16.08 $ 15.17 $ 17.05 $ 16.27 $ 10.51
INCOME DIVIDENDS.. $ -- $ .08 $ .10 $ .10 $ .01 $ .30
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .01 $ -- $ -- $ -- $ --
FUND TOTAL
RETURN (%)........ 9.92 22.49 -5.09 13.11 -4.46 -33.51
INDEX TOTAL
RETURN (%)........ 19.10 41.11 -3.69 23.42 -7.40 -37.89
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 April 30, 1998
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GEOGRAPHICAL
(Excludes 4% Cash Equivalents)
- ---------------------------------------------------------------------------
Hong Kong 23%
Taiwan 21%
Australia 9%
India 9%
Philippines 7%
China 6%
Korea 6%
New Zealand 5%
Indonesia 4%
Other 10%
- --------------------------------------
100%
- --------------------------------------
Quality companies in China, Hong
Kong, the Philippines, Korea, and
India were added based on a more
proactive response to the crisis in
these countries.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS
(Excludes 4% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 29%
Technology 18%
Communications 9%
Manufacturing 9%
Transportation 8%
Consumer Staples 5%
Utilities 5%
Metals & Minerals 4%
Service Industry 4%
Other 9%
- --------------------------------------
100%
- --------------------------------------
The portfolio's sector weightings
are the result of an individual
stock selection approach, rather
than a top-down allocation of
assets.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(23% of Portfolio)
- --------------------------------------------------------------------------
1. HSBC Holdings Ltd.
Bank
2. Philippine Long Distance Telephone Co.
Telecommunication services
3. New World Development Co., Ltd.
Property investment and development, construction
and engineering, hotels and restaurants,
telecommunications
4. CLP Holdings, Ltd.
Electric power holding company
5. ASE Test Ltd.
Testing services to semiconductor manufacturers
6. QBE Insurance Group Ltd.
Commercial, industrial and individual insurance
underwriter
7. Fletcher Challenge Energy
Oil and gas exploration and development
8. Austrailia & New Zealand Banking Group
Ltd.
General trading and savins bank
9. Smartone Telecommunications
Cellular communication services
10. Asustek Computer Inc.
Manufacturer of computer mainboards,
audio/visual cards and network cards
Changes to top fund holdings
over the six months reflect an
increased emphasis on attractive
valuations and high quality
companies.
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
This interview with Elizabeth J. Allan, Theresa M. Gusman, and Nick Bratt,
portfolio managers of Scudder Pacific Opportunities Fund, takes a look at the
market environment in the Pacific region and the Fund's strategy during the
six-month period ended April 30, 1998.
Q: How did the Fund perform for the six-month period?
A: The Fund returned -4.88%, compared with a -10.75% return for the MSCI All
Country Asia Free Index (excluding Japan). After declining sharply at the end of
1997, markets such as Korea and Thailand posted dramatic gains in early 1998
with the announcement of IMF (International Monetary Fund)-imposed reform
packages. These rallies were positive for the Fund; however, the Indonesian,
Chinese, and South Korean markets ended the period with sharply negative returns
for the six months.
Q: What factors contributed to the Fund's outperformance relative to its
benchmark index?
A: The Fund's relative outperformance was due largely to its technology holdings
in Taiwan -- including Asustek Computer and ASE Test -- stock selection in Hong
Kong, and stepped-up exposure to the Philippines. Also, Australian financial
stocks such as QBE Insurance were a plus.
Q: How would you describe the investment environment during the period?
A: In the final months of 1997, rising interest rates and ballooning foreign
currency debt threatened corporate earnings. At the same time, sudden demand for
liquidity and panic selling by investors took a significant toll on the region's
stock markets.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
Market Performance
BAR CHART PERIOD:
Six Months Ended April 30, 1998
CHART DATA:
% Change in % Change in
U.S. Dollar Currency Relative
Return to U.S. Dollar
----------- -----------------
Australia 7.93 15.37
Philippines 6.89 21.32
Taiwan 0.95 7.66
India -1.78 7.27
Thailand -4.35 -9.83
Hong Kong -9.62 -11.44
Singapore -9.93 -9.33
New Zealand -10.51 -1.13
Malaysia -15.09 -5.21
Korea -20.80 9.71
China -30.07 -29.97
Indonesia -61.62 -14.02
Source: Morgan Stanley Capital International
Volatility persisted into 1998 as investors balanced risks and opportunities.
The year began with Southeast Asian equity and currency markets plummeting to
new lows as investors worried about the possibility of debt-payment suspension
6 - Scudder Pacific Opportunities Fund
<PAGE>
and further economic meltdowns. By mid-January, Indonesian equities had fallen
nearly 60% in U.S. dollar terms from year-end levels, with Malaysia, Singapore,
Hong Kong, the Philippines, and Thailand all down by more than 25%.
The announcement of IMF-imposed reform packages in Indonesia, Korea, and
Thailand marked a turning point. IMF support, coupled with compelling valuations
after the selloff, set the stage for several powerful rallies. During the first
three months of the year, Thailand's stock market surged.
In March, this euphoria began to wane as the reality of the situation set in:
near-certain economic hardship, potential social and political instability,
stretched valuations, and government backsliding on announced reform programs.
By the end of April, several markets including Indonesia, Korea, and Thailand
had given back some or all of their first-quarter gains, yielding flat or
negative performance for the full six-month period.
Q: What was the Fund's strategy during this tumultuous period?
A: We significantly altered the Fund's portfolio composition in the first few
months of 1998. We used our cash reserves to buy stocks of quality companies at
compelling valuations, particularly in China, the Philippines, Korea, and India,
where policy response to the crisis has been the most proactive. In each case,
we looked for attractive companies with excellent management, dominant market
positions, a clear competitive advantage, high or improving return-on-equity,
and strong balance sheets.
In China, we were encouraged by the government's aggressive program of
infrastructure investment as a counterbalance to weaker growth in consumption
and exports (see box on page 8). As a result, we bolstered our
already-substantial exposure to road, power, and telecommunications companies.
Purchases included Sichuan Expressway, Beijing Datang Power, and China Telecom.
In Hong Kong and the Philippines, we purchased shares of New World
Infrastructure, Smartone Telecommunications, Philippino Telephone convertible
bonds, and Ayala Land. In Korea, we added several "blue chip" holdings at
attractive valuations including Pohang Iron and Steel and Samsung Electronics.
In February, we took profits in select Taiwanese technology shares, including
ASE Test, Asustek, and Delta Electronics. These sales notwithstanding, we
increased and diversified the Fund's holdings in Taiwan. We maintain our view
that the outsourcing trend among PC producers and the push toward
ever-lower-priced computers will benefit Taiwanese technology companies. In
addition, we took a position in Taishin International Bank, an undervalued and
conservatively managed Taiwanese bank.
Q: How do existing and anticipated political and economic reforms factor in?
A: We believe the duration of the turbulence in Asian equity and currency
markets will be influenced by government and corporate responses to the crisis.
As we have seen, proactive and pro-market responses are received favorably by
7 - Scudder Pacific Opportunities Fund
<PAGE>
THE FOLLOWING IS A FULL PAGE CALLOUT INSERTED ON SEPARATE PAGE
- --------------------------------------------------------------------------------
Trip Notes: China
Reforms Underway Lay Foundation for Higher Quality Growth
Consolidating its political standing after a year of transition, the Chinese
government has made significant progress developing a comprehensive framework
to implement long-term structural changes. Based on a recent visit to China,
our view is that the Asian economic crisis and the slowing Chinese economy
have given fresh impetus to the rate of structural reforms. However, the
sheer size of the economy, the magnitude of the challenges, and the existing
bottlenecks in the system lead us to believe that implementation will take
time, and at least 3-5 years to bear fruit.
Nonetheless, we believe there are investment opportunities in the meantime.
The Chinese government is acutely concerned about the weak domestic economy,
and we believe they will do their best to follow through with the highly
publicized fiscal stimulus policy. This initiative aims to keep the economy
afloat at a difficult time by targeting infrastructure and mass residential
housing development. Both are important issues on the government's long-term
economic development and reform agenda. The keys to the success of these
initiatives are anticipated reforms of the banking and financial sectors, and
state-owned enterprises in particular.
We are increasingly confident that China's economy is not poised at the edge
of a precipice, but rather, that it continues on a long and gradual uptrend
aided by secular changes in the economy. Despite China's vast population and
its attendant potential, identifying good investment opportunities requires
careful analysis and a selective approach, as the economy remains highly
fragmented with many inefficiencies. We continue to believe that together the
equity markets of Hong Kong, Taiwan, and China offer a wide spectrum of
growth opportunities. We believe these are best exploited on the dips that
inevitably come when confidence over China's longer-term prospects waver
unduly.
- --------------------------------------------------------------------------------
8 - Scudder Pacific Opportunities Fund
<PAGE>
the equity and currency markets. Needed reforms include establishing proper
monetary and fiscal policy frameworks, improving banking sector supervision,
introducing deregulation and liberalization measures, and improving corporate
and statistical transparency.
The Philippines, for example, has embraced many of these reforms, and President
Ramos seems to be doing all in his power to ensure that his successor continues
to promote the investor-friendly posture that has been a goal of his
administration. China also has taken a proactive stance as evidenced by its
stated commitment to accelerate the reform of state-owned enterprises and the
financial sector, rationalize government bureaucracy, promote home ownership,
and boost infrastructure spending. We believe the IMF-imposed reform packages
introduced in Indonesia, Korea, and Thailand are clearly a step in the right
direction. But, it is unclear whether the latter two countries have the
political, social, and financial fortitude to follow the IMF road to recovery.
Malaysia's response to the crisis is still uncertain.
Q: How do you expect to manage the portfolio going forward?
A: We believe superior stock selection is the key to superior performance.
Original, forward-looking fundamental equity research remains the cornerstone of
our investment strategy. While the landscape for investing in the Pacific has
changed dramatically over the last year, we will continue to look for companies
with the potential for rapid growth that are undervalued, exceptionally
well-managed and dominant in clearly identifiable market niches. We are placing
increased emphasis on valuation analysis, which should help us determine the
proper re-entry price points for high-quality companies in the region. In the
coming months, we believe continued exposure to the Australian financial
services sector and Taiwan, coupled with increased holdings in China, Hong Kong,
India, the Philippines, and Korea, should position the Fund to benefit from a
recovery in the Pacific region.
9 - Scudder Pacific Opportunities Fund
<PAGE>
Glossary of Investment Terms
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 the total return of
their investment.
DIVERSIFICATION The spreading of risk by putting money in
several different classes of investments,
such as stocks, bonds, money market
instruments and real estate, or in several
stocks in different industries.
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.
INTERNATIONAL MONETARY An organization focused on lowering trade
FUND (IMF) barriers and stabilizing currencies. While
helping developing nations pay their debts,
the IMF usually imposes tough guidelines
aimed at lowering inflation, cutting imports,
and raising exports.
LIQUIDITY A characteristic of an investment or an asset
referring to the ease of convertibility into
cash within a reasonably short period of
time.
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.
VOLATILITY The tendency of a security, commodity, or
market to rise and fall in price over time.
Volatility is inherent in almost all
investments but differs in degree from
investment to investment and from market to
market. For example, in the United States,
short-term bond funds are relatively low risk
and tend to have limited price changes. By
contrast, stock mutual funds historically
have been relatively high risk investments.
While generally offering greater potential
returns, these investments exhibit much
greater variations in price.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
10 - Scudder Pacific Opportunities Fund
<PAGE>
Investment Portfolio as of April 30, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 3.9%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 4/30/98 at 5.5%,
to be repurchased at $5,214,797 on 5/1/98, collateralized by a $4,255,000 U.S. -----------
Treasury Bond, 7.875%, 2/15/21 (Cost $5,214,000) ...................................... 5,214,000 5,214,000
-----------
Convertible Bonds 6.1%
- ------------------------------------------------------------------------------------------------------------------------------
Hong Kong 1.5%
Kerry Properties Ltd., 2%, 6/15/07 ...................................................... 640,000 592,000
New World Infrastructure Ltd., 5%, 7/15/01 .............................................. 688,000 681,120
New World Infrastructure Ltd., 1%, 4/15/03 ............................................. 756,000 712,530
-----------
1,985,650
-----------
Indonesia 2.3%
APP Global Finance Ltd., 2%, 7/25/00 .................................................... 1,260,000 1,316,700
Asia Pulp & Paper Company Ltd., Zero Coupon, 11/18/12 ................................... 6,934,000 1,707,498
-----------
3,024,198
-----------
Philippines 1.0%
International Container Terminal, Inc., 1.75%, 3/13/04 .................................. 48,000 41,640
Philippino Telephone Corp., 1.750%, 7/17/06 ............................................. 1,678,000 1,342,400
-----------
1,384,040
-----------
Singapore 1.3%
Wing Tai Holdings Ltd., 1.5%, 7/15/02 ................................................... 2,325,000 1,639,119
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $7,604,498) 8,033,007
- ------------------------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 89.7%
- ------------------------------------------------------------------------------------------------------------------------------
Australia 8.7%
Australia & New Zealand Banking Group Ltd. (General trading and savings bank) ........... 391,806 2,735,211
Broken Hill Proprietary Co., Ltd. (ADR) (Steel, minerals and petroleum
exploration and production) ........................................................... 76,600 1,512,850
Commonwealth Bank of Australia (Bank) ................................................... 128,357 1,541,301
QBE Insurance Group Ltd. (Commercial, industrial and individual insurance
underwriter) .......................................................................... 633,874 2,910,649
Qantas Airways Ltd. (International airline) ............................................. 896,750 1,368,679
Smith (Howard) Ltd. (Shipping and engineering conglomerate) ............................. 190,700 1,353,548
-----------
11,422,238
-----------
China 5.7%
Beijing Datang Power Generation Co., Ltd. "H" (Owner and operator of coal-fired
electric power plants) ................................................................ 994,000 410,638
China Resources Beijing Land (Real estate holding company) .............................. 2,446,000 1,294,681
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Pacific Opportunities Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
China Telecommunications Ltd. (Telecommunication services)* ............................. 147,000 278,970
Jiangsu Expressway Co., Ltd. "H" (Builder and manager of the Shanghai-Nanjing
expressway) ........................................................................... 5,196,000 1,509,295
Shenzhen Expressway Co. "H" (Highway developer) ......................................... 5,133,000 1,408,162
Sichuan Expressway Co. "H"(Developer of toll roads, bridges and tunnels) ................ 4,139,000 710,673
Zhejiang Expressway Co., Ltd. "H" (Road construction and management) .................... 8,334,000 1,990,434
-----------
7,602,853
-----------
Hong Kong 20.8%
CLP Holdings Ltd. (Electric power holding company) ...................................... 633,500 3,042,370
Cheung Kong Holdings Ltd. (Real estate company) ......................................... 213,000 1,416,150
China Southern Airlines Co., Ltd. "H" (Commercial airline service in southeast
Asia)* ................................................................................ 4,460,000 955,797
Citic Pacific Ltd. (Diversified holding company) ........................................ 751,000 2,312,335
Dao Heng Bank Group Ltd. (Commercial bank holding company) .............................. 601,000 1,776,775
First Pacific Corp., Ltd. (International management and investment company) ............. 1,390,000 668,442
HSBC Holdings PLC (Bank) ................................................................ 146,190 4,170,926
Hutchison Whampoa, Ltd. (Container terminal and real estate company) .................... 413,000 2,553,925
Li & Fung Ltd. (Investment holding company, engaged in export trading) .................. 1,464,000 2,457,010
Liu Chong Hing Bank Ltd. (Commercial bank) .............................................. 173,000 242,325
National Mutual Asia Ltd. (Insurance company) ........................................... 912,000 729,977
New World Development Co., Ltd. (Property investment and development,
construction and engineering, hotels and restaurants, telecommunications) ............. 1,140,706 3,239,805
New World Infrastructure Ltd. (Investment and operation of infrastructure
projects)* ............................................................................ 47,400 101,886
Smartone Telecommunications Holdings, Ltd. (Cellular communication services) ............ 1,027,000 2,698,096
South China Morning Post Co., Ltd. (Newspaper publisher) ................................ 1,980,000 1,188,613
-----------
27,554,432
-----------
India 8.6%
Corporation Bank (Commercial bank) ...................................................... 459,600 1,667,591
Crompton Greaves Ltd. (GDR) (Manufacturer of electrical equipment)* ..................... 922,689 1,799,244
HDFC Bank Ltd. (Corporate banking and financial services) ............................... 1,302,000 2,506,305
Hero Honda Motors Ltd. (Manufacturer of motorized two wheelers) ......................... 7,100 213,366
Housing Development Finance Corp. Ltd. (Housing finance provider to individuals,
corporations and developers) .......................................................... 7,095 576,497
Indian Tobacco Co. (Tobacco company) .................................................... 93,400 1,853,772
Mahanagar Telephone Nigan Ltd. (Telecommunication services in Delhi and Bombay) ......... 329,300 2,089,478
TVS Suzuki Ltd. (Manufacturer of motorcycles and mopeds) ................................ 52,700 745,085
-----------
11,451,338
-----------
</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>
Indonesia 1.3%
Gudang Garam (Manufactures and distributes cigarettes) .................................. 59,500 71,028
Gulf Indonesia Resources Ltd. (Independent oil and gas producer)* ....................... 36,300 558,113
Indorama Synthetics (Producer of polyester yarn, fiber and fabric) ...................... 3,715,300 963,656
PT Astra International, Inc. (Distributor of automobiles and related parts) ............. 979,000 192,741
-----------
1,785,538
-----------
Korea 5.6%
Hyundai Engineering & Construction Co. (Leading general contractor)* .................... 1,320 6,667
Hyundai Engineering & Construction Co. Rights (expire 5/7/98) (b)* ...................... 297 389
Korea Electric Power Co. (Electric utility) ............................................. 170,380 2,320,177
Pohang Iron & Steel Co., Ltd. (Leading steel producer) (b) .............................. 30,740 1,653,152
Samsung Display Devices Co. (Leading manufacturer of CRT and picture tubes) ............. 36,723 1,827,220
Samsung Electronics Co., Ltd. (Major electronics manufacturer) .......................... 27,680 1,532,600
Samsung Electronics Co., Ltd. Rights (expire 6/25/98) (b)* .............................. 2,202 42,508
-----------
7,382,713
-----------
Malaysia 2.4%
Kuala Lumpur Kepong Berhad (Producer of palm products, natural rubber and cocoa) ........ 614,000 1,427,715
United Plantations Berhad (Cultivation and processing of oil palm, copra and
cocoa) ................................................................................ 1,447,000 1,742,624
-----------
3,170,339
-----------
New Zealand 4.9%
Fletcher Challenge Building Corp. (Commercial, industrial and residential
construction) ......................................................................... 1,125,700 2,276,188
Fletcher Challenge Energy Ltd. (Oil and gas exploration and development) ................ 644,500 2,198,241
Fletcher Challenge Energy Ltd. (AUD) (Oil and gas exploration and development) .......... 179,500 620,518
Telecom Corp. of New Zealand (Installment Receipts, Partly Paid 3/31/99)
(Telecommunication services) .......................................................... 538,600 1,445,099
-----------
6,540,046
-----------
Philippines 5.8%
Aboitiz Equity Ventures Inc. (Conglomerate: electricity, infrastructure,
shipbuilding)* ........................................................................ 6,183,270 308,008
Ayala Land, Inc. (Real estate and land developer) ....................................... 4,326,000 1,696,999
First Philippine Holdings Corp. "B" (Holding company involved in electric power
distribution, construction services and passenger bus transportation) ................. 1,551,060 1,139,633
International Container Terminal Services, Inc. (Containerized cargo handling
firm) ................................................................................. 7,225,900 953,855
Philippine Long Distance Telephone Co. (Telecommunication services) ..................... 33,000 883,562
Philippine Long Distance Telephone Co. (Global Sponsored Depository Shares)
(pfd.) ................................................................................ 53,300 2,731,625
-----------
7,713,682
-----------
</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>
Singapore 1.8%
Oversea-Chinese Banking Corp., Ltd. (Foreign registered) (Commercial bank) .............. 156,000 822,868
Overseas Union Bank Ltd. (Foreign registered) (Provider of banking and financial
services) ............................................................................. 225,000 852,811
United Overseas Bank, Ltd. (Foreign registered) (Commercial bank) ....................... 157,000 743,841
-----------
2,419,520
-----------
Taiwan 20.1%
ASE Test Ltd. (Testing services to semiconductor manufacturers)* ........................ 60,200 3,040,100
Acer Peripherals, Inc. (Developer and distributor of computer peripherals) .............. 1,265,033 2,301,839
Asustek Computer Inc. (Manufacturer of computer mainboards, audio/video cards
and network cards)* ................................................................... 132,300 2,696,193
China Development Corp. Ltd. (Leading venture capital firm and investment bank)* ........ 14,825 40,238
Compeq Manufacturing Co., Ltd. (Manufacturer of multi-layer double-sided printed
circuit boards)* ...................................................................... 327,000 2,518,855
Delta Electronic Industrial (Manufacturer of power supply equipment) .................... 700,855 2,571,789
Far East Textile Ltd. (Manufacturer of natural and synthetic textile products) .......... 500 455
GVC Corp. (Manufacturer of fax modems and PC mother boards)* ............................ 788,000 963,059
Gold Circuit Electronics Ltd. (Manufacturer of double-sided and multi-layer
circuit boards)* ...................................................................... 230,000 1,597,295
Hon Hai Precision Industry Co., Ltd. (Manufacturer of electronic connectors,
cable assemblies and memory chips)* ................................................... 462,000 2,690,079
Pacific Construction Co. (Land development and public works construction)* .............. 2,915,900 1,653,621
Phoenixtec Power Co., Ltd. (Manufacturer of industrial electric and electronic
products)* ............................................................................ 97,000 316,229
Siliconware Corp. (Testing and packaging of integrated circuits)* ....................... 821,000 1,269,799
Synnex Technology International Corp.(GDR) (Distributor of personal computers
and peripherals)* ..................................................................... 362,000 2,063,898
Taishin International Bank (Commercial bank) ............................................ 2,104,000 1,480,320
Taishin International Bank (pfd.) (b)* .................................................. 58,940 37,322
Lite-on Electronics, Inc. (Manufacturer of electronic components and power
supplies) ............................................................................. 495,000 1,411,090
-----------
26,652,181
-----------
Thailand 2.1%
Bank SinoPac (Commercial bank)* ......................................................... 1,950,000 1,419,279
PTT Exploration and Production Co., Ltd. (Foreign registered) (Petroleum
refinery) ............................................................................. 128,800 1,359,648
-----------
2,778,927
-----------
United States 1.9%
Freeport McMoRan Copper & Gold, Inc. "A" (US company mining in Indonesia) ............... 139,000 2,475,939
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $129,754,466) 118,949,746
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Pacific Opportunities Fund
<PAGE>
<TABLE>
<CAPTION>
Number of Market
Contracts Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Purchased Option 0.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hong Kong -----------
Call on Hang Seng, strike price 10,625 HKD, expires 8/3/98 (Cost $909,133) .............. 4,371 356,322
-----------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $143,482,097) (a) 132,553,075
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $144,947,022. At April 30,
1998, net unrealized depreciation for all securities based on tax cost was
$12,393,947. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $10,679,110 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$23,073,057.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $1,733,371 (1.12% 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 April 30, 1998 aggregated $1,215,221. These securities
may also have certain restrictions as to resale.
(c) Principal amount stated in U.S. dollars unless otherwise noted.
* Non-income producing security
At April 30, 1998, outstanding written options were as follows:
<TABLE>
<CAPTION>
Number of Expiration Strike Price Market
Call Options Contracts Date (HKD) Value($)
------------------------ ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hang Seng. 4,371 8/3/98 13,500 8,865
---------
Total outstanding written options (Premiums received $317,983) .......................... 8,865
=========
</TABLE>
Transactions in written options during the six months ended April 30, 1998
were:
<TABLE>
<CAPTION>
Number of Contracts Premiums ($)
--------------------------------------------------
<S> <C> <C>
Outstanding at
October 31, 1997 ................................................ -- --
Contracts written ............................................... 4,371 317,983
Contracts closed ................................................ -- --
--------------------------------------------------
Outstanding at
April 30, 1998 (strike price HKD 13,500, expires 8/3/98) ........ 4,371 317,983
===== =======
</TABLE>
Currency Abbreviations
----------------------
AUD Australian Dollars
HKD Hong Kong Dollars
The accompanying notes are an integral part of the financial statements.
15 - Scudder Pacific Opportunities Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 1998
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $143,482,097) ................ $ 132,553,075
Foreign currency holdings, at market (identified cost
$7,413,917) ........................................................ 7,439,772
Receivables for investments sold ..................................... 946,917
Dividends and interest receivable .................................... 225,896
Receivables for Fund shares sold ..................................... 16,984,072
Foreign taxes recoverable ............................................ 25,497
Unrealized appreciation on forward currency exchange contracts ....... 288,885
Other assets ......................................................... 3,874
----------------
Total assets ......................................................... 158,467,988
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 3,383,083
Payable for Fund shares redeemed ..................................... 353,967
Written options, at value (premiums received $317,983) ............... 8,865
Accrued management fee ............................................... 134,187
Other payables and accrued expenses .................................. 233,487
----------------
Total liabilities .................................................... 4,113,589
-------------------------------------------------------------------------------------------
Net assets, at market value $ 154,354,399
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distribution in excess of net investment income .......... (771,256)
Unrealized appreciation (depreciation) on:
Investments ....................................................... (10,929,022)
Written options ................................................... 309,118
Foreign currency related transactions ............................. 295,021
Accumulated net realized loss ........................................ (35,568,921)
Paid-in capital ...................................................... 201,019,459
-------------------------------------------------------------------------------------------
Net assets, at market value $ 154,354,399
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($154,354,399 / 14,686,952 shares of capital stock ----------------
outstanding, $.01 par value, 100,000,000 shares authorized) ........ $10.51
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Pacific Opportunities Fund
<PAGE>
Statement of Operations
six months ended April 30, 1998
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $79,238) ................. $ 1,057,071
Interest (net of foreign taxes withheld of $4,244) ................... 799,898
----------------
1,856,969
----------------
Expenses:
Management fee ....................................................... 773,179
Services to shareholders ............................................. 470,214
Custodian and accounting fees ........................................ 195,186
Trustees' fees and expenses .......................................... 28,679
Reports to shareholders .............................................. 59,073
Auditing ............................................................. 33,398
Registration fees .................................................... 13,409
Legal ................................................................ 7,323
Amortization of organization expenses ................................ 1,143
Other ................................................................ 9,349
----------------
1,590,953
-------------------------------------------------------------------------------------------
Net investment income (loss) 266,016
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .......................................................... (16,405,853)
Foreign currency related transactions ................................ (664,004)
----------------
(17,069,857)
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments (Net of India Tax $168,200) .............................. 11,543,857
Written options ...................................................... 309,118
Foreign currency related transactions ................................ 593,968
----------------
12,446,943
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (4,622,914)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (4,356,898)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Pacific Opportunities Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
April 30, October 31,
Increase (Decrease) in Net Assets 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ................................ $ 266,016 $ (626,474)
Net realized gain (loss) from investment transactions ....... (17,069,857) (1,792,604)
Net unrealized appreciation (depreciation) on
investment transactions during the period ................. 12,446,943 (49,806,055)
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ................................................ (4,356,898) (52,225,133)
---------------- ----------------
Distributions to shareholders from net investment
income .................................................... (3,652,405) (208,281)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................... 254,984,269 389,468,297
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 3,371,466 183,112
Cost of shares redeemed ..................................... (243,268,725) (519,332,843)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. 15,087,010 (129,681,434)
---------------- ----------------
Increase (decrease) in net assets ........................... 7,077,707 (182,114,848)
Net assets at beginning of period ........................... 147,276,692 329,391,540
Net assets at end of period (including accumulated
distribution in excess of net investment income of
$771,256 and undistributed net investment income of ---------------- ----------------
$2,615,133) .............................................. $ 154,354,399 $ 147,276,692
---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 12,936,930 20,682,798
---------------- ----------------
Shares sold ................................................. 24,174,102 24,241,782
Shares issued to shareholders in reinvestment of
distributions ............................................. 336,809 10,985
Shares redeemed ............................................. (22,760,889) (31,998,635)
---------------- ----------------
Net increase (decrease) in Fund shares ...................... 1,750,022 (7,745,868)
---------------- ----------------
Shares outstanding at end of period ......................... 14,686,952 12,936,930
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - 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
Six Months (commencement
Ended Years Ended October 31, of operations) to
April 30, October 31,
1998(a) 1997(a) 1996(a) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of period ....... $11.38 $15.93 $15.59 $17.57 $16.21 $12.00
Income from investment operations: ----------------------------------------------------------------------------
Net investment income (loss) ............... .02 (.04) .02 .10 .04 .04
Net realized and unrealized gain (loss)
on investment transactions .............. (.59) (4.50) .42 (1.98) 1.41 4.17
----------------------------------------------------------------------------
Total from investment operations ........... (.57) (4.54) .44 (1.88) 1.45 4.21
Less distributions from: ----------------------------------------------------------------------------
Net investment income ...................... (.30) (.01) (.10) (.10) (.08) --
Net realized gains on investment
transactions ............................ -- -- -- -- (.01) --
----------------------------------------------------------------------------
Total distributions ........................ (.30) (.01) (.10) (.10) (.09) --
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value, end of period ............. $10.51 $11.38 $15.93 $15.59 $17.57 $16.21
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) ........................... (4.88)** (28.52) 2.76 (10.73) 8.97 35.08**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ..... 154 147 329 384 499 270
Ratio of operating expenses, net to
average daily net assets (%) ............ 2.29* 1.94 1.75 1.74 1.81 1.75*
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .................... 2.29* 1.94 1.75 1.74 1.81 2.90*
Ratio of net investment income
(loss) to average daily net assets (%) .. .38* (.22) .12 .65 .28 1.41*
Portfolio turnover rate (%) ................ 113.8* 97.2 95.4 64.0 38.5 9.9*
Average commission rate paid (b) ........... $.0068 $.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
19 - 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.
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 indices 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.
20 - Scudder Pacific Opportunities Fund
<PAGE>
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 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.
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 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.
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.
21 - Scudder Pacific Opportunities Fund
<PAGE>
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.
B. Purchases and Sales of Securities
For the six months ended April 30, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $82,291,195 and
$68,178,901, respectively.
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
22 - Scudder Pacific Opportunities Fund
<PAGE>
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 was 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 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 six months ended April 30, 1998, the fee pursuant to
these agreements amounted to $773,179 of which $134,187 is unpaid at April 30,
1998.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 1998, the amount charged to the Fund by SSC
aggregated $388,401, of which $60,043 is unpaid at April 30, 1998.
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 six months ended April 30, 1998,
the amount charged to the Fund by STC aggregated $21,420, of which $3,631 is
unpaid at April 30, 1998.
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 six months
ended April 30, 1998, the amount charged to the Fund by SFAC aggregated $60,929,
of which $10,925 is unpaid at April 30, 1998.
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.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 1998, Directors' fees and expenses aggregated $28,679.
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
23 - Scudder Pacific Opportunities Fund
<PAGE>
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. Commitments
As of April 30, 1998, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized appreciation of
$288,885.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
--------------------------------- --------------------------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Taiwan Dollars 290,122,229 U.S. Dollars 9,081,361 5/18/98 288,885
=========
</TABLE>
F. 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.
24 - 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 April 30,
1998, and the related statement of operations for the six months then ended, the
statements of changes in net assets for the six months then ended and for the
year ended October 31, 1997, and the financial highlights for the six months
ended April 30, 1998, for each of the four years in the period ended October 31,
1997, 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 April
30, 1998, 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 April 30, 1998, the results of its
operations for the six months then ended, the changes in its net assets for the
six months then ended and for the year ended October 31, 1997, and the financial
highlights for the six months ended April 30, 1998, for each of the four years
in the period ended October 31, 1997, 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.
June 5, 1998
25 - Scudder Pacific Opportunities Fund
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27 - Scudder Pacific Opportunities Fund
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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
Nicholas Bratt*
President
Elizabeth J. Allan*
Vice President
Irene T. Cheng*
Vice President
Joyce E. Cornell*
Vice President
Susan E. Dahl*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Theresa Gusman*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
Sheridan P. Reilly*
Vice President
John R. Hebble*
Assistant Treasurer
Richard W. Desmond*
Assistant Secretary
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, 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
Scudder Real Estate Investment 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 previously designated.
Distributions Direct
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 8,000 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
</TABLE>
31 - Scudder Pacific Opportunities Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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