SCUDDER
INVESTMENTS(SM)
[LOGO]
- -----------------------------
EQUITY/GLOBAL
- -----------------------------
Scudder Pacific Opportunities Fund
Fund #073
Annual Report
October 31, 1999
The fund seeks to provide long-term growth of capital.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
- --------------------------------------------------------------------------------
4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
16 Glossary of Investment Terms
17 Investment Portfolio
22 Financial Statements
25 Financial Highlights
26 Notes to Financial Statements
32 Report of Independent Accountants
33 Tax Information
34 Officers and Directors
35 Investment Products and Services
37 Scudder Solutions
2
<PAGE>
Scudder Pacific Opportunities Fund
- --------------------------------------------------------------------------------
ticker symbol SCOPX fund number 073
- --------------------------------------------------------------------------------
Date of o Asian stocks surged in the first half of the calendar
Inception: year due to favorable liquidity factors and a
12/8/92 resurgence in economic growth. In the third quarter,
however, sentiment was dampened by global interest rate
concerns, Daewoo's debt default, and the Taiwan
earthquake.
Total Net Assets o Despite these short-term difficulties, the long-term
as of 10/31/99: Asian growth story remains intact. Fund management
$143 million believes that corporate restructuring, improving
macroeconomic fundamentals, and structural reforms
should act as catalysts for higher stock prices in
the years ahead.
o The fund maintained its overweight positions in
cyclicals and technology stocks.
3
<PAGE>
Letter from the Fund's President
Dear Shareholders,
Only last year, the crisis in the Asian economies had the global investment
community on edge. Negative growth and falling currency exchange rates sparked
an outflow of assets from the Asian markets and fueled stories about the
region's "meltdown" in the popular press. In such an atmosphere, it is very easy
for investors to become nervous and consider selling some of their holdings in
favor of investments with a higher degree of safety. Nevertheless, the events of
the past year have reinforced the value of a long-term approach and a
willingness to use market corrections as an opportunity to buy, not to sell. The
Asian stock markets have rebounded with a vengeance in 1999, and currency
exchange rates have firmed. In addition, the region's economic growth is picking
up, corporate earnings are improving, and the restructuring process that has
proven so beneficial to the U.S. and European markets is beginning to gain steam
in Asia. As portfolio manager Tien-Yu Sieh discusses in the Q&A that begins on
page 8, the outlook for the Asian markets has improved considerably, and the
foundation for both stronger earnings and an increased willingness of investors
to pay higher multiples for those earnings appears to be in place.
With this as a backdrop, we would like to once again stress the importance of
patience and a long-term approach to investing. While equities sometimes produce
nerve-wracking volatility over short-term time periods, the long-term trend
tends to be upward.
4
<PAGE>
Often, the moments when the outlook appears to be the most bleak can be the best
time to buy, as evidenced by the events in the Asian markets over the past two
years. Going forward, we encourage shareholders to look past the short-term
fluctuations of the markets, and instead focus on the importance of long-term
trends such as profit growth, restructuring, reform, and consolidation.
Finally, it should be noted that Daniel Pierce retired in June of this year as
President of Scudder Pacific Opportunities Fund, at which time I assumed that
role and its responsibilities. We are fortunate that Dan's longstanding
affiliation with Scudder is ongoing, and that we will continue to benefit from
his counsel going forward. I am pleased to join the Pacific Opportunities Fund's
team in this capacity, and look forward to serving your interests.
Thank you for your continued investment in Scudder Pacific Opportunities Fund.
If you have any questions about your investment, please call Scudder Investor
Information at 1-800-SCUDDER (1-800-728-3337), or visit our Web site at
www.scudder.com.
Sincerely,
/s/Nicholas Bratt
Nicholas Bratt
President,
Scudder Pacific Opportunities Fund
5
<PAGE>
Performance Update
- --------------------------------------------------------------------------------
October 31, 1999
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Pacific MSCI All Country Asia
Opportunities Fund Free Index (excluding Japan)*
10000 10000
13542 16472
14757 19062
13174 17131
13538 18525
9677 12871
7339 9647
10312 14805
Yearly periods ended October 31
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/1999 $10,000 Cumulative Annual
- --------------------------------------------------------------------------------
Scudder Pacific Opportunities Fund
- --------------------------------------------------------------------------------
1 year $ 14,049 40.49% 40.49%
- --------------------------------------------------------------------------------
5 year $ 6,987 -30.13% -6.92%
- --------------------------------------------------------------------------------
Life of Fund** $ 10,286 2.86% 0.41%
- --------------------------------------------------------------------------------
MSCI All Country Asia Free Index (excluding Japan)*
- --------------------------------------------------------------------------------
1 year $ 15,346 53.46% 53.46%
- --------------------------------------------------------------------------------
5 year $ 7,767 -22.33% -4.93%
- --------------------------------------------------------------------------------
Life of Fund** $ 14,805 48.05% 5.91%
- --------------------------------------------------------------------------------
* 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 are
reinvested and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on December 8, 1992. Index comparisons begin
December 31, 1992.
6
<PAGE>
- --------------------------------------------------------------------------------
Returns and Per Share Information
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE SCUDDER PACIFIC OPPORTUNITIES FUND TOTAL RETURN (%) AND
MSCI ALL COUNTRY ASIA FREE INDEX (EXCLUDING JAPAN)* TOTAL RETURN (%)
Yearly periods ended October 31
1993** 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
Fund Total 35.08 8.97 -10.73 2.76 -28.52 -24.16 40.49
Return (%)
- --------------------------------------------------------------------------------
Index Total 64.72 15.73 -10.14 8.15 -30.52 -25.04 53.46
Return (%)
- --------------------------------------------------------------------------------
Net Asset Value 16.21 17.57 15.59 15.93 11.38 8.38 11.76
($)
- --------------------------------------------------------------------------------
Income Dividends -- .08 .10 .10 .01 .30 .02
($)
- --------------------------------------------------------------------------------
Capital Gains -- .01 -- -- -- -- --
Distributions ($)
- --------------------------------------------------------------------------------
* 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 are
reinvested and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on December 8, 1992. Index comparisons begin
December 31, 1992.
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 life of Fund total return for the Fund
would have been lower.
7
<PAGE>
Portfolio Summary
- --------------------------------------------------------------------------------
October 31, 1999
- --------------------------------------------------------------------------------
Geographical
- --------------------------------------------------------------------------------
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 6% Cash Equivalents) Taiwan, Korea, and Hong
Kong are, in our view,
Taiwan 22% the three most
Korea 22% progressive economies in
Hong Kong 19% the region.
India 11%
Singapore 8%
United Kingdom 4%
Australia 3%
Philippines 3%
China 2%
Thailand 2%
Other 4%
- ------------------------------------
100%
- ------------------------------------
- --------------------------------------------------------------------------------
Sectors
- --------------------------------------------------------------------------------
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 6% Cash Equivalents) The technology sector in
Asia has provided a
Technology 28% wealth of investment
Financial 26% opportunities, as many
Manufacturing 10% companies are poised to
Consumer Staples 8% take advantage of the
Communications 6% increasing global demand
Energy 5% for personal computers,
Consumer Discretionary 4% semiconductor-related
Metals & Minerals 4% products, and
Durables 3% telecommunications
Service Industries 2% equipment.
Other 4%
- ------------------------------------
100%
- ------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------------
(27% of Portfolio) The fund's top holdings
reflect a focus on
1. Samsung Electronics Co., Ltd. well-managed,
Electronics manufacturer in Korea fast-growing companies
with dominant market
2. Taiwan Semiconductor Manufacturing Co. positions and clear
Manufacturer of integrated circuits in Taiwan competitive advantages.
3. Legend Holdings Ltd.
Manufacturer of computer related products in Hong Kong
4. Hutchison Whampoa, Ltd.
Diversified investment holding company in Hong Kong
5. Infosys Technologies Ltd.
Financial and industrial software developer in India
6. Li & Fung Ltd.
Exporter of consumer products in Hong Kong
7. Standard Chartered PLC
International bank in the United Kingdom
8. Pohang Iron & Steel Co., Ltd.
Steel producer in Korea
9. Korea Telecom Corp.
Telecommunication services in Korea
10. DBS Group Holdings Ltd.
Provider of banking and other financing services in
Singapore
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
- --------------------------------------------------------------------------------
October 31, 1999
In the following interview, Tien-Yu Sieh, lead portfolio manager of Scudder
Pacific Opportunities Fund, discusses the Fund's strategy and the market
environment for the twelve-month period ended October 31, 1999.
Q: After staging quite a comeback over the past year, the Asian markets have
slowed down somewhat in recent months. What has been the cause of this?
A: Given the strong performance of Asian equities over the first half of the
year, the third quarter slump wasn't surprising. Through June 30, the MSCI
All-Country Asia Free (Ex-Japan) Index, which is the fund's benchmark, was up
43.11%. While this gain partially reflected the improved fundamentals of the
region, liquidity factors also played a significant role. When the world's major
central banks cut interest rates in the wake of last autumn's financial crises,
they unleashed a torrent of liquidity that ultimately washed into emerging
markets equities. Asia, which had been depressed for months due to the regional
crisis that began in 1997, benefited from huge inflows of investment capital. As
the region's stock markets took off, even low-quality, debt-ridden names were
taken along for the ride.
The benchmark dropped 7.2% in the third quarter, however, marking the beginning
of what is likely to be a more challenging investment environment than what we
saw in the first half of the year. In this period, three of the strongest
performing markets of the second quarter -- Korea, Indonesia, and Thailand --
gave up some of their strong gains as concerns over the handling and ultimate
resolution of outstanding financial problems from the crisis ate into investor
confidence. Most notably, investors were rattled by the announcement that Daewoo
- -- the large Korean conglomerate -- had defaulted on $57 billion of debt. While
Daewoo's announcement caused short-term disruptions in the market, we believe
that it will ultimately fuel an acceleration in the country's reform process.
Investors were also frightened by the earthquake in Taiwan, which threatened to
disrupt the supply chain of
10
<PAGE>
the global technology industry. These fears have also proven to be overblown,
since the earthquake is likely to have a smaller impact on the country's economy
than was first thought. Once these concerns dissipated in October, the Asian
markets again picked up steam along with the rest of the global markets.
We believe that the spotty third quarter returns of Asian equities reflect a
return to fundamentals and an increase in the importance of stockpicking, which
contrasts to the liquidity-driven gains of the first half of the year. As the
recovery deepens, the market will likely differentiate between those companies
whose prospects have improved and those whose rebounds have been driven largely
by the improvement in the region's macroeconomic outlook. We feel that this
shift plays into our strength of bottom-up stockpicking, which should provide a
sound platform for strong fund performance going forward.
Q: Is the fundamental long-term backdrop for the region still positive?
A: In our view, absolutely. Looking past the short-term volatility, we feel that
the process of economic recovery is still in its early stages, and the
fundamental upside that lies ahead is significant enough to justify gains in
these markets for years to come. Improving macroeconomic fundamentals should
provide a stronger base for growth and overall demand across the region, and the
combination of a stronger Japanese economy, domestic structural reform, and
improving consumer confidence should lead to upside surprises in both
macroeconomic and corporate earnings growth in the coming year. This should in
turn result in a greater flow of capital into the region, thereby helping
companies to establish a stronger foundation for the future. We anticipate that
this virtuous cycle will go a long way to reestablishing the Asian economic
miracle -- this time on more orthodox and prudent Western financial terms -- and
lay the groundwork for more sustained economic growth in the years ahead.
11
<PAGE>
Q: How did the fund perform in this environment?
A: For the twelve-month period ended October 31, 1999, the fund produced a total
return of 40.49%, which trailed the 53.46% return of its unmanaged benchmark. We
believe that the fund's underperformance can be attributed to our focus on
higher-quality companies in a market where many of the lower-quality names
tended to post the best performance. We view this as a short-term anomaly, and
are confident that over time our focus on financially sound, well-run companies
will pay off.
Q: How is the portfolio positioned right now?
A: As always, we continue to use in-depth, bottom-up research and on-the-ground
experience to find the companies that have seized the initiative to improve
their competitive position. We utilize a careful stock selection process that
focuses on fast-growing companies with superior management teams, dominant
market positions, clear competitive advantages, high-or-improving returns on
equity, strong balance sheets, and catalysts for positive change. We expect that
as the recovery deepens, the difference between these companies and others whose
share prices have simply rebounded in line with the improvement in the
macroeconomic outlook will become increasingly differentiated.
The fund is heavily weighted in the electronics sector and in selected cyclical
companies. Our outlook is positive on the global demand for personal computers,
semiconductor-related products, and telecommunications equipment, and many
companies in Northern Asia are well positioned to cater to that demand. We
believe that Korea's Samsung Electronics and Taiwan Semiconductor are two of the
best in this industry. We also continue to favor contract manufacturers such as
Compal Electronics, Asustek, and Hon Hai Precision out of Taiwan, in addition to
JIT Holdings and Natsteel Electronics of Singapore. All of these companies'
client lists include international, blue chip technology firms. In the cyclical
sector, we remain
12
<PAGE>
very positive on petrochemical companies, such as Shanghai Petrochemical.
We are also finding some very interesting opportunities in the banking sector.
There are significant changes taking place among Asia's banks, particularly the
larger institutions in some of the more progressive economies such as Hong Kong,
Singapore, Taiwan, and to some degree, Korea. Specifically, we are encouraged by
the fact that bank managements are becoming more rational. The old model of
Asian banking focused on lending to corporations at the expense of the consumer,
a practice that was fueled by "crony capitalism" and only served to stifle
economic growth and facilitate the creation of industrial overcapacity. Today,
however, the leading banks are focusing on consumers, a group that is now being
viewed as a better risk. We believe that this new business mix will act as a
catalyst not just for improved financial sector earnings, but also for stronger
growth in the region as a whole. Our holdings are concentrated in larger
regional banks that possess high-quality management teams and low levels of
non-performing loans. Larger banks also tend to adhere more closely to
international standards, and stand to benefit from both economies of scale and
their ability to invest heavily in information technology. Portfolio holdings
that fit within this category include HSBC and Standard Chartered, and DBS Bank
of Singapore. We believe that the concurrent growth of the region's economy and
its largest banks will be a powerful theme in the years ahead.
Q: What is your outlook from here?
A: We see three catalysts for long-term gains in the Asian markets. First, stock
prices should benefit from the continued improvement in corporate earnings that
will likely be sparked by further economic growth and corporate restructuring.
Second, we feel that there is more room for the expansion of the earnings
multiples of the best companies, as more enlightened management practices should
result in better resource allocation and hence more
13
<PAGE>
potent returns to shareholders. Finally, we believe that the growth in the use
of technology and the Internet will facilitate substantial gains in productivity
over time.
As these processes move forward, it is reasonable to expect continued market
volatility. There will be times when expectations overshoot reality, such as the
second calendar quarter of this year, and there will be periods of
consolidation, which we witnessed in the third quarter. Over time, however, the
direction of the region's fundamentals will be upward, and this trend should
ultimately be reflected in the long-term performance of stock prices.
14
<PAGE>
Scudder Pacific Opportunities Fund:
A Team Approach to Investing
Scudder Pacific Opportunities Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an important
role in the fund's management process. Team members work together to develop
investment strategies and select securities for the fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits fund investors
by bringing together many disciplines and leveraging our extensive resources.
Lead portfolio manager Tien-Yu Sieh assumed responsibility for the fund's
day-to-day management and investment strategies in May 1999. Mr. Sieh joined the
Adviser in 1996. Prior to joining the Adviser, Mr. Sieh was an Asian equity
analyst for an unaffiliated firm.
Portfolio manager Theresa Gusman joined the Adviser in 1995 and has over 14
years of experience in Pacific Basin investments.
Portfolio manager Elizabeth J. Allan joined the Adviser in 1987 as a member of
the portfolio management team concentrating in Asian investments.
Portfolio manager Nicholas Bratt joined the Adviser in 1976 and has over 20
years of experience in global investing. Mr. Bratt has been a member of the
fund's team since 1992.
15
<PAGE>
Glossary of Investment Terms
- --------------------------------------------------------------------------------
Bottom-Up Investing An investment style that focuses on the use of research to
Style assess the performance of individual companies before
considering the impact of economic trends. This approach,
which is the opposite of "top-down" investing, assumes that
the most significant determinant of performance is
individual stock selection, rather than industry or
country allocation.
Cyclical Stocks Companies whose earnings are closely tied to the business
cycle. Cyclical industries include steel, cement, paper,
machinery, and autos.
Liquidity A characteristic of an investment or an asset referring to
the ease of convertibility into cash within a reasonably
short period of time. 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 move in its market price as a
result.
Price/Earnings A widely used gauge of a stock's valuation that indicates
(P/E) (also what investors are paying for a company's earning power at
"earnings the current stock price. A P/E ratio may be based on a
multiple") company's projected earnings for the coming 12 months. A
higher "earnings multiple" indicates higher expected
earnings growth, along with greater risk of earnings
disappointment.
Restructuring The general term for major corporate changes aimed at
greater efficiency and adaptation to changing markets.
Cost-cutting initiatives, debt retirement, management
realignments, and the sale of non-core businesses are all
developments frequently associated with corporate
restructuring.
Weighting Refers to the allocation of assets -- usually in terms of
(over/under) sectors, industries, or countries -- within a portfolio
relative to the portfolio's benchmark index or investment
universe.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
16
<PAGE>
Investment Portfolio as of October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Repurchase Agreements 3.4%
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 10/29/1999 at 5.2%, to be repurchased at
$4,795,077 on 11/1/1999, collateralized by a
$4,798,000 U.S. Treasury Inflationary Index Note,
3.625%, 1/15/2008 (Cost $4,793,000) ......................... 4,793,000 4,793,000
- ------------------------------------------------------------------------------------------
Short-Term Notes 2.1%
- ------------------------------------------------------------------------------------------
United States
Federal Home Loan Bank, 5.234%**, 11/1/1999
(Cost $3,000,000) ........................................... 3,000,000 3,000,000
Shares
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Common Stocks 94.5%
- ------------------------------------------------------------------------------------------
Australia 2.6%
Broken Hill Proprietary Co., Ltd. (Petroleum and mineral
exploration and steel production) ........................... 120,600 1,244,862
Cable & Wireless Optus Ltd.* (Telecommunication
services) ................................................... 591,700 1,352,905
Woodside Petroleum Ltd. (Oil and gas producer) ................. 191,300 1,151,378
-----------
3,749,145
-----------
China 1.9%
Guangdong Kelon Electric Holdings, Ltd. "H" (Refrigerator
manufacturer) ............................................... 332,000 294,902
Shanghai Petrochemical Co., Ltd. "H" (Manufacturer of
petrochemical and petroleum products) ....................... 11,531,000 2,375,077
-----------
2,669,979
-----------
Hong Kong 17.5%
Cheung Kong Holdings Ltd. (Real estate company) ................ 225,000 2,049,273
China Telecommunications Ltd.* (Telecommunication
services in Hong Kong) ...................................... 12,000 41,014
Citic Pacific Ltd. (Diversified holding company) ............... 645,000 1,673,114
Dah Sing Financial Group (General banking and property
investment holding company) ................................. 288,800 1,159,959
Esprit Holdings Ltd. (Designer and manufacturer of high
quality fashion products) ................................... 2,406,000 2,261,045
Giordano International Ltd. (Retailer of casual apparel) ....... 1,792,000 1,903,193
Hutchison Whampoa, Ltd. (Diversified investment holding
company) .................................................... 329,900 3,312,590
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Legend Holdings Ltd. (Manufacturer of computer related
products) ............................................... 3,299,000 3,546,170
Li & Fung Ltd.* (Exporter of consumer products) ............ 1,820,000 3,186,406
New World China Land Ltd.* (Property development) .......... 942,920 436,987
New World Development Co., Ltd. (Property investment
and development) ........................................ 824,095 1,559,500
New World Infrastructure Ltd.* (Investment in and operation
of infrastructure projects) ............................. 830,400 962,101
SmarTone Telecommunications Holdings Ltd. (Cellular
communication services) ................................. 451,500 1,592,572
Sun Hung Kai Properties Ltd. (Real estate developer and
finance company) ........................................ 170,000 1,378,733
-----------
25,062,657
-----------
India 10.6%
Corporation Bank (Commercial bank) ......................... 100 242
HDFC Bank Ltd. (Corporate banking and financial
services) ............................................... 100 210
Hero Honda Motors Ltd. (Manufacturer of motorized two
wheelers) ............................................... 73,700 1,953,848
Hindustan Lever Ltd. (Manufacturer of branded and
packaged consumer products) ............................. 43,600 2,310,639
ICICI Ltd. (ADR)* (Venture capital firm) ................... 106,700 1,173,700
Infosys Technologies Ltd. (Financial and industrial software
developer) .............................................. 20,600 3,296,379
Mahanagar Telephone Nigam Ltd. (Telecommunication
services in Delhi and Bombay) ........................... 100 395
NIIT Ltd. (Designer and distributor of computer software) .. 32,600 1,625,871
Punjab Tractors Ltd. (Manufacturer of agricultural
equipment) .............................................. 44,000 1,047,153
Satyam Computer Services, Ltd.* (Provider of software
services) ............................................... 83,100 2,434,436
Satyam Infoway Limited (ADR)* (Provides internet access
and services to consumers and businesses) ............... 5,809 225,099
TVS Suzuki Ltd. (Manufacturer of motorcycles and
mopeds) ................................................. 68,700 1,139,199
-----------
15,207,171
-----------
Indonesia 1.5%
PT Gudang Garam (Manufacturer and distributor of
cigarettes) ............................................. 254,500 656,293
Indonesia Satellite Corp. (ADR) (International
telecommunication services) ............................. 27,700 441,469
PT Indo-rama Synthetics Tbk* (Producer of polyester yarn,
fiber and fabric) ....................................... 3,143,300 782,947
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
PT Indofood Sukses Makmur Tbk* (Manufacturer of food
products) .............................................. 271,000 321,626
-----------
2,202,335
-----------
Korea 20.8%
Cheil Jedang Corp. (Sugar refiner and major integrated
food processor) ........................................ 27,540 1,584,210
Dacom Corp.* (Provider of domestic, long-distance services,
and internet services in Korea) ........................ 13,340 1,634,831
Honam Petrochemical Corp. (Manufacturer of
polypropylene, polyethylene, and ethylene glycol) ...... 83,670 1,618,294
Kookmin Bank (Commercial bank) ............................ 112,750 1,757,753
Kookmin Bank* (Rights) (b) ................................ 11,325 68,922
Korea Telecom Corp. (ADR)* (Telecommunication services) ... 83,500 2,943,375
Medison Co., Ltd. (Producer of medical equipment) ......... 100,990 1,010,321
Pacific Corp., Ltd. (Manufacturer of life commodities and
bio-chemical products) ................................. 68,060 1,594,403
Pohang Iron & Steel Co., Ltd. (Steel producer) (c) ........ 24,840 3,041,683
Samsung Corp.* (Trading company) .......................... 86,660 1,372,689
Samsung Display Devices Co. (GDR)* (Manufacturer of
cathode ray tubes) ..................................... 68,100 893,813
Samsung Electronics Co., Ltd. (Electronics manufacturer) .. 40,256 6,711,963
Samsung Securities Co., Ltd. (Securities company) ......... 60,952 2,134,209
Samsung Securities Co., Ltd.* (Rights) (b) ................ 16,914 179,081
Shinhan Bank (GDR)* (Bank) ................................ 70,600 1,509,075
Ssangyong Oil Refining Co. (Producer of refined oil, lube
oil, and lubricants) ................................... 79,940 1,819,393
-----------
29,874,015
-----------
Malaysia 1.6%
Genting Berhad (Operator of tourist resorts, hotels and
restaurants) ........................................... 480,100 1,718,253
Rothmans of Pall Mall Berhad (Manufacturer, importer and
retailer of tobacco products) .......................... 84,200 587,184
-----------
2,305,437
-----------
Papua New Guinea 1.3%
Oil Search Ltd.* (Oil and gas exploration and production) . 1,071,900 1,249,329
Orogen Minerals Ltd. (Investment company with controlling
interest in Papua New Guinea gold and oil companies) ... 521,800 558,322
-----------
1,807,651
-----------
Philippines 2.2%
Bank of the Philippine Islands (Commercial bank) .......... 433,000 1,144,589
International Container Terminal Services, Inc.*
(Containerized cargo handling firm) .................... 10,473,800 1,005,589
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Metropolitan Bank and Trust Co. (Commercial bank and
trust company) ........................................... 134,211 1,004,072
-----------
3,154,250
-----------
Singapore 7.8%
Allgreen Properties Ltd.* (Real estate development) ......... 896,000 760,144
Chartered Semiconductor (ADR)* (Manufacturer of
semiconductors) .......................................... 18,056 599,234
City Developments Ltd. (Developer of residential, industrial,
retail and investment properties) ........................ 118,000 610,590
DBS Group Holdings Ltd. (Provider of banking and other
financing services) ...................................... 252,899 2,860,711
JIT Holdings Ltd. (Manufacturer and distributor of
electronic products) ..................................... 1,265,000 2,085,499
Keppel Land Ltd. (Property investment and development) ...... 496,000 701,324
Natsteel Electronics Ltd. (Manufacturer of
telecommunication and network products) .................. 430,000 1,681,709
Oversea-Chinese Banking Corp., Ltd. (Foreign registered)
(Commercial bank) ........................................ 248,850 1,871,616
-----------
11,170,827
-----------
Taiwan 20.9%
ASE Test Ltd. (Provider of testing services to semiconductor
manufacturers) ........................................... 73,000 1,825,000
Acer Peripherals, Inc. (Developer and distributor of
computer peripherals) .................................... 1,017,318 2,710,069
Asustek Computer Inc. (Manufacturer of computer
mainboards, audio, video and network cards) .............. 220,439 2,314,193
Bank Sinopac (Bank) ......................................... 2,203,161 1,243,272
China Petrochemical Development Corp.* (Manufacturer of
petrochemical products) .................................. 449,900 248,211
China Steel Corp. (Manufacturer and marketer of steel
products) ................................................ 1,895,000 1,457,692
China Trust Commercial Bank* (Bank) ......................... 607,840 557,634
Compal Electronics Inc. (Manufacturer and marketer of
notebook computers and color monitors) ................... 490,053 1,645,354
Far East Textile Ltd. (Manufacturer of natural and synthetic
textile products) ........................................ 1,998,289 2,734,103
Formosa Plastics Corp. (Manufacturer of plastics
materials) ............................................... 1,214,450 2,431,197
Hon Hai Precision Industry Co., Ltd. (Manufacturer of
electronic connectors, cable assemblies and memory
chips) ................................................... 306,600 2,097,484
Siliconware Precision Industries Co. (Manufacturer and
marketer of integrated circuit plates) ................... 891,750 1,602,451
Taiwan Semiconductor Manufacturing Co. (Manufacturer of
integrated circuits) ..................................... 1,447,710 6,435,281
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
United Micro Electric Corp., Ltd.* (Manufacturer of
integrated circuits) .................................. 620,000 1,612,547
Yang Ming Marine Transport* (Marine transportation) ...... 1,905,000 1,063,004
------------
29,977,492
------------
Thailand 1.7%
BEC World Public Co., Ltd. (Foreign registered) (Holding
company involved in entertainment and television
broadcasting) (b) ..................................... 251,700 1,563,961
Thai Farmers Bank Public Co., Ltd.* (Foreign registered)
(Commercial bank) ..................................... 583,200 822,897
------------
2,386,858
------------
United Kingdom 4.1%
HSBC Holdings PLC (International banking and financial
services company) ..................................... 231,717 2,789,076
Standard Chartered PLC (Global bank) ..................... 223,516 3,132,283
------------
5,921,359
------------
- ---------------------------------------------------------------------------------------
Total Common Stocks (Cost $95,629,332) 135,489,176
- ---------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $103,422,332) (a) 143,282,176
- ---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security
** Annualized yield at time of purchase, not a coupon rate.
(a) The cost for federal income tax purposes was $106,821,114. At October 31,
1999, net unrealized appreciation for all securities based on tax cost was
$36,461,062. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $41,655,312 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$5,194,250.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $1,811,964 (1.27% 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, 1999 aggregated $1,325,421. These securities may
also have certain restrictions as to resale.
(c) Security that has met the foreign-ownership limitation valued at a premium
in good faith by the Valuation Committee of the Board of Directors. The
cost of the security at October 31, 1999 was $869,082. The aggregate
premium ($59,640) over the local share price ($2,982,043) for the security
valued by the Valuation Committee was approximately 0.04% of the Fund's net
assets at October 31, 1999.
- --------------------------------------------------------------------------------
Transactions in written options during the year ended October 31, 1999 were:
Outstanding at: Number of Premiums ($)
Contracts
------------ -----------
October 31, 1998 .............................. -- --
Contracts written.............................. (269) (74,524)
Contracts closed .............................. 269 74,524
October 31, 1999 .............................. -- --
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $103,422,332) ........................ $ 143,282,176
Cash ......................................................................... 1,146
Foreign currency holdings, at market (identified cost $1,178,907) ............ 1,187,234
Receivable for Fund shares sold .............................................. 2,235,545
Dividends and interest receivable ............................................ 189,856
Other assets ................................................................. 506
-------------
Total assets ................................................................. 146,896,463
Liabilities
- ----------------------------------------------------------------------------------------------
Payable for investments purchased ............................................ 610,413
Payable for Fund shares redeemed ............................................. 1,537,280
Deferred foreign taxes ....................................................... 1,145,576
Accrued management fee ....................................................... 132,710
Other payables and accrued expenses .......................................... 346,618
-------------
Total liabilities ............................................................ 3,772,597
Net assets, at market value .................................................. $ 143,123,866
Net Assets
- ----------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ................. (128,040)
Unrealized appreciation (depreciation) on:
Investments (net of deferred foreign taxes of $1,145,576) .................. 38,714,268
Foreign currency related transactions ...................................... 7,408
Accumulated net realized gain (loss) ......................................... (62,272,732)
Paid-in capital .............................................................. 166,802,962
Net assets, at market value .................................................. $ 143,123,866
Net Asset Value
- ----------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($143,123,866 /
12,172,640 shares of capital stock outstanding, $.01 par value, 100,000,000
shares authorized) ........................................................ $ 11.76
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 1999
- --------------------------------------------------------------------------------
Investment Income (Loss)
- --------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $200,025) .......... $ 1,733,497
Interest (net of foreign taxes withheld of $36,973) ............ 548,138
------------
2,281,635
------------
Expenses:
Management fee ................................................. 1,408,702
Services to shareholders ....................................... 806,508
Custodian and accounting fees .................................. 448,606
Directors' fees and expenses ................................... 58,080
Reports to shareholders ........................................ 80,998
Auditing ....................................................... 84,311
Registration fees .............................................. 49,923
Legal .......................................................... 18,242
Other .......................................................... 47,840
------------
3,003,210
Net investment income (loss) ................................... (721,575)
Realized and unrealized gain (loss) on investment transactions
------------
Net realized gain (loss) from:
Investments .................................................... 2,448,812
Futures ........................................................ (389,378)
Written options ................................................ (253,830)
Foreign currency related transactions .......................... (889,119)
------------
916,485
------------
Net unrealized appreciation (depreciation) during the period on:
Investments (net of deferred foreign taxes of $1,145,576) ...... 45,407,504
Foreign currency related transactions .......................... 584,772
------------
45,992,276
Net gain (loss) on investment transactions ..................... 46,908,761
Net increase (decrease) in net assets resulting from
operations .................................................. $ 46,187,186
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Years Ended October 31,
1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ..................... $ (721,575) $ 607,308
Net realized gain (loss) from investment
transactions .................................. 916,485 (44,875,920)
Net unrealized appreciation (depreciation) on
investment transactions during the period ..... 45,992,276 15,501,227
------------- -------------
Net increase (decrease) in net assets resulting
from operations ............................... 46,187,186 (28,767,385)
------------- -------------
Distributions to shareholders from net investment
income ........................................ (314,081) (3,652,405)
------------- -------------
Fund share transactions:
Proceeds from shares sold ........................ 461,378,994 488,924,261
Net asset value of shares issued to shareholders
in reinvestment of distributions .............. 287,106 3,371,465
Cost of shares redeemed .......................... (477,752,884) (494,386,113)
Redemption fees .................................. 571,030 --
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions ............................ (15,515,754) (2,090,387)
------------- -------------
Increase (decrease) in net assets ................ 30,357,351 (34,510,177)
Net assets at beginning of period ................ 112,766,515 147,276,692
Net assets at end of period (including accumulated
distributions in excess of net investment
income of $128,040 and undistributed net
investment income of $273,389, respectively)... $ 143,123,866 $ 112,766,515
Other Information
- -----------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........ 13,463,341 12,936,930
------------- -------------
Shares sold ...................................... 49,215,178 53,297,255
Shares issued to shareholders in reinvestment of
distributions ................................. 32,540 336,809
Shares redeemed .................................. (50,538,419) (53,107,653)
------------- -------------
Net increase (decrease) in Fund shares ........... (1,290,701) 526,411
Shares outstanding at end of period .............. 12,172,640 13,463,341
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<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>
- --------------------------------------------------------------------------------
Years Ended October 31, 1999(a) 1998(a) 1997(a) 1996(a) 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.38 $11.38 $15.93 $15.59 $17.57
--------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) (.06) .05 (.04) .02 .10
Net realized and unrealized gain 3.41 (2.75) (4.50) .42 (1.98)
(loss) on investment transactions
--------------------------------------------
Total from investment operations 3.35 (2.70) (4.54) .44 (1.88)
Less distributions from:
Net investment income (.02) (.30) (.01) (.10) (.10)
--------------------------------------------
Total distributions (.02) (.30) (.01) (.10) (.10)
Redemption fees .05 -- -- -- --
Net asset value, end of period $11.76 $ 8.38 $11.38 $15.93 $15.59
--------------------------------------------
Total Return (%) 40.49 (24.16) (28.52) 2.76 (10.73)
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 143 113 147 329 384
Ratio of operating expenses to average
daily net assets (%) 2.35 2.46 1.94 1.75 1.74
Ratio of net investment income (loss) (.56) .50 (.22) .12 .65
to average daily net assets
Portfolio turnover rate (%) 121.9 140.9 97.2 95.4 64.0
</TABLE>
(a) Based on monthly average shares outstanding during the period.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1999
A. Significant Accounting Policies
Scudder Pacific Opportunities (the "Fund") a non-diversified series of Scudder
International Fund, Inc. (the "Corporation") which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company organized as a Maryland Corporation.
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. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Money market instruments purchased with an original maturity of sixty days or
less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
26
<PAGE>
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
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 call options on indices and wrote put options on
indices as a hedge against potential adverse price movements in the value of
portfolio assets.
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
prices 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. Gain or loss is recognized when the
option contract expires or is closed.
If 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 above the exercise price. If the
Fund writes a put option it accepts the risk of a decline in the market value of
the underlying security 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
27
<PAGE>
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.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of a financial
instrument at a specified price on a specific date (settlement date). During the
period, the Fund purchased index futures to hedge against declines in the value
of portfolio securities.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund dependent upon
the daily fluctuations in the value of the underlying security and are recorded
for financial reporting purposes as unrealized gains or losses by the Fund. When
entering into a closing transaction, the Fund will realize a gain or loss equal
to the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price.
Certain risks may arise upon entering into futures contracts, including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with the changes in the value of
the securities or currencies hedged. When utilizing futures contracts to hedge,
the Fund gives up the opportunity to profit from favorable price movements in
the hedged positions during the term of the contract.
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 against changes in the 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. Sales and
purchases of forward contracts having the same settlement date and broker are
offset and any gain (loss) is realized on the date of offset; otherwise, gain
28
<PAGE>
(loss) is realized on settlement date. Realized and unrealized gains and losses
which represent the difference between the value of a forward contract to buy
and a 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.
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, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $59,002,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2002 ($12,714,000), October 31, 2004 ($4,484,000) and October 31, 2006
($41,736,000), and October 31, 2007 ($68,000), the respective expiration dates,
whichever occurs first.
Net realized and unrealized gains of the Fund derived in India are subject to
certain non-U.S. taxes.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
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.
29
<PAGE>
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
All premiums and original issue discounts are amortized/accreted for both tax
and financial reporting purposes.
Redemption Fees. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 2% of the current net asset value of the shares
will be assessed and retained by the Fund for the benefit of the remaining
shareholders. The redemption fee is accounted for as an addition to paid-in
capital. This redemption fee is only applicable to shares purchased on or after
May 22, 1999.
B. Purchases and Sales of Securities
During the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $146,606,012 and
$158,645,845, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1999 was $92,057,194.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, 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 Agreement. The management fee payable under the
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, 1999, the fee pursuant to this Agreement amounted to $1,408,702.
30
<PAGE>
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, 1999, the amount charged to the Fund by SSC aggregated
$610,048, of which $94,987 is unpaid at October 31, 1999.
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, 1999, the
amount charged to the Fund by STC aggregated $50,297, of which $13,606 is unpaid
at October 31, 1999.
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, 1999, the amount charged to the Fund by SFAC aggregated $114,817, of
which $19,240 is unpaid at October 31, 1999.
The Fund pays each Director not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1999, Directors' fees and expenses aggregated $58,080.
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. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $850
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 pro rata 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.
31
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder Pacific Opportunities Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Pacific Opportunities Fund
(the "Fund") at October 31, 1999, the results of its operations, the changes in
its net assets, and the financial highlights for the periods indicated therein,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 14, 1999
32
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
October 31, 1999
The Fund paid foreign taxes of $237,000 and earned $237,000 of foreign source
income during the year ended October 31, 1999. Pursuant to section 853 of the
Internal Revenue Code, the Fund designates $0.02 per share as foreign taxes paid
and $0.02 per share as income earned from foreign sources for the year ended
October 31, 1999.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
33
<PAGE>
Officers and Directors
- --------------------------------------------------------------------------------
Nicholas Bratt* Elizabeth J. Allan*
o President o Vice President
Sheryle J. Bolton Irene T. Cheng*
o Director; Chief Executive Officer, o Vice President
Scientific Learning Corporation
Joyce E. Cornell*
William T. Burgin o Vice President
o Director; General Partner,
Bessemer Venture Partners Susan E. Dahl*
o Vice President
Keith R. Fox
o Director; Private Equity Philip S. Fortuna*
Investor o Vice President
William H. Luers Carol L. Franklin*
o Director; Chairman and President, o Vice President
U.N. Association of America
Edmund B. Games, Jr.*
Kathryn L. Quirk* o Vice President
o Director, Vice President and
Assistant Secretary Theresa Gusman*
o Vice President
Joan E. Spero
o Director; President, Doris Duke Ann M. McCreary*
Charitable Foundation o Vice President
Thomas J. Devine Sheridan P. Reilly*
o Honorary Director; Consultant o Vice President
William H. Gleysteen, Jr. Shahram Tajbakhsh*
o Honorary Director; Consultant; o Vice President
Guest Scholar, Brookings
Institution John Millette*
o Vice President and Secretary
Wilson Nolen
o Honorary Director; Consultant John R. Hebble*
o Treasurer
Robert G. Stone, Jr.
o Honorary Director; Chairman Richard W. Desmond*
Emeritus and Director, Kirby o Assistant Secretary
Corporation
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
34
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
35
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Scudder Global High Income Fund, Inc.
The Brazil Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Montgomery Street Income Securities, Inc.
</TABLE>
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 or classes thereof 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.
++ Only the International 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.
+++ +++ +++ A no-load variable annuity contract issued by Glenbrook Life and
Annuity Company and underwritten by Allstate Financial Services,
Inc., sold 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.
36
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in
securities regardless of price fluctuations and does not
assure a profit or protect against loss in declining
markets. Investors should consider their ability to
continue such a plan through periods of low price
levels.
Around-the- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
37
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
38
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
About the Fund's Adviser
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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.
