SCUDDER
INVESTMENTS(SM)
[LOGO]
-------------------------
EQUITY/GLOBAL
-------------------------
Scudder Pacific
Opportunities Fund
Annual Report
October 31, 2000
The fund seeks to provide long-term growth of capital.
<PAGE>
Contents
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4 Letter from the Fund's
President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
15 Glossary of Investment Terms
16 Investment Portfolio
19 Financial Statements
22 Financial Highlights
24 Notes to Financial Statements
32 Report of Independent Accountants
33 Tax Information
34 Shareholder Meeting Results
35 Officers and Directors
36 Investment Products and Services
38 Account Management Resources
2
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Scudder Pacific Opportunities Fund
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Class AARP ticker symbol SPOX fund number 173
Class S ticker symbol SCOPX fund number 073
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Date of o Pressured by declines in U.S. tech stocks as well as a
Inception: litany of local concerns, Pacific Basin equities fell
12/8/92 sharply during the latter half of the reporting period.
o The fund's focus on fast-growing, fundamentally sound
companies, many of which reside in the technology
Total Net sector, failed to have a positive impact on performance
Assets as during a period in which virtually all stocks,
of 10/31/00-- regardless of their quality, were the subject of
selling pressure.
Class AARP:
$2,349 o Although the Asian markets are likely to remain
volatile in the near term, we remain positive on the
Class S: longer-term prospects for the region.
$104,768,219
3
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Letter from the Fund's President
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Dear Shareholders,
The past year -- and the most recent six months in particular -- was a difficult
time for those invested in Asian equities. Following the crisis period of
1997-98, the region staged a comeback on the strength of positive fundamental
changes and the surge in global liquidity that resulted from low short-term
interest rates in the U.S. and Japan. However, weakness in U.S. tech stocks has
combined with regional concerns to batter the Asian markets so far in 2000. We
recognize that a setback of this nature can be very disheartening, even to
long-term investors. Nevertheless, we believe that with stock prices having
fallen and valuations having become increasingly attractive in recent months,
shareholders should revisit the long-term picture for Asian stocks.
We believe that the ongoing process of reform on both the public and private
levels is creating the foundation of a "virtuous cycle" that will benefit the
region's economy. As corporations gain strength and begin to generate improved
earnings, we believe that confidence among investors and consumers should
improve markedly, allowing capital to flow into the region and provide the fuel
for further growth. On the individual company level, we continue to find
numerous stocks that offer strong earnings and improving fundamentals.
Unfortunately, such factors have not
4
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necessarily led to good stock price performance in recent months. However, we
believe that over the long term, the use of on-the-ground, bottom-up research to
find fast-growing, fundamentally sound companies will position the fund to
benefit from an eventual improvement in Asia's economic backdrop. For more
information on where the fund's management team sees both risks and
opportunities in the months and years ahead, please turn to the Portfolio
Management Discussion that begins on page 8.
Thank you for your continued investment in Scudder Pacific Opportunities Fund.
For current information on the fund or your account, visit our Web site at
www.scudder.com. There you'll find a wealth of information, including fund
performance, the most recent news on Scudder products and services, and the
opportunity to perform account transactions. You can also speak with one of our
representatives by calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President
Scudder Pacific Opportunities Fund
5
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Performance Update
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October 31, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
MSCI All
Scudder Pacific Country Asia
Opportunities Fund -- Free Index
Class S (excluding Japan)*
12/92** 10000 10000
'93 13542 16472
'94 14757 19062
'95 13174 17131
'96 13538 18525
'97 9677 12871
'98 7340 9647
'99 10312 14805
'00 8853 11826
Yearly periods ended October 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder Pacific Opportunities Fund-- Class S
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1 year $ 8,580 -14.20% -14.20%
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5 year $ 6,720 -32.80% -7.64%
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Life of Fund** $ 8,831 -11.69% -1.56%
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MSCI All Country Asia Free Index (excluding Japan)*
--------------------------------------------------------------------------------
1 year $ 7,988 -20.12% -20.12%
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5 year $ 6,903 -30.97% -7.14%
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Life of Fund** $ 11,826 18.26% 2.16%
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6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE SCUDDER PACIFIC
OPPORTUNITIES FUND -- CLASS S 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 2000
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Fund Total
Return (%) 35.08 8.97 -10.73 2.76 -28.52 -24.16 40.49 -14.20
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Index Total
Return (%) 64.72 15.73 -10.14 8.15 -30.52 -25.04 53.46 -20.12
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Net Asset
Value ($) 16.21 17.57 15.59 15.93 11.38 8.38 11.76 10.09
--------------------------------------------------------------------------------
Income
Dividends
($) -- .08 .10 .10 .01 .30 .02 --
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Capital
Gains
Distributions
($) -- .01 -- -- -- -- -- --
--------------------------------------------------------------------------------
* 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.
On October 2, 2000, existing shares of the Fund were redesignated as
Class S shares. In addition, the Fund commenced offering Class AARP
shares. The total return information provided is for the Fund's Class S
shares.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. If the
Adviser had not maintained the Fund's expenses, the life of Fund total
return for the Fund would have been lower.
7
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Portfolio Summary
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October 31, 2000
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Geographical
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(Excludes 5% Cash Equivalents) The fund was
underweight in
Hong Kong 41% top-performing markets
Korea 15% such as Singapore and
Taiwan 14% Australia, which we felt
India 11% were largely comprised
Singapore 10% of companies with
UK 4% limited upside potential.
Australia 2%
Malaysia 1%
China 1%
Other 1%
------------------------------------
100%
------------------------------------
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Sectors
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(Excludes 5% Cash Equivalents) The fund continues to
hold an overweight
Technology 21% position in companies
Communications 20% with exposure to the
Financial 17% recovery of the regional
Manufacturing 14% economy, as well as
Consumer Discretionary 7% leading exporters of
Transportation 7% industrial products
Consumer Staples 4% and services.
Construction 3%
Credit Card Receivables 2%
Utilities 2%
Other 3%
------------------------------------
100%
------------------------------------
8
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Ten Largest Equity Holdings
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<TABLE>
<S> <C>
(40% of Portfolio) The fund's top holdings
demonstrate a focus on
1. China Telecom Ltd. well-managed,
Provider of cellular telecommunication services in fast-growing companies
Hong Kong with dominant market
positions and clear
2. Hutchison Whampoa, Ltd. competitive advantages.
Diversified investment holding company in Hong Kong
3. SK Telecom Co., Ltd.
Provider of mobile telecommunications services in
Indonesia
4. MTR Corporation
Provider of public transportation services in Hong Kong
5. DBS Group Holdings Ltd.
Provider of banking and other financial services in
Singapore
6. China Unicom
Provider of telecommunication services in Hong Kong
7. Infosys Technologies Ltd.
Financial and industrial software developer in India
8. Korea Telecom Corp.
Provider of telecommunication services in Korea
9. HSBC Holdings plc
International banking and financial services company
10. Cheung Kong Holdings Ltd.
Provider of real estate and financial management
services in Hong Kong
</TABLE>
For more complete details about the Fund's investment portfolio, see page 16. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
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October 31, 2000
We asked Tien-Yu Sieh, lead portfolio manager of Scudder Pacific Opportunities
Fund, to discuss the recent market environment and the fund's investment
strategy over the twelve-month period ended October 31, 2000.
Q: How did the Asian markets perform during the period?
A: Pacific Basin equities declined during the twelve months ended October 31,
2000 due to extreme weakness in the second half of the period. Negative external
factors such as rising oil prices and weakness in the U.S. equity market weighed
heavily on stock prices. The Asian markets were further impacted by
region-specific difficulties, such as political issues in Taiwan and the
decision by Ford Motor Company to withdraw its offer for Daewoo's auto division,
a move that raised anxieties over the slowing pace of restructuring in Korea.
Additionally, Asian currencies were weak across the board in the face of a
strong dollar. Against this backdrop, the net asset value of Scudder Pacific
Opportunities Fund -- Class S shares during the period fell 14.20%, a smaller
decline than the -20.12% return of its unmanaged benchmark, the MSCI All Country
Asia Free, ex-Japan Index. In the second half of the period, the fund lost
27.22%, while its benchmark fell 25.50%.
Q: What were some of the key factors in the fund's underperformance?
A: The largest contributor to the fund's recent underperformance was its
overweighting in the technology and telecommunications areas, a position that
had contributed positively to performance in the early part of the year. During
the course of the third quarter, however, we reevaluated our holdings in these
sectors in the face of overwhelming downward pressure on share prices. While we
still believe in the superior fundamentals of many of the leading companies in
the sector, we are not confident that this will be reflected in the short-term
performance of their stock prices. The fund's relative performance was also hurt
10
<PAGE>
by its underweighting in value names and stocks that are prominent in the
regional indices, both of which benefited from a rotation away from companies in
the tech and telecom sectors. We have had relatively little exposure to value
names because of their finite growth potential, relatively poor operating
characteristics, and weaker competitive positioning.
In the latter part of the period, the fund was hurt by the fact that the markets
offering the heaviest representation of companies with the most attractive
fundamentals failed to perform. As a result, fund performance was hurt by
macroeconomic and political factors such as those affecting Taiwan and Korea.
Such issues, which we believe to be unrelated to the basic company-specific
fundamentals of the stocks we hold in the portfolio, prevented our bottom-up
stock selection approach from having a positive effect. Similarly, we were
underweight top-performing markets like Hong Kong, Singapore, and Australia,
which we felt were largely comprised of companies with limited upside potential.
Q: The fund has held a large position in semiconductor stocks, as well as plays
on the boom in wireless communication. How did these holdings affect
performance?
A: The decline in these areas was a key factor in the fund's underperformance.
Believing that the semiconductor industry was still in the middle of an extended
growth cycle, we were highly positive on the sector entering the third quarter.
We were further intrigued by the fact that valuations of Asian semiconductor
companies were dramatically lower than those of their counterparts in other
parts of the world. Another sector that we were enthusiastic on was mobile
telephony, based on our thesis that the world is on the brink of the dawn of a
mobile data revolution. However, our views on these key sectors have since
evolved. While valuations remain fundamentally sound -- and in fact have gotten
even more attractive in recent months -- we are now taking a more cautious
11
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stance. Our primary rationale is that the Asian tech and telecom sectors are
still a secondary investment made after global investors have already
established positions in the industry leaders in the U.S. and Europe. Although
the fundamental outlook for several companies in the sector remains positive, it
will be difficult for their values to be recognized by investors as long as
volatility in U.S. tech stocks remains high.
Q: How is the fund positioned at present, and what changes have you made in
recent months?
A: The fund continues to hold an overweight position in companies with exposure
to the recovery of the domestic economy, as well as leading exporters of
industrial products and services. As in the second quarter, we reviewed our
portfolio composition in considerable detail, undertaking an in-depth analysis
of our holdings through on-the-ground meetings with company managements. With
few exceptions, we determined that the operating positions of the companies in
the fund remained highly positive, and in many cases were ahead of expectations.
We therefore made few changes to the portfolio during the period. Further, we
resisted adding to positions in these companies (such as Samsung Electronics, SK
Telecom, and China Telecom), choosing instead to accumulate a higher cash level
in the face of severe market volatility and uncertainty. We continued to add to
the banking and financial services sectors, however, based on our view that the
leading companies had accelerated the overhaul of their operations with the aim
of improving efficiency and future returns.
Given our expectation for further volatility, the fund remains defensively
positioned. There is currently a dearth of attractive opportunities promising
favorable absolute returns. The threat of an imminent slowdown in economic
growth, combined with the volatility in oil prices and the weakness of the euro,
have made for a more challenging backdrop for almost all business in Asia. As a
result, we chose to raise cash levels in recent months, after having
12
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held minimal cash throughout the first half of the calendar year.
Q: What is your outlook for the Asian markets?
A: In the short term, we believe that sharp rallies from depressed levels are
likely to prove unsustainable. This should limit the upside in many sectors
until the larger questions surrounding global growth, oil prices, and currencies
have been resolved. Despite these concerns, we remain positive on our medium- to
longer-term outlook for Asia. In the past, we have stated our belief that more
enlightened management practices will, over time, lead to a higher quality of
income, and hence higher valuations and more potent returns to shareholders.
These changes, in turn, should have a positive impact on macroeconomic
fundamentals by providing a stronger base for growth and overall demand across
the region. As consumer confidence grows and corporate earnings increase, we
believe that funds will flow into the region and further help its companies
build a better foundation for the future. In this way, restructuring and reform
has the potential to unleash a virtuous cycle that can benefit Asia for years to
come.
In our view, the year 2000 probably marks a watershed in the transition from the
explosive rebound phase that followed the crises of 1997-98 to a period of more
sustainable growth. Further, the sharp downturn in the Asian markets since the
end of the first quarter has effectively lowered valuations to more reasonable
levels. We believe this to be especially true in light of the strong operating
performance that many of our holdings have demonstrated. Although investors
should not expect strong absolute returns in the near term, we will continue to
position the fund to benefit from the long-term themes that are emerging in the
Pacific Basin.
13
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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 strategy in May 1999. Mr. Sieh joined the
Adviser in 1996.
Portfolio manager Theresa Gusman joined the Adviser in 1995 and has over 15
years of experience in Pacific Basin investments.
Portfolio manager Elizabeth J. Allan joined the Adviser in 1987 as a member of
the fund team concentrating in Asian investments.
Portfolio manager Nicholas Bratt joined the Adviser in 1976 and has over 21
years of experience in global investing. Mr. Bratt has been a member of the fund
team since 1992.
14
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Glossary of Investment Terms
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<TABLE>
<S> <C>
Currency Exchange The price at which one country's currency can be exchanged
Rate into another currency. When a country's currency rises
relative to other currencies, this decreases the buying
power of foreign purchasers of that country's goods and
services and tends to hurt the earnings of companies that
export; by contrast, a weak currency promotes exports. From
the perspective of a U.S. investor in overseas securities, a
weakening U.S. dollar adds to total returns, as assets
denominated in foreign currencies then translate into more
in dollar terms; a strengthening dollar relative to foreign
currencies reduces returns to U.S. investors.
Defensive Securities Stocks and bonds that are more conservative than average,
and tend to perform better than the overall market when that
market is weak. Often, non-cyclical stocks are used to
establish a defensive position, since they tend not to be as
severely affected during economic slowdowns.
Fundamental Analysis of companies based on the projected impact of
Research management, products, sales, and earnings on their 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.
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.
</TABLE>
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
15
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Investment Portfolio as of October 31, 2000
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Short-Term Investments 5.5%
---------------------------------------------------------------------------------
<S> <C> <C>
United States
Student Loan Marketing Association, 6.45%**, 11/1/2000
(Cost $5,298,000) ................................... 5,298,000 5,298,000
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Common Stocks 94.5%
---------------------------------------------------------------------------------
Australia 1.7%
Davnet Limited (Provider of telecommunication services) 1,352,000 551,271
E.R.G. Australia Ltd. (Producer and installer of
electronic ticketing equipment, and manufacturer of
radio communication equipment) ...................... 210,100 1,037,892
-----------
1,589,163
-----------
China 1.2%
China Petroleum and Chemical Corp. "H"* (Explorer and
producer of oil and natural gas) .................... 6,042,000 1,185,374
-----------
Hong Kong 39.0%
Cheung Kong Holdings Ltd. (Provider of real estate and
financial management services) ...................... 227,000 2,510,547
China Telecom Ltd. (Provider of cellular
telecommunication services) ......................... 921,000 5,904,906
China Unicom (Provider of telecommunications services) . 1,754,000 3,519,875
Citic Pacific Ltd. (Diversified holding company) ....... 356,000 1,428,821
Dao Heng Bank Group Ltd. (Provider of commercial
and retail banking) ................................. 198,000 1,000,333
Esprit Holdings Ltd. (Designer and manufacturer of high
quality fashion products) ........................... 2,325,081 1,997,543
Giordano International Ltd. (Retailer of casual apparel) 3,259,424 1,912,121
Hong Kong Electric Holdings, Ltd. (Electric utility and
real estate) ........................................ 480,000 1,584,900
Hongkong Land Holdings, Ltd. (Investor in commercial
property) ........................................... 928,000 1,716,800
Hutchison Whampoa, Ltd. (Diversified investment holding
company) ............................................ 444,400 5,527,505
JCG Holdings Ltd. (Bank) ............................... 2,066,000 1,099,415
Legend Holdings Ltd. (Manufacturer of computers and
related products) ................................... 2,142,000 1,812,787
Li & Fung, Ltd. (Exporter of consumer products) ........ 1,168,000 2,171,672
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
MTR Corporation* (Provider of public transportation
services) ............................................. 2,871,000 4,252,052
Quality Healthcare Asia Ltd.* (Provider of medical
coverage services) .................................... 4,539,000 1,047,650
------------
37,486,927
------------
India 10.2%
Dr. Reddy's Laboratories Ltd. (Manufacturer and exporter
of pharmaceuticals) ................................... 16,700 499,770
Global Tele-Systems Limited (Manufacturer of
telecommunication products and services) .............. 29,350 662,842
HDFC Bank Ltd. (Corporate banking and financial services) 100 534
Hindustan Lever Ltd. (Manufacturer of consumer products) . 265,000 1,005,524
ITC Limited (Tobacco company) ............................ 55,400 900,863
Infosys Technologies Ltd. (Financial and industrial
software developer) ................................... 21,300 3,259,862
NIIT Ltd. (Designer and distributor of computer software) 36,300 1,221,856
Satyam Computer Services Ltd. (Provider of software
services) ............................................. 341,120 2,237,360
------------
9,788,611
------------
Korea 14.3%
Hite Brewery Co., Ltd. (Brewery and producer of natural
mineral drinking water) ............................... 19,600 877,046
Kookmin Credit Card Co., Ltd. (Provider of credit
card services) ........................................ 99,500 2,169,319
Korea Telecom Corp. (ADR) (Provider of
telecommunications services) .......................... 78,300 2,887,313
SK Telecom Co., Ltd. (Provider of mobile
telecommunications services) .......................... 22,470 4,790,308
Samsung Electro-Mechanics Co., Ltd. (Manufacturer
of precision and electronic parts) .................... 16,870 539,840
Samsung Electronics Co. (Manufacturer of electronics) .... 19,906 2,493,719
------------
13,757,545
------------
Malaysia 1.1%
SCB Developments Berhad (Builder of residential buildings) 835,800 1,064,545
------------
Singapore 8.9%
Chartered Semiconductor (ADR)* (Manufacturer of
semiconductors) ....................................... 20,801 967,247
DBS Group Holdings Ltd. (Provider of banking and
other financial services) ............................. 299,899 3,536,867
Singapore Airlines Limited (Provider of air
transportation) ....................................... 167,900 1,683,592
Venture Manufacturing Ltd. (Provider of manufacturing
services to electronics companies) .................... 246,300 2,385,540
------------
8,573,246
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
------------------------------------------------------------------------------------
<S> <C> <C>
Taiwan 13.6%
ASE Test Ltd. (Provider of testing services to
semiconductor manufacturers) ......................... 84,700 1,307,556
Compeq Manufacturing Co., Ltd.* (Manufacturer of
multi-layer and double-sided printed circuit boards) . 375,400 1,417,920
Far Eastern Textile Ltd. (Manufacturer of natural and
synthetic textile products) .......................... 1,369,724 1,128,008
Formosa Plastics Corp. (Manufacturer of plastics
materials) ........................................... 80,770 128,782
GigaMedia Ltd.* (Provider of broadband Internet access
services and content) ................................ 62,400 304,200
Hon Hai Precision Industry Co., Ltd. (Manufacturer of
electronic products) ................................. 326,080 1,706,115
Pacific Electric Wire & Cable Co., Ltd.* (Manufacturer of
electrical wires and cables) ......................... 369,225 153,748
Synnex Technology International Corp. (Distributor of
personal computers and peripherals) .................. 66,900 140,842
Taiwan Cement Corp. (Manufacturer of cement) ............ 3,127,680 1,597,731
Taiwan Semiconductor Manufacturing Co. Ltd. .............
(Manufacturer of integrated circuits) ................ 417,328 1,266,196
United MicroElectronics Corporation (ADR)* (Manufacturer
of integrated circuits) .............................. 163,817 1,863,416
Via Technologies Inc. (Designer, manufacturer and
marketer of integrated PC chipsets) .................. 99,000 711,084
Yageo Corp. (Manufacturer of resistors and
related equipment) ................................... 1,748,000 1,342,118
------------
13,067,716
------------
United Kingdom 4.1%
HSBC Holdings plc (International banking and financial
services company) .................................... 189,150 2,631,597
Standard Chartered plc (Global bank) .................... 93,107 1,341,304
------------
3,972,901
------------
United States 0.4%
AsiaInfo Holdings, Inc.* (Provider of Internet-related
software products) ................................... 28,400 344,350
------------
------------------------------------------------------------------------------------
Total Common Stocks (Cost $91,887,066) 90,830,378
------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $97,185,066) (a) 96,128,378
------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $97,984,603. At October
31, 2000, net unrealized depreciation for all securities based on tax
cost was $1,856,225. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $14,621,338 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $16,477,563.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 2000
------------------------------------------------------------------------------------------------
Assets
------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $97,185,066) ......................... $ 96,128,378
Cash ........................................................................... 1,353
Foreign currency, at value (cost $6,919,396) ................................... 6,877,293
Receivable for investments sold ................................................ 3,213,171
Dividends receivable ........................................................... 11,489
Receivable for Fund shares sold ................................................ 124,640
Foreign taxes recoverable ...................................................... 781
Due from Adviser ............................................................... 32,505
---------------
Total assets ................................................................... 106,389,610
Liabilities
------------------------------------------------------------------------------------------------
Payable for investments purchased .............................................. 1,003,246
Payable for Fund shares redeemed ............................................... 178,453
Accrued management fee ......................................................... 101,055
Accrued reorganization costs ................................................... 8,977
Accrued Directors' fees and expenses ........................................... 65,009
Other accrued expenses and payables ............................................ 262,302
---------------
Total liabilities .............................................................. 1,619,042
Net assets, at value ........................................................... $ 104,770,568
Net Assets
------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments .................................................................. (1,056,688)
Foreign currency related transactions ........................................ (42,740)
Accumulated net realized gain (loss) ........................................... (33,517,136)
Paid-in capital ................................................................ 139,387,132
Net assets, at value ........................................................... $ 104,770,568
Net Asset Value
------------------------------------------------------------------------------------------------
Class AARP
Net Asset Value, offering and redemption price per share ($2,349 / 233 shares of
capital stock outstanding, $.01 par value,
100,000,000 shares authorized) .............................................. $ 10.08
Class S
Net Asset Value, offering and redemption price per share ($104,768,219 /
10,388,299 shares of capital stock outstanding, $.01 par value, 100,000,000
shares authorized) .......................................................... $ 10.09
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 2000
-------------------------------------------------------------------------------
Investment Income
-------------------------------------------------------------------------------
Income:
<S> <C>
Dividends (net of foreign taxes withheld of $142,220) .......... $ 1,073,488
Interest ....................................................... 137,603
---------------
Total Income ................................................... 1,211,091
---------------
Expenses:
Management fee ................................................. 1,789,220
Services to shareholders ....................................... 681,755
Custodian and accounting fees .................................. 439,256
Adminstrative fee .............................................. 57,980
Auditing ....................................................... 92,322
Legal .......................................................... 7,094
Directors' fees and expenses ................................... 89,346
Reports to shareholders ........................................ 68,103
Registration fees .............................................. 8,728
Reorganization fees ............................................ 55,126
Other .......................................................... 55,181
---------------
Total expenses, before expense reductions ...................... 3,344,111
Expense reductions ............................................. (32,505)
---------------
Total expenses, after expense reductions ....................... 3,311,606
Net investment income (loss) ................................... (2,100,515)
Realized and unrealized gain (loss) on investment transactions
-------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments (net of foreign taxes of $1,286,932) ............... 28,568,616
Foreign currency related transactions .......................... (387,804)
---------------
28,180,812
---------------
Net unrealized appreciation (depreciation) during the period on:
Investments (net of deferred foreign tax benefit of $1,145,576) (39,770,956)
Foreign currency related transactions .......................... (50,148)
---------------
(39,821,104)
-------------------------------------------------------------------------------
Net gain (loss) on investment transactions (11,640,292)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(13,740,807)
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Statements of Changes in Net Assets
-------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Years Ended October 31,
2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ...................... $ (2,100,515) $ (721,575)
Net realized gain (loss) on investment transactions 28,180,812 916,485
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (39,821,104) 45,992,276
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations ................................ (13,740,807) 46,187,186
---------------- ----------------
Distributions to shareholders from:
Net investment income:
Class AARP ...................................... -- --
---------------- ----------------
Class S ......................................... -- (314,081)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ......................... 96,599,537 461,378,994
Reinvestment of distributions ..................... -- 287,106
Cost of shares redeemed ........................... (121,909,595) (477,752,884)
Redemption fees ................................... 697,567 571,030
---------------- ----------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (24,612,491) (15,515,754)
---------------- ----------------
Increase (decrease) in net assets ................. (38,353,298) 30,357,351
Net assets at beginning of period ................. 143,123,866 112,766,515
Net assets at end of period (including accumulated
distributions in excess of net investment
income of $128,040 at October 31, 1999) ........ $ 104,770,568 $ 143,123,866
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Class AARP
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(a)
------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.93
----------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (b) (.01)
------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (.84)
----------
------------------------------------------------------------------------------------
Total from investment operations (.85)
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income --
------------------------------------------------------------------------------------
Redemption fees --
------------------------------------------------------------------------------------
Net asset value, end of period $10.08
----------
------------------------------------------------------------------------------------
Total Return (%) (7.78)(c)**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------------
Net assets, end of period ($ millions) .002
------------------------------------------------------------------------------------
Ratio of expenses (%) 1.75*
------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.11)**
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 134
------------------------------------------------------------------------------------
</TABLE>
(a) For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
(b) Based on monthly average shares outstanding during the period.
(c) Shareholders redeeming shares held less than one year will have a lower
total return due to the effect of the 2% redemption fee.
* Annualized
** Not annualized
22
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class S (a)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Years Ended October 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.76 $ 8.38 $11.38 $15.93 $15.59
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (b) (.18) (.06) .05 (.04) .02
------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions (1.55) 3.41 (2.75) (4.50) .42
--------------------------------------------
------------------------------------------------------------------------------------
Total from investment operations (1.73) 3.35 (2.70) (4.54) .44
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income -- (.02) (.30) (.01) (.10)
--------------------------------------------
------------------------------------------------------------------------------------
Total distributions -- (.02) (.30) (.01) (.10)
------------------------------------------------------------------------------------
Redemption fees .06 .05 -- -- --
------------------------------------------------------------------------------------
Net asset value, end of period $10.09 $11.76 $ 8.38 $11.38 $15.93
--------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) (14.20) 40.49 (24.16) (28.52) 2.76
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 105 143 113 147 329
------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 2.05(c) 2.35 2.46 1.94 1.75
------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 2.03(c) 2.35 2.46 1.94 1.75
------------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) (1.29) (.56) .50 (.22) .12
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 134 122 141 97 95
------------------------------------------------------------------------------------
</TABLE>
(a) On October 2, 2000, existing shares of the Fund were redesignated as
Class S shares.
(b) Based on monthly average shares outstanding during the period.
(c) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.98%
and 1.98%, respectively (see Notes to Financial Statements).
* Annualized
** Not annualized
23
<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") which is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company and is organized as a Maryland Corporation.
On October 2, 2000, the Fund commenced offering multiple classes of shares.
Existing shares of the Fund were redesignated as Class S and the Fund commenced
offering Class AARP shares. The two classes of shares provide investors with
different purchase options. Shares of Class AARP are especially designed for
members of AARP. Investment income, realized and unrealized gains and losses,
and certain Fund-level expenses and expense reductions, if any, are borne pro
rata on the basis of relative net assets by the holders of both classes except
that each class bears certain expenses unique to that class such as
reorganization expenses (see Note F). Differences in class-level expenses may
result in payment of different per share dividends by class. All shares of the
Fund have equal rights with respect to voting subject to class-specific
arrangements. Effective October 2, 2000, there are no class-specific expenses.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America which require the
use of management estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
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.
24
<PAGE>
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.
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.
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
(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
25
<PAGE>
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.
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, 2000, the Fund had a net tax basis capital loss carryforward of
approximately $32,718,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2006 ($32,650,000) 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 accounting principles generally accepted in the United
States of America. 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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
26
<PAGE>
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.
Redemption Fees. In general, shares of each class 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, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $205,255,956 and
$237,566,838, respectively.
C. Related Parties
As described in Note F, Scudder Kemper Investments, Inc. has initiated a
restructuring program for most of its Scudder no-load open-end funds. As part of
this reorganization, the Fund adopted a new Investment Management Agreement and
entered into an Administrative Agreement. Both of these agreements were
effective October 2, 2000. The terms of the newly adopted and the pre-existing
agreements are set out below.
Management Agreement. Under the Investment Management Agreement (the
"Agreement") with Scudder Kemper Investments, Inc. ("Scudder Kemper" or 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.
Effective October 2, 2000, the Fund, as approved by the Fund's Board of
Directors, adopted a new Investment Management Agreement (the "Management
Agreement") with Scudder Kemper. The Management Agreement is identical to the
pre-existing Agreement, except for the dates of execution and termination and
fee rate. The management fee payable under
27
<PAGE>
the Management Agreement is equal to an annual rate of 1.10% of the first
$500,000,000 of the average daily net assets and 1.05% of such net assets in
excess of $500,000,000, computed and accrued daily and payable monthly.
Accordingly, for the year ended October 31, 2000, the fee pursuant to the
Agreement and the Management Agreement aggregated to $1,789,220, which was
equivalent to an annual effective rate of 1.10% of the Fund's average daily net
assets.
Administrative Fee. Effective October 2, 2000, the Fund, as approved by the
Fund's Board of Directors, adopted an Administrative Agreement (the
"Administrative Agreement") with Scudder Kemper. Under the Administrative
Agreement the Adviser provides or pays others to provide substantially all of
the administrative services required by the Fund (other than those provided by
Scudder Kemper under its Management Agreement with the Fund, as described above)
in exchange for the payment by the Fund of an administrative services fee (the
"Administrative Fee") of 0.65% of average daily net assets. As of the effective
date of the Administrative Agreement, each service provider will continue to
provide the services that it currently provides to the Fund (i.e., fund
accounting, shareholder services, custody, audit and legal), under the current
arrangements, except that Scudder Kemper will pay these entities for the
provision of their services to the Fund and will pay most other Fund expenses,
including insurance, registration, printing and postage fees. Certain expenses
of the Fund will not be borne by Scudder Kemper under the Administrative
Agreement, such as taxes, brokerage, interest and extraordinary expenses, and
the fees and expenses of the Independent Directors (including the fees and
expenses of their independent counsel). For the period October 2, 2000 through
October 31, 2000, the Administrative Agreement expense charged to the Fund
amounted to $57,980, all of which is unpaid at October 31, 2000.
Service Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
Prior to October 2, 2000, the amount charged to the Fund by SSC aggregated
$521,970, of which $45,415 is unpaid at October 31, 2000.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. Prior to October 2, 2000, the
amount charged to the Fund by STC aggregated $52,365, of which $159 is unpaid at
October 31, 2000.
28
<PAGE>
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. Prior to October 2,
2000, the amount charged to the Fund by SFAC aggregated $117,618, of which
$8,015 is unpaid at October 31, 2000.
Effective October 2, 2000, the above fees will be paid by the Adviser in
accordance with the Administrative Agreement.
Directors' Fees and Expenses. 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, 2000, Directors' fees and
expenses aggregated $24,337. In addition, a one-time fee of $65,009 was accrued
by Class S prior to October 2, 2000 for payment to those Directors not
affiliated with the Adviser who did not stand for re-election under the
reorganization discussed in Note F. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $32,505 of such costs.
Other Related Parties. Effective October 2, 2000, Scudder Kemper has agreed to
pay a fee to AARP and/or its affiliates in return for advice relating to
investments by AARP members in Class AARP shares of the Fund. This fee is
calculated on a daily basis as a percentage of the combined net assets of the
AARP classes of all funds managed by Scudder Kemper. The fee rates, which
decrease as the aggregate net assets of the AARP classes become larger, are as
follows: 0.07% for the first $6,000,000,000 of net assets, 0.06% for the next
$10,000,000,000 of such net assets and 0.05% of such net assets thereafter.
D. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States of America. 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 of
America.
E. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $1 billion
revolving credit facility with Chase Manhattan Bank for temporary or
29
<PAGE>
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Participants are
charged an annual commitment fee which is allocated, pro rata based upon net
assets, among each of the Participants. Interest is calculated based on the
market rates at the time of the borrowing. The Fund may borrow up to a maximum
of 33 percent of its net assets under the agreement.
F. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund. In addition, after December 29, 2000, Class
S shares of the Fund will generally not be available to new investors.
30
<PAGE>
G. Share Transactions
The following table summarizes shares of capital stock and dollar activity in
the Fund:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
---------------------------------------------------------------------
Shares Dollars Shares Dollars
Shares sold
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class AARP* .... 233 $ 2,543 -- $ --
Class S** ...... 6,843,012 96,596,994 49,215,178 461,378,994
$ 96,599,537 $ 461,378,994
Shares issued to shareholders in reinvestment of distributions
----------------------------------------------------------------------------------------
Class AARP* .... -- $ -- -- $ --
Class S** ...... -- -- 32,540 287,106
$ -- $ 287,106
Shares redeemed
----------------------------------------------------------------------------------------
Class AARP* .... -- $ -- -- $ --
Class S** ...... (8,627,353) (121,909,595) (50,538,419) (477,752,884)
$(121,909,595) $(477,752,884)
Redemption fees
----------------------------------------------------------------------------------------
Class AARP* .... -- $ -- -- $ --
Class S** ...... -- 697,567 -- 571,030
$ 697,567 $ 571,030
Net increase (decrease)
----------------------------------------------------------------------------------------
Class AARP* .... 233 $ 2,543 -- $ --
Class S** ...... (1,784,341) (24,615,034) (1,290,701) (15,515,754)
$ (24,612,491) $ (15,515,754)
</TABLE>
* For the period from October 2, 2000 (commencement of sales of Class
AARP shares) to October 31, 2000.
** On October 2, 2000, existing shares of the Fund were redesignated as
Class S shares.
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, 2000, the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States of America. 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 auditing standards generally accepted in
the United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 15, 2000
32
<PAGE>
Tax Information (Unaudited)
--------------------------------------------------------------------------------
The Fund paid foreign taxes of $1,430,000 and earned $1,430,000 of foreign
source income during the year ended October 31, 2000. Pursuant to section 853 of
the Internal Revenue Code, the Fund designates $0.14 per share as foreign taxes
paid and $0.14 per share as income earned from foreign sources for the year
ended October 31, 2000.
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>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Pacific
Opportunities Fund (the "fund"), a series of Scudder International Fund, Inc.,
was held on July 13, 2000, at the office of Scudder Kemper Investments, Inc.,
Two International Place, Boston, Massachusetts 02110. At the Meeting the
following matters were voted upon by the shareholders (the resulting votes for
each matter are presented below).
1. To elect Directors of Scudder International Fund, Inc.
Number of Votes:
Director For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 5,596,057 182,086
Linda C. Coughlin 5,580,460 197,683
Dawn-Marie Driscoll 5,595,989 182,154
Edgar R. Fiedler 5,588,671 189,472
Keith R. Fox 5,596,708 181,435
Joan E. Spero 5,590,027 188,116
Jean Gleason Stromberg 5,589,904 188,239
Jean C. Tempel 5,591,938 186,205
Steven Zaleznick 5,583,349 194,794
--------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending October 31, 2000.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
5,586,363 72,922 118,858 0
--------------------------------------------------------------------------------
* Broker non-votes are proxies received by the fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
34
<PAGE>
Officers and Directors
--------------------------------------------------------------------------------
Linda C. Coughlin* Joyce E. Cornell*
o President and Director o Vice President
Henry P. Becton, Jr. Carol L. Franklin*
o Director; President, WGBH Educational o Vice President
Foundation
Edmund B. Games, Jr.*
Dawn-Marie Driscoll o Vice President
o Director; President, Driscoll
Associates; Executive Fellow, Center William F. Glavin*
for Business Ethics, Bentley College o Vice President
Edgar R. Fiedler Joan R. Gregory*
o Director; Senior Fellow and Economic o Vice President
Counsellor, The Conference Board, Inc.
James E. Masur*
Keith R. Fox o Vice President
o Director; General Partner,
The Exeter Group of Funds Howard S. Schneider*
o Vice President
Joan E. Spero
o Director; President, The Doris Tien-Yu Sieh*
Duke Charitable Foundation o Vice President
Jean Gleason Stromberg John Millette*
o Director; Consultant o Vice President and
Secretary
Jean C. Tempel
o Director; Managing Director, Kathryn L. Quirk*
First Light Capital, LLC o Vice President and
Assistant Secretary
Steven Zaleznick
o Director; President and John R. Hebble*
Chief Executive Officer, o Treasurer
AARP Services, Inc.
Brenda Lyons*
Thomas V. Bruns* o Assistant Treasurer
o Vice President
Caroline Pearson*
Irene T. Cheng* o Assistant Secretary
o Vice President
*Scudder Kemper Investments, Inc.
35
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Scudder Funds
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund
Prime Reserve Shares Scudder Small Company Value Fund
Premium Shares
Managed Shares Growth
Scudder Tax Free Money Fund Scudder Classic Growth Fund
Scudder Capital Growth Fund
Tax Free Scudder Large Company Growth Fund
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund
Scudder California Tax Free Fund Scudder 21st Century Growth Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund
Scudder GNMA Fund Scudder Global Discovery Fund
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio Scudder Health Care Fund
Scudder Pathway Growth Portfolio Scudder Technology Fund
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
36
<PAGE>
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
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Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
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Closed-End Funds
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The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
Scudder funds are offered by prospectus only. For more complete information on
any fund or variable annuity registered in your state, including information
about a fund's objectives, strategies, risks, advisory fees, distribution
charges, and other expenses, please order a free prospectus. Read the prospectus
before investing in any fund to ensure the fund is appropriate for your goals
and risk tolerance. There is no assurance that the objective of any fund will be
achieved, and fund returns and net asset values fluctuate. Shares are redeemable
at current net asset value, which may be more or less than their original cost.
A money market mutual fund investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although a
money market mutual fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in such a fund.
The services and products described should not be considered a solicitation to
buy or an offer to sell a security to any person in any jurisdiction where such
offer, solicitation, purchase, or sale would be unlawful under the securities
laws of such jurisdiction.
Scudder Investor Services, Inc.
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Account Management Resources
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For shareholders of Scudder funds including those in the AARP Investment Program
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly
to regularly purchase fund shares and "dollar cost
average" -- buy more shares when the fund's price is
lower and fewer when it's higher, which can reduce
your average purchase price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to
purchase shares -- use distributions from one Scudder
fund to purchase shares in another, automatically
(accounts with identical registrations or the same
social security or tax identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of
your transactions is electronically debited from a
previously designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government
checks -- invested in up to four Scudder funds at one
time.
* Dollar cost averaging involves continuous
investment in securities regardless of price
fluctuations and does not assure a profit or
protect against loss in declining markets.
Investors should consider their ability to
continue such a plan through periods of low
price levels.
Around-the- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to
exchange or redeem shares, and information on other
Scudder funds and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.scudder.com
Personal Investment Organizer: Offering account
information and transactions, interactive worksheets,
prospectuses and applications for all Scudder funds,
plus your current asset allocation, whenever you need
them. Scudder's site also provides news about Scudder
funds, retirement planning information, and more.
38
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Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the
proceeds for schedule (as frequently as once a month) and amount
living expenses of the redemptions, and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into
automated the bank account you designate within three business
withdrawal days after each distribution is paid.
programs
QuickSell
Provides speedy access to your money by
electronically crediting your redemption proceeds to
the bank account you previously designated.
For more Scudder Class S Shareholders:
information
about these Call a Scudder representative at
services 1-800-SCUDDER
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 219669
Kansas City, MO
64121-9669
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 219735
Kansas City, MO
64121-9735
39
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About the Fund's Adviser
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.
SCUDDER
INVESTMENTS(SM)
[LOGO]
AARP Investment
Program from Scudder
PO Box 219735
Kansas City, MO 64121-9735
1-800-253-2277
aarp.scudder.com
Scudder Funds
PO Box 219669
Kansas City, MO 64121-9669
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
