-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KvG8A1jvuExTljR9zs1mSymXnKTh9NrT9giJKlanZBDeGVh6UWRp7kz+E0gfg4JG ZPzgR6oZMDSp3XjYWgunyg== 0000088053-01-500312.txt : 20010702 0000088053-01-500312.hdr.sgml : 20010702 ACCESSION NUMBER: 0000088053-01-500312 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCUDDER INTERNATIONAL FUND INC CENTRAL INDEX KEY: 0000088053 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132827803 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00642 FILM NUMBER: 1672324 BUSINESS ADDRESS: STREET 1: 345 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10154 BUSINESS PHONE: 2123266200 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER INTERNATIONAL INVESTMENTS LTD DATE OF NAME CHANGE: 19761203 N-30D 1 sr-pof.txt SEMIANNUAL REPORT SCUDDER INVESTMENTS - -------------------------------------------------------------------------------- EQUITY/GLOBAL - -------------------------------------------------------------------------------- Scudder Pacific Opportunities Fund Semiannual Report April 30, 2001 The fund seeks to provide long-term growth of capital. Contents - -------------------------------------------------------------------------------- 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 22 Financial Statements 25 Financial Highlights 27 Notes to Financial Statements 34 Report of Independent Accountants 35 Officers and Directors 36 Investment Products and Services 38 Account Management Resources 2 Scudder Pacific Opportunities Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class AARP ticker symbol SPOPX fund number 173 Class S ticker symbol SCOPX fund number 073 - -------------------------------------------------------------------------------- Date of Inception: o The Pacific Rim markets generally declined during the 12/8/92 six-month reporting period, due in part to weakness in the Nasdaq index in the U.S. and concerns about the slowing global economy. Total Net Assets as of 4/30/01 -- o After having been overweight in technology and communications stocks during most of 2000, the fund has adopted a more defensive posture. As a result, Class AARP: it holds a higher-than-normal weighting in cash and $.07 million convertible bonds, and has increased its position in the financial sector during the past six months. Class S: $88 million 3 Letter from the Fund's President - -------------------------------------------------------------------------------- Dear Shareholders, The past year has been challenging for investors in the Pacific Rim, as the region's stock markets have been exceptionally volatile and highly vulnerable to the difficulties that have been affecting the entire global economy. Class S shares of Scudder Pacific Opportunities Fund have been hurt in this environment, as they have fallen 9.12% over the past six months and 33.79% over the past year. We understand that you may be dismayed by the decline in your fund's share price. However, it is often when the investment backdrop appears to be the most challenging that opportunities can be the most prevalent. By making the decision to sell when a sector has fallen sharply, you can avoid further fluctuations in the financial markets and reduce your short-term risk. But you also run the risk of missing a potential rally as the climate improves and investors start buying to take advantage of investment opportunities. In our view, such opportunities currently exist in the Asian markets. Stocks in the region are reasonably priced compared to both their own histories and other markets around the world, and corporate management teams are becoming increasingly shareholder-oriented and focused on the need to become more efficient. Although compelling valuations and more enlightened 4 management practices may not lead to improved market performance in the short term -- since investors will likely remain cautious until there are clearer signs that the global economy is picking up steam -- the Asian markets should benefit in the years ahead. We urge investors who have held on through the downturn of the past year to maintain a focus on potential long-term benefits of maintaining an investment in the Pacific Rim, even when the region is experiencing high volatility and poor short-term market performance. We would like to take this opportunity to announce a change in the fund's management. Peter Sartori, who has 11 years of experience in managing assets, became the fund's new lead portfolio manager in early June. Mr. Sartori will be working out of the firm's Singapore office. Thank you for your continued investment in Scudder Pacific Opportunities Fund. If you have any questions regarding the fund or your account, visit us on the Web. You can also speak with one of our representatives by calling us toll-free. Sincerely, /s/ Linda C. Coughlin Lin Coughlin President Scudder Pacific Opportunities Fund - -------------------------------------------------------------------------------- AARP Investment Program Scudder Class S Web site: aarp.scudder.com myScudder.com Toll-free: 1-800-253-2277 1-800-SCUDDER - -------------------------------------------------------------------------------- 5 Performance Update - -------------------------------------------------------------------------------- April 30, 2001 Growth of a $10,000 Investment THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE LINE CHART DATA: Scudder Pacific Opportunities MSCI All Country Asia Free Fund -- Class S Index (excluding Japan)* 12/92 10000 10000 1993 11019 11910 1994 13498 16806 1995 12811 16185 1996 14490 19974 1997 13844 18496 1998 9205 11487 1999 8976 13603 2000 12165 15874 2001 8034 10835 Yearly periods ended April 30 - -------------------------------------------------------------------------------- Fund Index Comparison - -------------------------------------------------------------------------------- Total Return Growth of Average Period ended 4/30/2001 $10,000 Cumulative Annual - -------------------------------------------------------------------------------- Scudder Pacific Opportunities Fund -- Class S - -------------------------------------------------------------------------------- 1 year $ 6,621 -33.79% -33.79% - -------------------------------------------------------------------------------- 5 year $ 5,559 -44.41% -11.08% - -------------------------------------------------------------------------------- Life of Class** $ 8,034 -19.66% -2.57% - -------------------------------------------------------------------------------- MSCI All Country Asia Free Index (excluding Japan)* - -------------------------------------------------------------------------------- 1 year $ 6,826 -31.74% -31.74% - -------------------------------------------------------------------------------- 5 year $ 5,425 -45.75% -11.51% - -------------------------------------------------------------------------------- Life of Class** $ 10,835 8.35% .97% - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Returns and Per Share Information - -------------------------------------------------------------------------------- THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA: Yearly periods ended April 30 1993** 1994 1995 1996 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Class Total Return (%) 9.92 22.49 -5.09 13.11 -4.46 -33.51 -2.48 35.52 -33.79 - -------------------------------------------------------------------------------- Index Total Return (%) 19.10 41.11 -3.69 23.42 -7.40 -37.89 18.42 16.70 -31.74 - -------------------------------------------------------------------------------- Net Asset Value ($) 13.19 16.08 15.17 17.05 16.27 10.51 10.21 13.85 9.17 - -------------------------------------------------------------------------------- Income Dividends ($) -- .08 .10 .10 .01 .30 .03 -- -- - -------------------------------------------------------------------------------- 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 reinvested dividends 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 Advisor had not maintained the Fund's expenses, the life-of-fund total return for the class would have been lower. 7 Portfolio Summary - -------------------------------------------------------------------------------- April 30, 2001 - -------------------------------------------------------------------------------- Geographical - -------------------------------------------------------------------------------- (Excludes 5% Cash Equivalents) During the six-month reporting period, the fund's weightings in Hong Kong and Korea fell, while its weightings in Taiwan and Singapore rose. A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW. Hong Kong 32% Taiwan 21% Korea 13% Singapore 11% India 11% U.K. 3% China 2% Australia 2% Thailand 2% Other 3% - ------------------------------------ 100% - ------------------------------------ - -------------------------------------------------------------------------------- Sectors - -------------------------------------------------------------------------------- (Excludes 5% Cash Equivalents) The fund's weighting in the financial sector increased from 17% of net assets on October 31, 2000. A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW. Financial 33% Technology 22% Manufacturing 15% Communications 12% Transportation 4% Consumer Discretionary 3% Consumer Staples 2% Energy 2% Durables 2% Other 5% - ------------------------------------ 100% - ------------------------------------ 8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Ten Largest Equity Holdings - -------------------------------------------------------------------------------- (36% of Portfolio) Six of the fund's top ten holdings are in the financial sector, compared to three on October 31, 2000. 1. Hutchison Whampoa Ltd. Provider of investment services in Hong Kong 2. China Mobile Ltd. Provider of cellular telecommunication services in Hong Kong 3. Samsung Electronics Co. Manufacturer of electronics in Korea 4. Taiwan Semiconductor Manufacturing Co., Ltd. Manufacturer of integrated circuits in Taiwan 5. United Microelectronics Corp. Designer and manufacturer of integrated circuits and related electronic products in Taiwan 6. Sun Hung Kai Properties Ltd. Provider of real estate and financial services in Hong Kong 7. Henderson Land Development Co., Ltd. Provider of management, construction, financial and information technology services in Hong Kong 8. Cheung Kong Holdings Ltd. Provider of real estate and financial management services in Hong Kong 9. DBS Group Holdings Ltd. Provider of banking and other financial services in Singapore 10. HSBC Holdings plc Provider of international banking and financial services in the United Kingdom For more complete details about the Fund's investment portfolio, see page 6. A quarterly Fund Summary and Portfolio Holdings are available upon request. 9 Portfolio Management Discussion - -------------------------------------------------------------------------------- April 30, 2001 In the following interview, Lead Portfolio Manager Tien-Yu Sieh discusses Scudder Pacific Opportunities Fund's strategy and the market environment during the six-month period ended April 30, 2001. Q: The Asian markets have performed poorly during the past six months. What factors have sparked their declines? A: The most important factor influencing the Asian markets during this time was the deterioration of the global investment environment. Fears of a slowing economy in the U.S. had a significant impact on sentiment in Asia, since such a large percentage of the region's exports are sold to the United States. Additionally, slowing sales of technology products worldwide took a large bite out of the share prices of Asian tech companies. These two factors, along with weakness in the Nasdaq average in the United States, kept pressure on Asian stocks for most of the period. However, stock market returns for the full six-month period showed only moderate losses due to substantial rallies in January -- following the surprise interest rate cut by the U.S. Federal Reserve on the first business day of the year -- and in April, when stocks rallied across the globe. Local factors also played a part, of course, but in the case of the four countries where we hold the largest percentage of fund assets, their influence was mixed. In Hong Kong, for example, lower interest rates in the U.S. and strong trade with China provided a boost, but investor sentiment was muted due to continued weakness in the local economy. Korean stocks were supported by attractive valuations, the improving political backdrop in Japan (since the two economies are so closely connected), and the upcoming World Cup soccer tournament, but market participants were disappointed by a lack of progress in government reform and corporate restructuring (see glossary). Taiwan presented a similarly mixed picture: stocks performed well in January through March due to lower local interest rates and hopes for a pickup in corporate merger activity, making the country the top 10 - -------------------------------------------------------------------------------- performer in the region for the first calendar quarter. However, the tensions associated with the downed U.S. plane, possible U.S. weapons sales to the island, and questions surrounding the Bush administration's China policy kept Taiwan's market from participating in April's global rally. In India, the positive effects of compelling valuations and strength in the consumer sector were offset by a bribery scandal at the top levels of the country's government. Q: How did the fund perform during the six-month period? A: Class S shares of the fund's total return was -9.12%, which trailed the -8.37% return of its unmanaged benchmark, the MSCI All-Country Asia Free Index. The fund has not performed well against its peers during the past year, due primarily to our decision to overweight the technology and telecommunications sectors early in 2000. In the wake of the sector's collapse and its subsequent effects on the fund's share price -- as well as the ongoing challenges posed by high market volatility and slowing corporate earnings growth worldwide -- we have adopted a more defensive positioning (see glossary) in the portfolio. We have raised the fund's weighting in cash and convertible bonds, and brought its country and sector weightings more closely in line with those of the benchmark. As a result of these shifts, the fund's weighting in technology and telecommunications stocks has declined substantially in recent months, while its holdings in the financial sector have increased. At a time when external factors are playing a significant role in the performance of Asian equities, we feel that an approach that avoids large "bets" on any particular area of the market is warranted. With a higher level of cash in the portfolio, we believe we will have the flexibility to take advantage of potential market upside if earnings visibility improves. 11 - -------------------------------------------------------------------------------- Q: The fund's weighting in technology and communications stocks has fallen significantly in the past six months. What's your view on the sector now? A: We were overweight in these areas during the first half of last year, so the fund's performance was hurt significantly when the Nasdaq's correction sparked a decline in these sectors across all global markets. A key aspect of our positive view on Asian techs was our belief that they were attractively valued in relation to their global counterparts. However, if tech stocks underperform in the rest of the world, they will also underperform in Asia regardless of their valuations. The fund's weighting in techs and telecoms has declined in the past six months, from 41% of net assets on October 31, 2000, to 34% on April 30, 2001. This was largely due to additional declines in our holdings in these sectors rather than an active decision on our part to trim our existing holdings. The position we hold now includes more defensive stocks that we believe to have good earnings prospects and attractive valuations, such as Samsung Electronics (Korea) and Compal (Taiwan), as well more aggressive stocks such as Chartered Semiconductor (Singapore). In this way, we hope to position the fund to benefit from potential gains in the sector while at the same time providing a cushion against further declines. Q: The fund's weighting in the financial sector has increased substantially during the past six months. Why? A: The financial sector now accounts for 33% of the portfolio's net assets, versus 17% on October 31, 2000. We believe that the sector, in general, offers compelling opportunities due to falling interest rates worldwide (which are generally beneficial for the financial sector's earnings) and a positive environment for consolidation (merger) activity. Consolidation is generally helpful in that it benefits the stocks of the acquired companies, leads to speculation that other companies will also be acquired (thus boosting their share prices), and reduces industry 12 - -------------------------------------------------------------------------------- capacity. We are also positive about the restructuring and reforms we see taking place within the banking sectors of Korea and India, and are encouraged by the attractive valuations we see in the financial sector across the entire Asian region. Our holdings in this area also include banks in Thailand and Malaysia, which we bought to gain exposure to the growth of the two countries' economies. Q: What is your outlook for the Asian markets from here? A: Although our long-term view on the region's potential remains positive due to several key factors -- such as attractive demographics, some of the highest economic growth rates in the world, rising merger activity, the proliferation of restructuring, and a gradual reduction in government regulations -- it is likely that the extraordinary volatility that has characterized the market environment in recent months will persist throughout the remainder of the year. Until such time as investors have a clear view as to the direction of the global economy and corporate earnings worldwide, stocks in general -- and Asian stocks in particular -- will be vulnerable to short-term factors due to the region's dependence on exports to the U.S. and the health of the global technology sector. Another potential negative is the likelihood that earnings expectations for Asian companies will continue to be ratcheted down in the months ahead. Having said that, there are two key external factors that could help the Asian markets in the months ahead. First, the U.S. Federal Reserve continues to cut interest rates aggressively and additional stimulus appears to be in the cards in the form of tax cuts. Both of these could support a rebound in the U.S. economy, which would help Asian exporters. Second, the ongoing weakness in the Japanese economy has prompted the country to make a number of significant changes. The Bank of Japan has cut interest rates back to zero and announced a fight against deflation (see glossary), which bodes well for the economy -- providing that the government can make the necessary 13 - -------------------------------------------------------------------------------- reforms. Reinforcing hopes for an eventual turnaround, the pro-reform maverick Junichiro Koizumi was elected president of the ruling LDP party in late April, making him the country's next Prime Minister. Unlike his predecessors, Koizumi seems to have a greater appreciation for the need to make short-term sacrifices to ensure the country's long-term prosperity. Whether these developments can help spark a rebound in the economies of the U.S. and Japan remains to be seen, but overall we believe they bode well for the smaller economies of the Pacific Rim. Individual stock selection will be extremely important in this uncertain environment. We will therefore focus our efforts on using fundamental research to find the highest quality companies the region has to offer. We intend to maintain a focus on companies with strong balance sheets, steady revenues, strong management teams, and the potential to benefit from important fundamental changes (such as meaningful restructuring initiatives). We believe that this approach will help the fund weather the volatile environment we see unfolding in the months ahead. 14 Glossary of Investment Terms - -------------------------------------------------------------------------------- Consolidation The reduction in the number of companies in a particular industry, brought about by merger and acquisition activity. Convertible Bonds that are exchangeable for a set number of Bonds another type of security (usually common shares) at a prestated price. Convertibles generally offer higher income than is available from a common stock, but more appreciation potential than non-convertible bonds. Defensive Stocks and bonds that are more conservative than average, Securities and tend to perform better than the overall market when that market is weak. Often, non-cyclical to establish a defensive position, since they tend not to be as severely affected during economic slowdowns. Deflation A decline in the prices of goods and services. The opposite of inflation, deflation usually has a negative effect on output and employment. 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. Valuation Placing a value on an asset. Stock analysis determines the market value of a company's stocks based on the outlook for earnings and the market value of assets on the balance sheet. Valuation is normally expressed in terms of price-to-earnings (or P/E) ratio. A stock with a high P/E is said to have a high valuation, a stock with a low P/E is said to have a low valuation. 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. (Sources: Zurich Scudder Investments, Inc.; Barron's Dictionary of Finance and Investment Terms) 15 Investment Portfolio as of April 30, 2001 - --------------------------------------------------------------------------------
Principal Amount ($) Value ($) - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- Repurchase Agreements 3.8% - ------------------------------------------------------------------------------------------- United States Salomon Smith Barney, 4.62%, to be repurchased at $3,307,424 on 5/1/2001** ----------- (Cost $3,307,000) ........................................... 3,307,000 3,307,000 ----------- - ------------------------------------------------------------------------------------------- Short-Term Investments 1.2% - ------------------------------------------------------------------------------------------- United States Federal Home Loan Bank, 4.77%***, 5/1/2001 ----------- (Cost $1,000,000) ........................................... 1,000,000 1,000,000 ----------- - ------------------------------------------------------------------------------------------- Convertible Bonds 2.4% - ------------------------------------------------------------------------------------------- Cayman Islands 0.9% IBK Cayman Finance Co., 1.5%, 8/17/2003 ........................ 752,000 756,738 ----------- Taiwan 1.5% Compal Electronics, Inc., 10/19/2005 ........................... 654,000 739,020 Hon Hai Precision Industry, 11/15/2005 ......................... 577,000 579,885 ----------- 1,318,90 ----------- - ------------------------------------------------------------------------------------------- Total Convertible Bonds (Cost $2,057,140) 2,075,643 - ------------------------------------------------------------------------------------------- Shares - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- Common Stocks 92.6% - ------------------------------------------------------------------------------------------- Australia 1.9% Cable & Wireless Optus Ltd.* (Provider of communication and telecommunication services) ............................. 236,200 429,611 E.R.G. Ltd. (Manufacturer of automated fare collection equipment and systems) ...................................... 312,700 240,318 National Australia Bank Ltd. (Provider of commercial banking services) ........................................... 21,200 326,941 The News Corp., Ltd. (Producer and distributor of motion pictures and television programming) ................. 67,200 641,292 ----------- 1,638,162 ----------- Bermuda 0.5% Asia Global Crossing Ltd. "A"* (Provider of full range of integrated telecommunications and IP services in the Asia Pacific region) ........................................ 69,600 436,392 ----------- The accompanying notes are an integral part of the financial statements. 16 Shares Value ($) - ------------------------------------------------------------------------------------------- China 1.9% Beijing Datang Power Generation Co., Ltd. "H" (Developer and operator of coal-fired electric power plants) ............................................... 1,342,000 447,385 China Petroleum and Chemical Corp. "H" (Explorer and producer of oil and natural gas) ............................ 1,828,000 325,797 Huaneng Power International, Inc. (ADR) (Developer, owner and operator of large coal-fired power plants) .............. 17,900 411,521 PetroChina Co., Ltd. "H" (Explorer, developer and producer of crude oil and natural gas) ...................... 2,248,000 481,358 ----------- 1,666,061 ----------- Hong Kong 30.3% Amoy Properties Ltd. (Property management company) ............. 241,500 250,817 Bank of East Asia Ltd. (Provider of banking services) .......... 192,000 436,974 CNOOC Ltd.* (Producer of oil and gas) .......................... 655,000 634,080 Cheung Kong Holdings Ltd. (Provider of real estate and financial management services) .............................. 158,000 1,757,446 Cheung Kong Infrastructure Holdings, Ltd. (Infrastructure business in power plants, toll roads and bridges in China) ...................................................... 406,000 645,510 China Mobile Ltd.* (Provider of cellular telecommunication services) ................................. 984,000 4,844,867 Citic Pacific Ltd. (Diversified holding company) ............... 157,000 451,930 Dah Sing Financial Group (Provider of banking services and property investment) .................................... 67,800 369,466 Denway Motors Ltd.* (Manufacturer, assembler and trader of motor vehicles) .......................................... 1,894,000 564,623 Esprit Holdings Ltd.* (Designer and manufacturer of high quality fashion products) ................................... 828,581 940,229 Giordano International Ltd. (Retailer and distributor of casual apparel and accessories) ............................. 801,424 418,741 Henderson Investment Ltd. (Provider of management, construction, financial and information technology services) ................................................... 718,000 506,340 Henderson Land Development Co., Ltd. (Provider of management, construction, financial and information technology services) ........................................ 394,000 1,808,568 Hong Kong Exchanges & Clearing Ltd. (Owner and operator of the stock exchange and futures exchange) ........ 434,000 779,064 Hutchison Whampoa, Ltd. (Provider of investment services) ................................................... 548,400 5,888,948 Legend Holdings Ltd. (Manufacturer of computers and related products) ........................................... 1,398,000 1,111,359 MTR Corp. (Provider of public transport services) .............. 665,200 1,147,176 The accompanying notes are an integral part of the financial statements. 17 - ------------------------------------------------------------------------------------------- Shares Value ($) - ------------------------------------------------------------------------------------------- Sun Hung Kai Properties Ltd. (Provider of real estate and financial services) ......................................... 260,000 2,433,614 The Wharf (Holdings) Ltd. (Developer of real estate properties) ................................................. 287,000 677,104 Wing Hang Bank Ltd. (Provider of corporate and retail banking services) ........................................... 174,900 690,710 ----------- 26,357,566 ----------- India 10.4% Dr. Reddy's Laboratories Ltd. (Manufacturer and exporter of pharmaceuticals) ......................................... 18,600 445,344 Grasim Industries Ltd. (Operator of a diversified manufacturing company) ...................................... 34,300 212,325 HDFC Bank Ltd. (Provider of corporate banking and custodial services) ......................................... 58,300 287,206 Hindalco Industries Ltd. (Miner and refiner of aluminum) ....... 11,100 191,857 Hindustan Lever Ltd. (Manufacturer of diverse branded and packaged consumer products) ............................. 292,000 1,313,813 Housing Development Finance Corp., Ltd. (Provider of housing finance to individuals, corporations and developers) ............................................. 36,000 442,891 ICICI Ltd. (ADR) (Provider of promotion and participation of private capital) ......................................... 24,400 290,360 ITC Ltd. (Manufacturer of tobacco products) .................... 46,200 825,712 Infosys Technologies Ltd. (Provider of IT services and consulting) ............................................. 10,700 851,568 Larsen & Toubro Ltd. (Manufacturer of cement, engineering equipment and machinery) ........................ 45,800 215,018 Mahanagar Telephone Nigam Ltd. (Operator of a telecommunications company) ............................... 138,900 445,702 Reliance Industries Ltd. (Manufacturer of synthetic fibers, fiber intermediates, petrochemicals and textiles) ........... 147,700 1,084,100 Satyam Computer Services Ltd. (Provider of Information Technology services) ........................................ 116,620 538,409 State Bank of India (Provider of banking services) ............. 208,500 934,778 Videsh Sanchar Nigam Ltd. (Provider of telecommunication services) ................................................... 37,100 500,850 Wipro Ltd.* (Provider of Information Technology and computer-related technologies) .............................. 16,000 490,658 ----------- 9,070,591 ----------- Korea 12.3% Hite Brewery Co., Ltd. (Producer of beer, liquor and natural mineral drinking water) ............................. 15,110 512,845 Housing & Commercial Bank (Provider of commercial banking and financial services) ............................. 28,250 537,329 Hyundai Motor Co., Ltd. (Manufacturer of automobiles) .......... 46,500 727,335 Kookmin Bank (Provider of commercial banking services) ......... 40,760 482,806 The accompanying notes are an integral part of the financial statements. 18 - ------------------------------------------------------------------------------------------- Shares Value ($) - ------------------------------------------------------------------------------------------- Kookmin Credit Card Co., Ltd. (Provider of credit card services) .............................................. 35,280 932,228 Korea Telecom Corp. (ADR) (Provider of telecommunication services) ................................. 26,900 743,247 Korea Telecom Freetel* (Provider of mobile communication services) ..................................... 13,900 498,162 Pohang Iron & Steel Co., Ltd. (Producer of steel) .............. 6,050 450,190 SK Telecom Co., Ltd. (Provider of mobile telecommunication services) ................................. 6,370 1,095,524 Samsung Electro-Mechanics Co., Ltd. (Manufacturer of electronic parts and consumer products) ..................... 7,470 236,238 Samsung Electronics Co., Ltd. (Manufacturer of electronic equipment) ....................................... 24,186 4,205,462 Samsung SDI Co., Ltd. (Manufacturer of cathode ray tubes for television and computer monitors) ................. 6,400 265,816 ----------- 10,687,182 ----------- Malaysia 1.4% British American Tobacco Malaysia Berhad (Manufacturer, importer and retailer of tobacco products) .................. 49,400 451,744 Malayan Banking Berhad (Provider of banking and financial services) ......................................... 158,000 407,468 Malaysian Pacific Industries Berhad (Manufacturer of inte Unisem (M) Berhad (Manufacturer of semiconductors) ............. 101,000 184,721 ----------- 1,187,615 ----------- Singapore 11.0% Capitaland Ltd. (Operator of residential and commercial properties) ...................................... 398,000 502,470 Chartered Semiconductor (ADR)* (Provider of wafer fabrication services to semiconductor suppliers) ............ 16,600 531,034 Chartered Semiconductor Manufacturing Ltd.* (Provider of comprehensive wafer fabrication services and technologies) ............................................... 161,000 494,895 DBS Group Holdings Ltd. (Provider of banking and financing services) ......................................... 197,999 1,728,062 Oversea-Chinese Banking Corp., Ltd. (Foreign registered) (Provider of commercial banking services) ................... 126,400 763,201 Sembcorp Logistics Ltd. (Provider of passenger ferry services, ocean towage and marine transportation) ........... 308,200 1,184,213 Singapore Airlines Ltd. (Provider of air transportation) ....... 124,700 992,507 Singapore Press Holdings, Ltd. (Printer, publisher and distributor of newspapers and magazines) .................... 63,000 722,747 Singapore Telecommunications Ltd. (Provider of telecommunications systems and services) .................... 733,000 732,276 The accompanying notes are an integral part of the financial statements. 19 - ------------------------------------------------------------------------------------------- Shares Value ($) - ------------------------------------------------------------------------------------------- United Overseas Bank, Ltd. (Provider of a full range of commercial banking and financial services) .................. 145,800 968,372 Venture Manufacturing Ltd. (Provider of manufacturing services to electronics companies) .......................... 139,600 973,16 ----------- 9,592,946 ----------- Taiwan 18.3% Cathay Life Insurance Co., Ltd. (Provider of life insurance services) ......................................... 244,000 359,805 China Development Industrial Bank* (Provider of investment banking services) ................................ 925,000 824,035 Chung Hsing Bills Finance Corp. (Provider of brokerage and dealer services for short-term debt instruments) ........................................... 1,893,000 532,388 Compal Electronics, Inc. (Manufacturer and marketer of notebook computers and color monitors) ...................... 196,000 333,718 Compeq Manufacturing Co., Ltd.* (Manufacturer of multi-layer and double-sided printed circuit boards) ........ 187,400 572,627 Dah An Commercial Bank* (Provider of commercial banking services) ........................................... 3,943,000 833,197 Delta Electronics, Inc. (Manufacturer of power supply and video display equipment) .................................... 98,000 297,963 Far Eastern Air Transport Co., Ltd.* (Provider of scheduled air transportation services for passengers and freight) ..... 483,000 146,853 Formosa Plastics Corp. (Manufacturer of plastic materials) .................................................. 2 3 Hon Hai Precision Industry Co., Ltd. (Manufacturer of electronic products) ........................................ 55,080 323,212 Macronix International Co., Ltd.* (Manufacturer of computer memory chips) ...................................... 416,000 638,735 Nanya Technology Corp.* (Manufacturer of dynamic random access memories) ..................................... 417,000 382,895 Phoenixtec Power Co., Ltd. (Manufacturer of industrial electric and electronic products) ........................... 395,000 362,694 President Chain Store Corp. (Operator of convenience stores) ..................................................... 272,000 785,649 Silicon Integrated Systems Co., Ltd.* (Manufacturer of chipsets for computers) ..................................... 342,000 556,309 Sunplus Technology Co., Ltd., (GDR)* (Designer, manufacturer and marketer of integrated circuits) ........... 28,000 267,400 Taipei Bank* (Provider of commercial banking services) ......... 1,321,000 787,218 Taiwan Semiconductor Manufacturing Co., Ltd. ................... (Manufacturer of integrated circuits) ....................... 1,337,328 3,700,117 United Microelectronics Corp. (ADR)* (Designer and manufacturer of integrated circuits and related electronic products) ........................................ 264,717 2,909,240 The accompanying notes are an integral part of the financial statements. 20 Shares Value ($) - ------------------------------------------------------------------------------------------- Via Technologies, Inc.* (Designer, manufacturer and marketer of integrated PC chipsets) ......................... 41,000 386,440 Yuanta Core Pacific Securities Co.* (Provider of brokerage, dealer and underwriter services for financial securities) ... 1,206,000 916,692 ----------- 15,917,190 ----------- Thailand 1.4% Bangkok Bank Ltd. (Foreign registered)* (Provider of commercial banking services) ................... 361,900 400,349 National Finance Public Co., Ltd. (Foreign registered)* (Provider of financial services) ............................ 2,188,210 407,443 Shin Corporation Public Co., Ltd. plc (Foreign registered)* (Investor of diversified telecommunication, media and advertising businesses) ................................. 120,500 429,384 ----------- 1,237,176 ----------- United Kingdom 3.2% HSBC Holdings plc (Provider of a variety of international banking and financial services) ............................. 126,750 1,608,936 Standard Chartered plc (Operator of an international banking group) .............................................. 84,572 1,197,705 ----------- 2,806,641 ----------- - ------------------------------------------------------------------------------------------- Total Common Stocks (Cost $83,145,656) 80,597,522 - ------------------------------------------------------------------------------------------- Total Investment Portfolio -- 100.0% (Cost $89,509,796) (a) 86,980,165 - -------------------------------------------------------------------------------------------
* Non-income producing security. ** Repurchase agreements are fully collateralized by U.S. Treasury or government agency securities. *** Annualized yield at time of purchase; not a coupon rate. (a) The cost for federal income tax purposes was $90,191,178. At April 30, 2001, net unrealized depreciation for all securities based on tax cost was $3,211,013. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $6,024,635 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $9,235,648. 21 Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Statement of Assets and Liabilities as of April 30, 2001 - --------------------------------------------------------------------------------
Assets - ----------------------------------------------------------------------------------------------- Investments in securities, at value (cost $89,509,796) ........................ $ 86,980,165 Cash .......................................................................... 55,907 Foreign currency, at value (cost $2,551,343) .................................. 2,551,990 Receivable for investments sold ............................................... 62,188 Dividends receivable .......................................................... 224,064 Interest receivable ........................................................... 2,743 Receivable for Fund shares sold ............................................... 486,251 Foreign taxes recoverable ..................................................... 179,644 ------------- Total assets .................................................................. 90,542,952 Liabilities - ----------------------------------------------------------------------------------------------- Payable for investments purchased ............................................. 2,558,458 Payable for Fund shares redeemed .............................................. 212,896 Accrued management fee ........................................................ 74,763 Other accrued expenses and payables ........................................... 61,063 ------------- Total liabilities ............................................................. 2,907,180 - ----------------------------------------------------------------------------------------------- Net assets, at value $ 87,635,772 - ----------------------------------------------------------------------------------------------- Net Assets - ----------------------------------------------------------------------------------------------- Undistributed net investment income ......................................... 8,730 Net unrealized appreciation (depreciation) on: Investments ................................................................. (2,529,631) Foreign currency related transactions ....................................... 1,104 Accumulated net realized gain (loss) .......................................... (40,589,440) Paid-in capital ............................................................... 130,745,009 - ----------------------------------------------------------------------------------------------- Net assets, at value $ 87,635,772 - ----------------------------------------------------------------------------------------------- Net Asset Value - ----------------------------------------------------------------------------------------------- Class AARP Net Asset Value, offering and redemption price per share ($73,378 / 8,013 shares of capital stock outstanding, $.01 par value, 100,000,000 shares --------------- authorized) ................................................................ $ 9.16 --------------- Class S Net Asset Value, offering and redemption price per share ($87,562,394 / 9,553,196 shares of capital stock outstanding, $.01 par value, 100,000,000 --------------- shares authorized) ......................................................... $ 9.17 ---------------
The accompanying notes are an integral part of the financial statements. 22 - -------------------------------------------------------------------------------- Statement of Operations for the six months ended April 30, 2001 - -------------------------------------------------------------------------------- Investment Income - -------------------------------------------------------------------------------- Income: Dividends (net of foreign taxes withheld of $79,334) ............ $ 736,634 Interest ........................................................ 117,964 ----------- Total Income .................................................... 854,598 ----------- Expenses: Management fee .................................................. 529,376 Administrative fee .............................................. 312,813 Directors' fees and expenses .................................... 2,617 Other ........................................................... 1,062 ----------- Total expenses .................................................. 845,868 - -------------------------------------------------------------------------------- Net investment income (loss) 8,730 - -------------------------------------------------------------------------------- Realized and unrealized gain (loss) on investment transactions - -------------------------------------------------------------------------------- Net realized gain (loss) from: Investments (including foreign taxes of $174,827) ............... (6,889,239) Foreign currency related transactions (including foreign taxes of $ 76,379)........................................................ (183,065) ----------- (7,072,304) ----------- Net unrealized appreciation (depreciation) during the period on: Investments ..................................................... (1,472,943) Foreign currency related transactions ........................... 43,844 ----------- (1,429,099) - -------------------------------------------------------------------------------- Net gain (loss) on investment transactions (8,501,403) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations . $(8,492,673) - -------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements. 23 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Six Months Ended Year Ended April 30, October 31, Increase (Decrease) in Net Assets 2001 2000 - -------------------------------------------------------------------------------- Operations: Net investment income (loss)...................... $ 8,730 $ (2,100,515) Net realized gain (loss) on investment transactions (7,072,304) 28,180,812 Net unrealized appreciation (depreciation) on investment transactions during the period...... (1,429,099) (39,821,104) ---------------- ---------------- Net increase (decrease) in net assets resulting from operations................................ (8,492,673) (13,740,807) ---------------- ---------------- Fund share transactions: Proceeds from shares sold......................... 55,837,298 96,599,537 Cost of shares redeemed........................... (64,600,961) (121,909,595) Redemption fees................................... 121,540 697,567 ---------------- ---------------- Net increase (decrease) in net assets from Fund share transactions............................. (8,642,123) (24,612,491) ---------------- ---------------- Increase (decrease) in net assets................. (17,134,796) (38,353,298) Net assets at beginning of period................. 104,770,568 143,123,866 Net assets at end of period (including undistributed net investment income of $8,730 ----------------- ---------------- at April 30, 2001) $ 87,635,772 $ 104,770,568 ----------------- ----------------
The accompanying notes are an integral part of the financial statements. 24 Financial Highlights - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements. Class AARP - ------------------------------------------------------------------------------ 2001(a) 2000(b) - ------------------------------------------------------------------------------ Net asset value, beginning of period $10.08 $10.93 - ------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (c) .00(e) (.01) - ------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investment transactions (.93) (.84) - ------------------------------------------------------------------------------- Total from investment operations (.93) (.85) - ------------------------------------------------------------------------------- Redemption fees .01 -- - ------------------------------------------------------------------------------- Net asset value, end of period $ 9.16 $10.08 - ------------------------------------------------------------------------------- Total Return (%) (9.13)** (7.78)(d)** - ------------------------------------------------------------------------------- Ratios to Average Net Assets and Supplemental Data - ------------------------------------------------------------------------------- Net assets, end of period ($ millions) .073 .002 - ------------------------------------------------------------------------------- Ratio of expenses (%) 1.76* 1.75* - ------------------------------------------------------------------------------- Ratio of net investment income (loss) (%) .05* (.11)** - ------------------------------------------------------------------------------- Portfolio turnover rate (%) 208* 134* - ------------------------------------------------------------------------------- (a) For the six months ended April 30, 2001. (b) For the period from October 2, 2000 (commencement of sales of Class AARP shares) to October 31, 2000. (c) Based on monthly average shares outstanding during the period. (d) Shareholders redeeming shares held less than one year will have a lower total return due to the effect of the 2% redemption fee. (e) Less than $.005 per share. * Annualized ** Not annualized 25 - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements. Class S
- ------------------------------------------------------------------------------------ Years Ended October 31, 2001(a) 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------ Net asset value, beginning of period $10.09 $11.76 $ 8.38 $11.38 $15.93 $15.59 - ------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) .00(d) (.18) (.06) .05 (.04) .02(b) - ------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investment transactions (.93) (1.55) 3.41 (2.75) (4.50) .42 - ------------------------------------------------------------------------------------ Total from investment operations (.93) (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 .01 .06 .05 -- -- -- - ------------------------------------------------------------------------------------ Net asset value, end of period $ 9.17 $10.09 $11.76 $ 8.38 $11.38 $15.93 - ------------------------------------------------------------------------------------ Total Return (%) (9.12)**(14.20) 40.49 (24.16) (28.52) 2.76 - ------------------------------------------------------------------------------------ Ratios to Average Net Assets and Supplemental Data - ------------------------------------------------------------------------------------ Net assets, end of period ($ millions) 88 105 143 113 147 329 - ------------------------------------------------------------------------------------ Ratio of expenses before expense reductions (%) 1.76* 2.05(c) 2.35 2.46 1.94 1.75 - ------------------------------------------------------------------------------------ Ratio of expenses after expense reductions (%) 1.76* 2.03(c) 2.35 2.46 1.94 1.75 - ------------------------------------------------------------------------------------ Ratio of net investment income (loss) (%) .05* (1.29) (.56) .50 (.22) .12 - ------------------------------------------------------------------------------------ Portfolio turnover rate (%) 208* 134 122 141 97 95 - ------------------------------------------------------------------------------------
(a) For the six months ended April 30, 2001. (b) Based on monthly average shares outstanding during the period. (c) The ratios of operating expenses excluding costs incurred in connection with the reorganization in fiscal 2000 before and after expense reductions were 1.98% and 1.98%, respectively. (d) Less than $.005 per share. * Annualized ** Not annualized 26 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. The Fund offers multiple classes of shares. The two classes of shares provide investors with different purchase options. Shares of Class AARP are especially designed for members of AARP. After December 29, 2000, Class S shares of the Fund are generally not available to new investors. 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. 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. 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. Actual results could differ from those 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. 27 - -------------------------------------------------------------------------------- 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 28 - -------------------------------------------------------------------------------- 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. Principal amounts of cash and securities invested in Malaysia 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. 29 - -------------------------------------------------------------------------------- Other. 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 discounts are accreted for both tax and financial reporting purposes. 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. B. Purchases and Sales of Securities During the six months ended April 30, 2001, purchases and sales of investment securities (excluding short-term investments) aggregated $91,666,620 and $91,636,477, respectively. C. Related Parties Management Agreement. Under the Investment Management Agreement (the "Management Agreement") with Zurich Scudder Investments, Inc., formerly Scudder Kemper Investments, Inc., ("ZSI" or the "Advisor"), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor 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 Advisor provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 1.10% of the 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 six months ended April 30, 2001, the fee pursuant to the Management Agreement amounted to $529,376, which was equivalent to an annualized effective rate of 1.10% of the Fund's average daily net assets. Administrative Fee. Under the Administrative Agreement (the "Administrative Agreement") the Advisor provides or pays others to provide substantially all of the administrative services required by the Fund (other than those provided by ZSI under its Management Agreement with the Fund, as described above) 30 - -------------------------------------------------------------------------------- in exchange for the payment by each class of the Fund of an administrative services fee (the "Administrative Fee"). The Administrative Fee under the Administrative Agreement for Class AARP and Class S for the six months ended April 30, 2001, was equal to an annual effective rate of 0.65% of average daily net assets, computed and accrued daily and payable monthly. Various third-party service providers, some of which are affiliated with ZSI, provide certain services to the Fund under the Administrative Agreement. Scudder Fund Accounting Corporation, a subsidiary of ZSI, computes the net asset value for the Fund and maintains the accounting records of the Fund. Scudder Service Corp., also a subsidiary of ZSI, is the transfer, shareholder service and dividend-paying agent for the shares of the Fund. Scudder Trust Company, an affiliate of ZSI, provides subaccounting and recordkeeping services for shareholders in certain retirement and employee benefit plans. In addition, other service providers, not affiliated with ZSI, provide certain services (i.e. custody, legal, audit) to the Fund under the Administrative Agreement. ZSI pays the service providers for the provision of their services to the Fund and pays other Fund expenses, including insurance, registration, printing, postage and other costs. Certain expenses of the Fund will not be borne by ZSI under the Administrative Agreement, such as taxes, brokerage, interest and extraordinary expenses, and the fees and expenses of Independent Directors (including the fees and expenses of their independent counsel). For the six months ended April 30, 2001, the Administrative Fee was as follows: Total Unpaid at April Administrative Fee Aggregated 30, 2001 - ----------------------------------------------------------------------------- Class AARP........................... $ 178 $ 23 Class S.............................. 312,635 40,987 ---------------------------------- $ 312,813 $ 41,010 ---------------------------------- Directors' Fees and Expenses. The Fund pays each Director not affiliated with the Advisor an annual retainer, plus specified amounts for attended board and committee meetings. For the six months ended April 30, 2001, Directors' fees and expenses aggregated $2,617. Other Related Parties. AARP through its affiliates, monitors and approves the AARP Investment Program from ZSI. The Advisor has agreed to pay a fee to AARP and/or its affiliates in return for the use of the AARP trademark and services 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 ZSI. The fee rates, which decrease as the aggregate net assets of the AARP classes become 31 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. These amounts are used for the general purposes of AARP and its members. 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 J.P. Morgan Chase & Co. 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 based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus .5%. The Fund may borrow up to a maximum of 33% of its net assets under the agreement. F. Subsequent Event (Unaudited) On May 28, 2001, the Scudder Pacific Opportunities Fund (the "Fund") acquired all the net assets of Kemper Asian Growth Fund pursuant to a plan of reorganization approved by shareholders on May 15, 2001. The acquisition was accomplished by a tax-free exchange of 909,695 shares of Class A, 559,016 shares of Class B and 112,342 shares of Class C of the Fund, respectively, for 1,815,514 shares of Class A shares, 1,139,186 shares of Class B shares and 231,912 shares of Class C shares of the Kemper Asian Growth Fund, respectively, outstanding on May 28, 2001. Kemper Asian Growth Fund's net assets at that date ($14,814,414), including $995,104 of unrealized depreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $90,326,623. The combined net assets of the Fund immediately following the acquisition were $105,141,037. 32 - -------------------------------------------------------------------------------- G. Share Transactions The following table summarizes shares of capital stock and dollar activity in the Fund:
Six Months Ended Year Ended April 30, 2001 October 31, 2000 ------------------------------------------------------------------ Shares Dollars Shares Dollars Shares sold - ------------------------------------------------------------------------------------- Class AARP........ 29,715 $ 284,997 233* $ 2,543* Class S........... 5,924,587 55,552,301 6,843,012 96,596,994 -------------- -------------- $ 55,837,298 $ 96,599,537 -------------- -------------- Shares redeemed - ------------------------------------------------------------------------------------- Class AARP........ (21,935) $ (211,491) -- $ -- Class S........... (6,759,690) (64,389,470) (8,627,353) (121,909,595) -------------- -------------- $ (64,600,961) $(121,909,595) -------------- -------------- Redemption fees - ------------------------------------------------------------------------------------- Class AARP........ -- $ 2,923 -- $ -- Class S........... -- 118,617 -- 697,567 -------------- -------------- $ 121,540 $ 697,567 -------------- -------------- Net increase (decrease) - ------------------------------------------------------------------------------------- Class AARP........ 7,780 $ 76,429 233* $ 2,543* Class S........... (835,103) (8,718,552) (1,784,341) (24,615,034) -------------- -------------- $ (8,642,123) $ (24,612,491) -------------- --------------
* For the period from October 2, 2000 (commencement of sales of Class AARP shares) to October 31, 2000. 33 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 April 30, 2001, and 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 April 30, 2001 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. Boston, Massachusetts PricewaterhouseCoopers LLP June 18, 2001 34 Officers and Directors - -------------------------------------------------------------------------------- Linda C. Coughlin* o President and Director Henry P. Becton, Jr. o Director; President, WGBH Educational Foundation Dawn-Marie Driscoll o Director; President, Driscoll Associates; Executive Fellow, Center for Business Ethics, Bentley College Edgar R. Fiedler o Director; Senior Fellow and Economic Counsellor, The Conference Board, Inc. Keith R. Fox o Director; General Partner, The Exeter Group of Funds Jean Gleason Stromberg o Director; Consultant Jean C. Tempel o Director; Managing Director, First Light Capital, LLC Steven Zaleznick o Director; President and Chief Executive Officer, AARP Services, Inc. Thomas V. Bruns* o Vice President Irene T. Cheng* o Vice President Joyce E. Cornell* o Vice President Carol L. Franklin* o Vice President William F. Glavin* o Vice President Joan R. Gregory* o Vice President James E. Masur* o Vice President Paul H. Rogers o Vice President Howard S. Schneider* o Vice President John Millette* o Vice President and Secretary Kathryn L. Quirk* o Vice President and Assistant Secretary John R. Hebble* o Treasurer Brenda Lyons* o Assistant Treasurer Caroline Pearson* o Assistant Secretary *Zurich Scudder Investments, Inc. 35 Investment Products and Services - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Scudder Funds - -------------------------------------------------------------------------------- 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 High Yield Opportunity Fund Scudder Gold Fund Global Income Regional Scudder Global Bond Fund Scudder Greater Europe Growth Fund Scudder Emerging Markets Income Fund Scudder Pacific Opportunities Fund Scudder Latin America Fund Asset Allocation The Japan Fund, Inc. Scudder Pathway Conservative Portfolio Scudder Pathway Moderate Portfolio Industry Sector Funds Scudder Pathway Growth Portfolio Scudder Health Care Fund Scudder Technology Innovation 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 - -------------------------------------------------------------------------------- Retirement Programs and Education Accounts - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Closed-End Funds - -------------------------------------------------------------------------------- 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.
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. 37 Account Management Resources - -------------------------------------------------------------------------------- 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 -- myScudder.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 - -------------------------------------------------------------------------------- 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 Scudder Investments to PO Box 219669 Kansas City, MO 64121-9669 For AARP Investment Program Shareholders: AARP Investment Program from Scudder Investments PO Box 219735 Kansas City, MO 64121-9735 39 About the Fund's Advisor Zurich Scudder Investments, Inc., a leading global investment management firm, is a member of the Zurich Financial Services Group. Zurich Scudder Investments is one of the largest and most experienced investment management organizations in the world, managing more than USD 370 billion in assets for corporate clients, retirement and pension plans, insurance companies, mutual fund investors, and individuals worldwide. Headquartered in New York, Zurich Scudder 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. Headquartered in Zurich, Switzerland, Zurich Financial Services Group is one of the global leaders in the financial services industry, providing its customers with products and solutions in the area of financial protection and asset accumulation. This information must be preceded or accompanied by a current prospectus. Portfolio changes should not be considered recommendations for action by individual investors. AARP Investment Program from Scudder Investments PO Box 219735 Kansas City, MO 64121-9735 1-800-253-2277 aarp.scudder.com Scudder Investments PO Box 219669 Kansas City, MO 64121-9669 1-800-SCUDDER myScudder.com SCUDDER INVESTMENTS A member of [LOGO] Zurich Scudder Investments -----END PRIVACY-ENHANCED MESSAGE-----