Filed electronically with the Securities and Exchange Commission on
February , 1995
File No. 33-5724
File No. 811-4670
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 23
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 26
Scudder Global Fund, Inc.
(Exact name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston, MA 02110
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
/ / immediately upon filing pursuant to paragraph (b)
/X/ on March 1, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following:
/ / this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. The Registrant filed the notice required by Rule 24f-2 for its
most recent fiscal year on December 28, 1994.
<PAGE>
Scudder Short Term Global Income Fund
Calculation of Registration Fee under the Securities Act of 1933
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Share (1) Price (1,2) Fee (2)
---------- ---------- ---------- ---------- ----------
Shares of 41,186,200 $10.38 $290,796 $100.28
Beneficial
Interest, $.01 Par
Value
This Post-Effective Amendment No. 23 seeks to register 41,186,200
additional shares of Scudder Short Term Global Income Fund under the
Securities Act of 1933.
(1) Computed under Rule 457(d) on the basis of the net asset value per
share of registrant's shares of beneficial interest at the close of
business on January 30, 1995. The above calculation shall not be
deemed a representation as to the actual offering price.
(2) Calculated pursuant to Rule 24e-2 under the Investment Company Act of
1940.
(a) Total number of shares redeemed during 59,954,327
previous fiscal year
(b) Total number of shares included in (a) 0
previously used under Rule 24e-2 this fiscal
year
(c) Total number of shares included in (a) 18,796,142
previously used under Rule 24f-2(c) this
fiscal year
(d) Total number of shares included in (a) being 41,158,185
used to reduce maximum aggregate offering
price in this Post-Effective Amendment
While no fee is required for the 41,158,185 shares, the Registrant has
elected to register for $100.28 an additional 28,015 shares.
<PAGE>
SCUDDER GLOBAL FUND, INC.
SCUDDER GLOBAL FUND
CROSS-REFERENCE SHEET
Items Required by Form N-1A
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant RISKS OF GLOBAL INVESTING
WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
INTERNATIONAL INVESTMENT EXPERIENCE
FUND ORGANIZATION--Investment adviser,
Transfer agent
5A. Management's Discussion SHAREHOLDER BENEFITS--A team approach to
of Fund Performance investing
6. Capital Stock and Other SHAREHOLDER BENEFITS--Dividend reinvestment
Securities plan
DISTRIBUTION AND PERFORMANCE INFORMATION--
Dividends and capital gains
distributions
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered TRANSACTION INFORMATION
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares
9. Pending Legal NOT APPLICABLE
Proceedings
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and ORGANIZATION OF THE FUNDS
History
13. Investment Objectives THE FUNDS' INVESTMENT OBJECTIVES AND
and Policies POLICIES
14. Management of the Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts, Other
Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS
18. Capital Stock and Other ORGANIZATION OF THE FUNDS
Securities
19. Purchase, Redemption PURCHASES AND EXCHANGES
and Pricing of REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUNDS-
Offered -Distribution Plans
SPECIAL PLAN ACCOUNTS
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
NET ASSET VALUE
20. Tax Status TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
SCUDDER GLOBAL FUND, INC.
SCUDDER INTERNATIONAL BOND FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant INTERNATIONAL BOND INVESTING
WHY INVEST IN THE FUND?
SPECIAL RISK CONSIDERATIONS
INVESTMENTS
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
INTERNATIONAL INVESTMENT EXPERIENCE
FUND ORGANIZATION--Investment adviser,
Transfer agent
5A. Management's Discussion SHAREHOLDER BENEFITS--A team approach to
of Fund Performance investing
6. Capital Stock and Other SHAREHOLDER BENEFITS--Dividend reinvestment
Securities plan
DISTRIBUTION AND PERFORMANCE INFORMATION--
Dividends and capital gains
distributions
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered TRANSACTION INFORMATION
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares
9. Pending Legal NOT APPLICABLE
Proceedings
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and ORGANIZATION OF THE FUNDS
History
13. Investment Objectives THE FUNDS' INVESTMENT OBJECTIVES AND
and Policies POLICIES
14. Management of the Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts, Other
Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS
18. Capital Stock and Other ORGANIZATION OF THE FUNDS
Securities
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUNDS-
Offered -Distribution Plans
SPECIAL PLAN ACCOUNTS
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
NET ASSET VALUE
20. Tax Status TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
SCUDDER GLOBAL FUND, INC.
SCUDDER SHORT TERM GLOBAL INCOME FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
SPECIAL RISK CONSIDERATIONS
INVESTMENTS
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
WHY INVEST IN THE FUND?
FUND ORGANIZATION--Investment adviser,
Transfer, Dividend-paying and
Shareholder Service Agent
5A. Management's Discussion SHAREHOLDER BENEFITS--A team approach to
of Fund Performance investing
6. Capital Stock and Other SHAREHOLDER BENEFITS--Toll-Free Telephone
Securities service and information, Dividend
reinvestment plan
DISTRIBUTION AND PERFORMANCE INFORMATION--
Dividends and capital gains
distributions
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered TRANSACTION INFORMATION
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares
9. Pending Legal NOT APPLICABLE
Proceedings
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives THE FUNDS' INVESTMENT OBJECTIVES AND
and Policies POLICIES
14. Management of the Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts, Other
Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS
18. Capital Stock and Other FUND ORGANIZATION
Securities
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUND--
Offered Distribution Plans
SPECIAL PLAN ACCOUNTS
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
NET ASSET VALUE
20. Tax Status TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
SCUDDER GLOBAL FUND, INC.
SCUDDER GLOBAL SMALL COMPANY FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant SPECIAL RISK CONSIDERATIONS
WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
INTERNATIONAL INVESTMENT EXPERIENCE
FUND ORGANIZATION--Investment Adviser,
Transfer Agent
5A. Management's Discussion SHAREHOLDER BENEFITS--A team approach to
of Fund Performance investing
6. Capital Stock and Other SHAREHOLDER BENEFITS--Toll-Free Telephone
Securities Service and Information, Dividend
Reinvestment Plan
FUND ORGANIZATION--Dividends and capital
gains distributions
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered TRANSACTION INFORMATION
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares
9. Pending Legal NOT APPLICABLE
Proceedings
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives THE FUNDS' INVESTMENT OBJECTIVES AND
and Policies POLICIES
14. Management of the Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts, Other
Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS
18. Capital Stock and Other FUND ORGANIZATION
Securities
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUND--
Offered Distribution Plans
SPECIAL PLAN ACCOUNTS
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
NET ASSET VALUE
20. Tax Status TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
SCUDDER GLOBAL FUND, INC.
SCUDDER EMERGING MARKETS INCOME FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
SPECIAL RISK CONSIDERATIONS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
INTERNATIONAL INVESTMENT EXPERIENCE
FUND ORGANIZATION--Investment adviser,
Transfer agent
5A. Management's Discussion SHAREHOLDER BENEFITS--A team approach to
of Fund Performance investing
6. Capital Stock and Other SHAREHOLDER BENEFITS--Toll-Free Telephone
Securities Service and Information, Dividend
reinvestment plan
DISTRIBUTION AND PERFORMANCE INFORMATION--
Dividends and capital gains
distributions
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered TRANSACTION INFORMATION
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares
9. Pending Legal NOT APPLICABLE
Proceedings
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVES AND
and Policies POLICIES
14. Management of the Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and DIRECTORS AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services ADDITIONAL INFORMATION--Experts, Other
Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS
18. Capital Stock and Other FUND ORGANIZATION
Securities
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUND--
Offered Distribution Plans
SPECIAL PLAN ACCOUNTS
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
NET ASSET VALUE
20. Tax Status TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
<PAGE>
This prospectus sets forth concisely the information about Scudder Global
Small Company Fund, a series of Scudder Global Fund, Inc., an open-end
management investment company, that a prospective investor should know
before investing. Please retain it for future reference.
If you require more detailed information, a combined Statement of
Additional Information dated March 1, 1995 , as amended from time to
time, may be obtained without charge by writing to Scudder Investor
Services, Inc., Two International Place, Boston, MA
02110- 4103 or calling 1-800-225-2470. The Statement, which is
incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Contents_see page 4.
Scudder Global Small Company Fund
Prospectus
March 1, 1995
A pure no-load(tm) (no sales charges) mutual fund which seeks above-average
capital appreciation over the long term by investing primarily in the
equity securities of small companies located throughout the world.
Expense information
How to compare a Scudder pure no-load(tm) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Global Small Company Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With
Scudder's pure no-load(tm) funds, you pay no commissions to purchase or
redeem shares, or to exchange from one fund to another. As a result, all of
your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses : Expenses paid by the Fund
before it distributes its net investment income, expressed as a
percentage of the Fund's average daily net assets for the fiscal year
ended October 31, 1994 .
Investment management fee 1.10%
12b-1 fees NONE
Other expenses 0.66%
------
Total Fund operating expenses 1.76%
**
======
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not
pay these expenses directly; they are paid by the Fund before it
distributes its net investment income to shareholders. (As noted above, the
Fund has no redemption fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------- ------- ------- -------
$ 18 $55 $95 $207
See "Fund organization_Investment adviser" for further information about
the investment management fee. This example assumes reinvestment of all
dividends and distributions and that the percentage amounts listed under
"Annual Fund operating expenses" remain the same each year. This example
should not be considered a representation of past or future expenses or
return. Actual Fund expenses and return vary from year to year and may be
higher or lower than those shown.
* You may redeem by writing or calling the Fund. If you wish to receive
your redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction
Information_Redeeming Shares."
** From the period November 1, 1993 through February 28, 1994, the
Adviser maintained expenses at not more than 1.50% of average daily
net assets of the Fund. Had this expense maintenance not been in
place, the total expenses of the Fund would have been 1.76% (of which
1.10% would have consisted of investment management fees) for the
fiscal year.
Financial highlights
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
audited financial statements.
If you would like more detailed information concerning the Fund's
performance, a complete portfolio listing and audited financial statements
are available in the Fund's Annual Report dated October 31, 1994 and
may be obtained without charge by writing or calling Scudder Investor
Services, Inc.
******FINANCIAL HIGHLIGHTS CHART TO BE DROPPED IN FROM
ANNUAL REPORT*******
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund
in 1928. Today, we manage in excess of $90 billion for many private
accounts and over 50 mutual fund portfolios. We manage the mutual funds in
a special program for the American Association of Retired Persons, as well
as the fund options available through Scudder Horizon Plan, a
tax-advantaged variable annuity. We also advise The Japan Fund and
nine closed-end funds that invest in countries around the world.
The Scudder Family of Funds is designed to make investing easy and less
costly. It includes money market, tax free, income and growth funds as well
as IRAs, 401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to
professional service representatives at Scudder Service Corporation and the
Scudder Investor Information department, easy exchange among funds,
shareholder reports, informative newsletters and the walk-in convenience of
Scudder Funds Centers.
All Scudder mutual funds are pure no-load(tm). This means you pay no
commissions to purchase or redeem your shares or to exchange from one fund
to another. There are no "12b-1" fees either, which many other funds now
charge to support their marketing efforts. All of your investment goes to
work for you. We look forward to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Global Small Company Fund
Investment objective
* above-average capital appreciation over the long term by investing
primarily in the equity securities of small companies located
throughout the world.
Investment characteristics
* participation in a diversified, professionally-
managed portfolio of smaller, often lesser-
known companies based in the U.S. and foreign countries
* access to global investment opportunities and diversification
* potential for above-average long-term capital appreciation with the
likelihood of above-average stock market volatility
Contents
Investment objective and policies 5
Why invest in the Fund? 6
International investment experience 7
Special risk considerations 7
Additional information about policies and investments 8
Distribution and performance information 11
Purchases 12
Exchanges and redemptions 13
Fund organization 14
Transaction information 14
Shareholder benefits 17
Directors and Officers 21
Investment products and services 22
How to contact Scudder 23
Investment objective and policies
Scudder Global Small Company Fund (the "Fund"), a series of Scudder Global
Fund, Inc., seeks above-average capital appreciation over the long term by
investing primarily in the equity securities of small companies located
throughout the world. The Fund is designed for investors looking for
above-average appreciation potential (when compared with the overall
domestic stock market as reflected by Standard & Poor's 500 Composite Price
Index) and the benefits of investing globally, but are willing to accept
above-average stock market risk, the impact of currency fluctuation and
little or no current income.
Except as otherwise indicated, the Fund's investment objective and policies
are not fundamental and may be changed without a vote of shareholders.
Shareholders will receive written notice of any changes in the Fund's
objective. If there is a change in investment objective, shareholders
should consider whether the Fund remains an appropriate investment in light
of their then current financial position and needs. There can be no
assurance that the Fund's objective will be met.
Investments in small companies
In pursuit of its objective, the Fund generally invests in small, rapidly
growing companies which offer the potential for above-average returns
relative to larger companies, yet are frequently overlooked and thus
undervalued by the market. The Fund has the flexibility to invest in any
region of the world. It can invest in companies based in emerging markets,
typically in the Far East, Latin America and Eastern Europe, as well as in
firms operating in developed economies, such as those of the United States,
Japan and Western Europe.
The Fund's investment adviser, Scudder, Stevens & Clark, Inc. (the
"Adviser"), invests the Fund's assets in companies it believes offer
above-average earnings, cash flow or asset growth potential. It also
invests in companies which may receive greater market recognition over
time. The Adviser believes that these factors offer significant opportunity
for long-term capital appreciation. The Adviser evaluates investments for
the Fund from both a macroeconomic and microeconomic perspective, using
fundamental analysis, including field research. The Adviser analyzes the
growth potential and relative value of possible investments. When
evaluating an individual company, the Adviser takes into consideration
numerous factors, including the depth and quality of management; a
company's product line, business strategy and competitive position;
research and development efforts; financial strength, including degree of
leverage; cost structure; revenue and earnings growth potential;
price-earnings ratios and other stock valuation measures. Secondarily, the
Adviser weighs the attractiveness of the country and region in which a
company is located.
While the Fund's Adviser believes that smaller, lesser-known companies can
offer greater growth potential than larger, more established firms, the
former also involve greater risk and price volatility. To help reduce risk,
the Fund expects, under usual market conditions, to diversify its portfolio
widely by company, industry and country. Under normal circumstances, the
Fund will invest at least 65% of its total assets in the equity securities
of small issuers. The Fund intends to allocate investments among at least
three countries at all times, including the United States.
The Fund will select its portfolio investments primarily from companies
whose individual equity market capitalizations would place them (at the
time of purchase) in the same size range as companies in approximately the
lowest 20% of market capitalization of companies that have equity
securities listed on a U.S. national securities exchange or traded in the
NASDAQ system. Based on this policy and recent U.S. share prices, the
companies held by the Fund typically will have individual equity market
capitalizations of between approximately $50 million and $1.4 billion
(although the Fund will be free to invest in smaller capitalization issues
that satisfy the Fund's size standard). Furthermore, at least 50% of the
assets represented by such companies will be in approximately the lowest
10% of market capitalization of U.S. equity securities as described above.
At current prices this lowest 10% equates to no more than $550 million in
market capitalization.
Because the Fund applies a U.S. size standard on a global basis, a small
company investment outside the U.S. might rank above the lowest 20% by
market capitalization in local markets and, in fact, might in some
countries rank among the largest companies in terms of capitalization.
The equity securities in which the Fund may invest consist of common
stocks, preferred stocks (either convertible or nonconvertible), rights and
warrants. These securities may be listed on the U.S. or foreign securities
exchanges or traded over-the-counter. For capital appreciation purposes,
the Fund may purchase notes, bonds, debentures, government securities and
zero coupon bonds (any of which may be convertible or nonconvertible). The
Fund may invest in foreign securities and American Depositary Receipts
which may be sponsored or unsponsored. The Fund may also invest in
closed-end investment companies holding foreign securities, and engage in
strategic transactions for hedging purposes and to seek to increase gain.
For temporary defensive purposes, the Fund may, during periods in which
conditions in securities markets warrant, invest without limit in cash and
cash equivalents. More information about investment techniques is provided
under "Additional information about policies and investments."
Why invest in the Fund?
Scudder Global Small Company Fund offers convenient, low-cost access to a
diversified, global portfolio of equity securities issued by smaller
companies. The Fund's experienced, professional management can help
investors take advantage of a rapidly changing world economy.
Unlike small company funds which limit themselves to U.S. investments, the
Fund seeks investment opportunities wherever they arise. The Fund enjoys
the flexibility to invest in all established markets, as well as in newly
free or newly industrialized economies around the world. Because the Fund
operates globally, it may, under certain market conditions, augment the
returns available from a comparable investment in the U.S. market alone.
The Fund focuses specifically on small companies believed to have favorable
long-term growth prospects. Small companies can be attractive because they
are frequently sources of new technologies and services, often compete with
larger companies on the basis of lower labor costs and often grow faster
than larger firms. Their smaller size often allows them to respond rapidly
to changing business conditions. Also, small companies may not be closely
followed by securities analysts, so they may reward the investor with the
patience and knowledge to carefully seek them out and understand them. This
can mean significant long-term opportunity as these companies achieve
greater recognition over time.
While the Fund is broadly diversified, it is not a complete investment
program. However, adding shares of the Fund to a portfolio can increase
diversification, which should moderate overall portfolio risk.
The Fund is appropriate for investors who can accept the greater risks of
global, small company investing for the potentially greater rewards.
Investing directly in foreign securities is usually impractical for
individual investors. Investors frequently find it difficult to arrange
purchases and sales, obtain current information about companies abroad,
hold securities in safekeeping, and convert their profits from foreign
currencies to U.S. dollars. The Fund makes it easy for investors to take
advantage of small company opportunities on a global basis and benefit from
the Adviser's experience managing international mutual funds.
In addition, the Fund offers all the benefits of the Scudder Family of
Funds. Scudder, Stevens & Clark, Inc. manages a diverse family of pure
no-load(tm) funds and provides a wide range of services to help investors
meet their investment needs. Please refer to "Investment products and
services" for additional information.
International investment experience
The Adviser has been a leader in international investment management for
over 40 years. Its investment company clients include Scudder International
Fund, Inc., which was incorporated in Canada in 1953 as the first foreign
investment company registered with the United States Securities and
Exchange Commission, Scudder International Bond Fund, which invests
internationally, Scudder Global Fund and Scudder Short Term Global
Income Fund, which invest worldwide, The Japan Fund, Inc., which
invests in Japanese issuers, Scudder Latin America Fund, which invests in
Latin American issuers , Scudder Pacific Opportunities Fund, which
invests in Pacific Basin issuers, Scudder Emerging Markets Income Fund,
which invests in debt securities issued in emerging markets and Scudder
Greater Europe Growth Fund, which invests in equity securities of European
companies. The Adviser also manages the assets of eight
closed-end investment companies which invest in foreign securities: The
Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian Fund, Inc.,
The Korea Fund, Inc., The Latin America Dollar Income Fund, Inc., Scudder
New Asia Fund, Inc., Scudder New Europe Fund, Inc. and Scudder
World Income Opportunities Fund, Inc. As of December 31, 1994 ,
the Adviser was responsible for managing more than $ -- billion of
non-U.S. securities.
Special risk considerations
The Fund is designed for long-term investors who can accept international
investment risk. Since the Fund normally will invest in both U.S. and
foreign securities markets, changes in the Fund's share price may have a
low correlation with movements in the U.S. markets, which enhances the
Fund's appeal as a diversification tool. The Fund's share price will
reflect the movements of the different stock markets in which it is
invested and the different currencies in which the investments are
denominated. The strength or weakness of the U.S. dollar against foreign
currencies is likely to account for part of the Fund's investment
performance, although the Adviser believes that, over the long term, the
impact of currency changes on Fund performance will not be as significant
as changes in the underlying investments. As with any long-term investment,
the value of shares when sold may be higher or lower than when purchased.
Global investing involves economic and political considerations not
typically found in U.S. markets. These considerations, which may favorably
or unfavorably affect the Fund's performance, include changes in exchange
rates and exchange rate controls (which may include suspension of the
ability to transfer currency from a given country), costs incurred in
conversions between currencies, nonnegotiable brokerage commissions,
different accounting standards, lower trading volume and greater market
volatility, the difficulty of enforcing obligations in other countries,
less securities regulation, different tax provisions (including withholding
on interest and dividends paid to the Fund), war, expropriation, political
and social instability, and diplomatic developments.
Further, the settlement period of securities transactions in foreign
markets may be longer than in domestic markets. These considerations
generally are more of a concern in developing countries. For example, the
possibility of political upheaval and the dependence on foreign economic
assistance may be greater in these countries than in developed countries.
The Adviser seeks to mitigate the risks associated with these
considerations through diversification and active professional management.
The Fund will limit investments in securities of issuers located in Eastern
Europe to 5% of its total assets.
There is typically less publicly available information concerning foreign
and smaller companies than for domestic and larger, more established
companies. Some small companies have limited product lines, distribution
channels and financial and managerial resources. Also, because smaller
companies normally have fewer shares outstanding than larger companies and
trade less frequently, it may be more difficult for the Fund to buy and
sell significant amounts of such shares without an unfavorable impact on
prevailing market prices. Some of the companies in which the Fund may
invest may distribute, sell or produce products which have recently been
brought to market and may be dependent on key personnel with varying
degrees of experience.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk. The Fund may not borrow money except as a temporary
measure for extraordinary or emergency purposes and may not make loans
except through the lending of portfolio securities, the purchase of debt
securities or through repurchase agreements.
In addition, as a matter of nonfundamental policy, the Fund may not invest
more than 10% of its net assets, in the aggregate, in securities which are
not readily marketable, restricted securities or in repurchase
agreements maturing in more than seven days. The Fund may not invest more
than 5% of its total assets in restricted securities.
A complete description of these and other policies and restrictions is
contained under "The Fund's Investment Objectives and Policies" in the
Fund's Statement of Additional Information.
The Fund may invest up to 35% of its total assets in equity securities of
companies which do not meet its small company criteria and in debt
securities if the Adviser determines that the capital appreciation of debt
securities is likely to exceed the capital appreciation of equity
securities. The Fund may purchase investment-grade bonds, those rated Aaa,
Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A
or BBB by Standard & Poor's ("S&P") or, if unrated, of equivalent
quality as determined by the Adviser. The Fund may also invest up to 5% of
its net assets in debt securities rated below investment-grade (see "Risk
factors").
Special situation securities
From time to time, the Fund may invest in equity or debt securities issued
by companies that are determined by the Adviser to possess "special
situation" characteristics. In general, a special situation company is a
company whose securities are expected to increase in value solely by reason
of a development particularly or uniquely applicable to the company.
Developments that may create special situations include, among others, a
liquidation, reorganization, recapitalization or merger, material
litigation, technological breakthrough and new management or management
policies. The principal risk associated with investments in special
situation companies is that the anticipated development thought to create
the special situation may not occur and the investments therefore may not
appreciate in value or may decline in value.
Convertible securities
The Fund may invest in convertible securities which may offer higher income
than the common stocks into which they are convertible. The convertible
securities in which the Fund may invest consist of bonds, notes, debentures
and preferred stocks which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock.
Prior to their conversion, convertible securities may have characteristics
similar to nonconvertible securities.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund
may enter into repurchase agreements with selected banks and
broker/dealers. Under a repurchase agreement, the Fund acquires securities,
subject to the seller's agreement to repurchase at a specified time and
price.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or
duration of fixed-income securities in the Fund's portfolio or to enhance
potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a
part of modern portfolio management and are regularly utilized by many
mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as
currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to
protect against possible changes in the market value of securities held in
or to be purchased for the Fund's portfolio resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's
unrealized gains in the value of its portfolio securities, to facilitate
the sale of such securities for investment purposes, to manage the
effective maturity or duration of fixed-income securities in the Fund's
portfolio, or to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. Some
Strategic Transactions may also be used to enhance potential gain although
no more than 5% of the Fund's assets will be committed to Strategic
Transactions entered into for non-hedging purposes. Any or all of these
investment techniques may be used at any time and in any
combination , and there is no particular strategy that dictates the use
of one technique rather than another, as use of any Strategic Transaction
is a function of numerous variables including market conditions. The
ability of the Fund to utilize these Strategic Transactions successfully
will depend on the Adviser's ability to predict pertinent market movements,
which cannot be assured. The Fund will comply with applicable regulatory
requirements when implementing these strategies, techniques and
instruments. Strategic Transactions involving financial futures and options
thereon will be purchased, sold or entered into only for bona fide hedging,
risk management or portfolio management purposes and not for speculative
purposes. Please refer to "Risk factors_Strategic Transactions and
derivatives " for more information.
Risk factors
The Fund's risks are determined by the nature of the securities held and
the portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques
that the Fund may use from time to time.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices
may reflect changes in the value of the underlying common stock.
Convertible securities entail less credit risk than the issuer's common
stock.
Debt securities. The Fund may invest up to 5% of its net assets in debt
securities which are rated below investment-grade , that is, rated below
Baa by Moody's or below BBB by S&P, and in unrated securities of equivalent
quality. Securities rated below Baa/BBB are commonly referred to as "junk
bonds." The lower the ratings of such debt securities, the greater
their risks render them like equity securities. The Fund may invest in
securities rated D by S&P at the time of purchase, which may be in default
with respect to payment of principal or interest. Also, longer maturity
bonds tend to fluctuate more in price as interest rates change than do
short-term bonds, providing both opportunity and risk.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted.
In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the security under a repurchase agreement,
the Fund may encounter delay and incur costs before being able to sell the
security. Also, if a seller defaults, the value of such securities may
decline before the Fund is able to dispose of them.
Strategic Transactions and derivatives. Strategic Transactions,
including derivative contracts, have risks associated with them
including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market
movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used.
Use of put and call options may result in losses to the Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions can result in the
Fund incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements or the inability
to deliver or receive a specified currency. The use of options and futures
transactions entails certain other risks. In particular, the variable
degree of correlation between price movements of futures contracts and
price movements in the related portfolio position of the Fund creates the
possibility that losses on the hedging instrument may be greater than gains
in the value of the Fund's position. In addition, futures and options
markets may not be liquid in all circumstances and certain over-the-counter
options may have no markets. As a result, in certain markets, the Fund
might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures contracts and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to
limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than
would purchases of options, where the exposure is limited to the cost of
the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such
losses can be greater than if the Strategic Transactions had not been
utilized. The Strategic Transactions that the Fund may use and some of
their risks are described more fully in the Fund's Statement of Additional
Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its ordinary income and
any net realized capital gains after utilization of capital loss
carryforwards, if any, in December. An additional distribution may be made
if necessary. Any dividends or capital gains distributions declared in
October, November or December with a record date in such a month and paid
during the following January will be treated by shareholders for federal
income tax purposes as if received on December 31 of the calendar year
declared. According to preference, shareholders may receive distributions
in cash or have them reinvested in additional shares of the Fund. If the
investment is in the form of a retirement plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.
Generally, dividends from net investment income are taxable to shareholders
as ordinary income. Long-term capital gains distributions, if any, are
taxable as long-term capital gains regardless of the length of time
shareholders have owned their shares. Short-term capital gains and any
other taxable distributions are taxable as ordinary income. A portion of
dividends from ordinary income may qualify for the dividends-received
deduction for corporations.
Shareholders may be able to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the Fund to
foreign countries.
The Fund sends detailed tax information to its shareholders about the
amount and type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature, or shareholder reports. All performance
figures are historical, show the performance of a hypothetical investment
and are not intended to indicate future performance. "Total return" is the
change in value of an investment in the Fund for a specified period. The
"average annual total return" of the Fund is the average annual compound
rate of return of an investment in the Fund assuming the investment has
been held for one year and the life of the Fund as of a stated ending date.
"Cumulative total return" represents the cumulative change in value of an
investment in the Fund for various periods. Total return calculations
assume that all dividends and capital gains distributions during the period
were reinvested in shares of the Fund. "Capital change" measures return
from capital, including reinvestment of any capital gains distributions but
does not include the reinvestment of dividends. Performance will vary based
upon, among other things, changes in market conditions and the level of the
Fund's expenses.
Purchases
Opening an account
Minimum initial investment: $1,000; IRAs $500
Group retirement plans (401(k), 403(b), etc.) have similar or lower
minimums. See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send your completed and signed application and check
by regular mail to: or by express,
registered, or
certified mail to:
The Scudder Funds The Scudder Funds
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 02370-1052
* By Wire
Please see Transaction information_Purchasing shares_ By wire
following these tables for details, including the ABA wire transfer
number. Then call 1-800-225-5163 for instructions.
* In Person
Visit one of our Funds Centers to complete your application with the
help of a Scudder representative. Funds Center locations are listed
under Shareholder benefits.
Purchasing additional shares
Minimum additional investment: $100; IRAs $50
Group retirement plans (401(k), 403(b), etc.) have similar or lower
minimums. See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send a check with a Scudder investment slip, or with a letter of
instruction including your account number and the complete Fund name,
to the appropriate address listed above.
* By Wire
Please see Transaction information_Purchasing shares_ By wire
following these tables for details, including the ABA wire transfer
number.
* In Person
Visit one of our Funds Centers to make an additional investment in
your Scudder fund account. Funds Center locations are listed under
Shareholder benefits.
* By Telephone
You may purchase additional shares in an amount of $10,000 or more.
Please call 1-800-225-5163 for more details.
* By Automatic Investment Plan ($50 minimum)
You may arrange to make investments on a regular basis through
automatic deductions from your bank checking account. Please call
1-800-225-5163 for more information and an enrollment form.
Exchanges and redemptions
Exchanging shares
Minimum investments: $1,000 to establish a new account; $100 to exchange
among existing accounts
* By Tele phone
To speak with a service representative, call 1-800-225-5163 from 8
a.m. to 8 p.m. eastern time or to access SAIL(tm), Scudder's
Automated Information Line, call 1-800-343-2890 (24 hours a day).
* By Mail or Fax
Print or type your instructions and include:
- the name of the Fund and the account number you are exchanging
from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime
phone number.
Send your instructions
by regular mail to: or by express, or by fax to:
registered, or
certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 02370-1052
Redeeming shares
* By Tele phone
To speak with a service representative, call 1-800-225-5163 from 8
a.m. to 8 p.m. eastern time or to access SAIL(tm), Scudder's
Automated Information Line, call 1-800-343-2890 (24 hours a day). You
may have redemption proceeds sent to your predesignated bank
account, or redemption proceeds of up to $50,000 sent to
your address of record.
* By Mail or Fax
Send your instructions for redemption to the appropriate address or
fax number above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime
phone number.
A signature guarantee is required for redemptions over $50,000. See
Transaction information_Redeeming shares following these tables.
* By Automatic Withdrawal Plan
You may arrange to receive automatic cash payments periodically if the
value of your account is $10,000 or more. Call 1-800-225-5163 for more
information and an enrollment form.
Fund organization
The Fund is a diversified series of Scudder Global Fund, Inc. (the
"Corporation"), an open-end, management investment company registered under
the Investment Company Act of 1940 (the "1940 Act"). The Corporation was
organized as a Maryland corporation in May 1986.
The Fund's activities are supervised by the Corporation's Board of
Directors. Shareholders have one vote for each share held on matters on
which they are entitled to vote. The Fund is not required to hold and has
no current intention of holding annual shareholder meetings, although
special meetings may be called for purposes such as electing or removing
Directors, changing fundamental investment policies or approving an
investment management agreement. Shareholders will be assisted in
communicating with other shareholders in connection with removing a
Director as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens &
Clark, Inc., a Delaware corporation, to manage the Fund's daily investment
and business affairs subject to the policies established by the Board of
Directors. The Directors have overall responsibility for the management of
the Fund under Maryland law.
For the period November 1, 1993 through February 28, 1994, the Adviser
maintained the annualized expenses of the Fund at 1.50% and, accordingly,
for the fiscal year ended October 31, 1994, the Adviser received
an investment management fee of 1.03% of the Fund's average
daily net assets on an annual basis. The fee is payable monthly, provided
the Fund will make such interim payments as may be requested by the Adviser
not to exceed 75% of the amount of the fee then accrued on the books of the
Fund and unpaid.
This fee is higher than that charged to most other funds. However,
management of the Fund involves analyzing companies, markets and economies
throughout the world and the management fee is not necessarily higher than
the fees charged to funds with similar investment objectives and policies.
All the Fund's expenses are paid out of gross investment income.
Shareholders pay no direct charges or fees for investment services.
Scudder, Stevens & Clark, Inc., is located at 345 Park Avenue, New York,
New York.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts
02107-2291, a wholly-owned subsidiary of the Adviser, is the transfer,
shareholder servicing and dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser,
is the Fund's principal underwriter. Scudder Investor Services, Inc.
confirms, as agent, all purchases of shares of the Fund. Scudder Investor
Information is a telephone information service provided by Scudder Investor
Services, Inc.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share
after the Fund's transfer agent in Boston receives the purchase request in
good order. Purchases are made in full and fractional shares. (See "Share
price.")
By check. If you purchase shares with a check that does not clear, your
purchase will be cance led and you will be subject to any losses or
fees incurred in the transaction. Checks must be drawn on or payable
through a U.S. bank. If you purchase shares by check and redeem them within
seven business days of purchase, the Fund may hold redemption proceeds
until the purchase check has cleared, which may take up to seven business
days. If you purchase shares by federal funds wire, you may avoid this
delay. Redemption or exchange requests by telephone prior to the expiration
of the seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at
1-800-225-5163 to obtain an account number. A representative will instruct
you to send a completed, signed application to the transfer agent in
Boston. Accounts cannot be opened without a completed, signed application
and a Scudder fund account number. Contact your bank to arrange a wire
transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
_ the name of the fund in which the money is to be invested,
_ the account number of the fund, and
_ the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By exchange. Your new account will have the same registration and address
as your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for
more information, including information about the transfer of special
account features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By telephone order. Existing shareholders may purchase shares at a certain
day's price by calling 1-800-225-5163 before the close of regular trading
on the New York Stock Exchange (the "Exchange"), normally 4 p.m. eastern
time, on that day. Orders must be for $10,000 or more and cannot be for an
amount greater than four times the value of your account at the time the
order is placed. You must include with your payment the order number given
at the time the order is placed. A confirmation with complete purchase
information is sent shortly after your order is received. If payment by
check or wire is not received within seven business days, the order will be
cance led and the shareholder will be responsible for any loss to the
Fund resulting from this cancellation. Telephone orders are not available
for shares held in Scudder IRA accounts and most other Scudder retirement
plan accounts.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund)
without redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If
you elected telephone redemption to your bank on your application, you can
call to request that federal funds be sent to your authorized bank account.
If you did not elect telephone redemption to your bank on your application,
call 1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested.
If your bank cannot receive federal reserve wires, redemption
proceeds will be mailed to your bank. There will be a $5 charge for
all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until
the Fund's transfer agent has received your completed and signed
application. Telephone redemption is not available for shares held in
Scudder IRA accounts and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
Signature guarantees. For your protection and to prevent fraudulent
redemptions, on written redemption requests in excess of $50,000 we require
an original signature and an original signature guarantee for each person
in whose name the account is registered. (The Fund reserves the right,
however, to require a signature guarantee for all redemptions.) You can
obtain a signature guarantee from most banks, credit unions or savings
associations, or from broker/dealers, municipal securities broker/dealers,
government securities broker/dealers, national securities exchanges,
registered securities associations, or clearing agencies deemed eligible by
the Securities and Exchange Commission. Signature guarantees by notaries
public are not acceptable. Redemption requirements for corporations, other
organizations, trusts, fiduciaries, agents, institutional investors and
retirement plans may be different from those for regular accounts. For more
information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and
the right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be
sent to a predesignated bank account. The Fund uses procedures
designed to give reasonable assurance that telephone instructions are
genuine, including recording telephone calls, testing a caller's identity
and sending written confirmation of telephone transactions. If the Fund
does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it
reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset
value. The Fund's custodian, Brown Brothers Harriman & Co., determines net
asset value per share as of the close of regular trading on the Exchange,
normally 4 p.m. eastern time, on each day the Exchange is open for trading.
Net asset value per share is calculated by dividing the value of total Fund
assets, less all liabilities, by the total number of shares outstanding.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange
are executed at the net asset value per share calculated at the close of
regular trading that day.
Purchase and redemption requests received after the close of regular
trading on the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify
Scudder Service Corporation by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business
day following the redemption request, but may take up to seven days (or
longer in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only.
The Fund and Scudder Investor Services, Inc. each reserves the right to
restrict purchases of Fund shares (including exchanges) when a pattern of
frequent purchases and sales made in response to short-term fluctuations in
the Fund's share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is
a sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and
redemption and exchange proceeds from accounts (other than those of certain
exempt payees) without a certified Social Security or tax identification
number and certain other certified information or upon notification from
the IRS or a broker that withholding is required. The Fund reserves the
right to reject new account applications without a certified Social
Security or tax identification number. The Fund also reserves the right,
following 30 days' notice, to redeem all shares in accounts without a
certified Social Security or tax identification number. A shareholder may
avoid involuntary redemption by providing the Fund with a tax
identification number during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which
amount may be changed by the Board of Directors. Scudder retirement plans
have similar or lower minimum share balance requirements. The Fund reserves
the right, following 60 days' written notice to shareholders, to redeem all
shares in sub-minimum accounts, including accounts of new investors, where
a reduction in value has occurred due to a redemption or exchange out of
the account. Reductions in value that result solely from market activity
will not trigger an involuntary redemption. The Fund will mail the proceeds
of the redeemed account to the shareholder. The shareholder may restore the
share balance to $1,000 or more during the 60-day notice period and must
maintain it at no lower than that minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is
made at an investor's election through a member of the National Association
of Securities Dealers, Inc., other than Scudder Investor Services, Inc.,
that member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen
by the Fund and valued as they are for purposes of computing the Fund's net
asset value (a redemption-in-kind). If payment is made in securities, a
shareholder may incur transaction expenses in converting these securities
to cash. The Corporation has elected, however, to be governed by Rule 18f-1
under the 1940 Act, as a result of which the Fund is obligated to redeem
shares, with respect to any one shareholder during any 90-day period,
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of the period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced
investment management firms, actively manages your Scudder fund investment.
Professional management is an important advantage for investors who do not
have the time or expertise to invest directly in individual securities.
A team approach to investing
Scudder Global Small Company Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are
supported by Scudder's large staff of economists, research analysts,
traders, and other investment specialists who work in Scudder's offices
across the United States and abroad. Scudder believes its team approach
benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Gerald J. Moran has set the Fund's investment
strategy and overseen its daily operation since the Fund was introduced in
1991. Mr. Moran joined Scudder's equity research and management area in
1968 as an analyst and has focused on small company stocks since 1982 and
has been a portfolio manager since 1985. Elizabeth Allan, Portfolio
Manager, who joined the team in 1994, concentrates on the Fund's Pacific
Basin investments. Ms. Allan, who has been a portfolio manager at Scudder
since 1991, joined the firm in 1987 as a member of the portfolio management
team of a Scudder closed-end mutual fund concentrating its investments in
Asia. Carol L. Franklin, Portfolio Manager, contributes expertise on
the Fund's European investments, a role she has filled since the
Fund commenced operations. Ms. Franklin has worked on international
equity investing as a portfolio manager at Scudder since 1981. Joan
Gregory, Portfolio Manager, joined the team in 1994 and focuses on stock
selection, a role she has played since she joined Scudder in 1992. Ms.
Gregory has been involved with investment in global and international
stocks as an assistant portfolio manager since 1989.
SAIL(tm)_Scudder Automated Information Line
For touchtone access to account information, prices and yields, or to
perform transactions in existing Scudder fund accounts, shareholders can
call Scudder's Automated Information Line (SAIL) at 1-800-343-2890. During
periods of extreme economic or market changes, or other conditions, it may
be difficult for you to effect telephone transactions in your account. In
such an event you should write to the Fund; please see "How to contact
Scudder" for the address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net
asset value. You can move your investments among money market, income, tax
free and growth funds with a simple toll-free call or, if you prefer, by
sending your instructions through the mail or by fax. Telephone and fax
redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some
cases, the transfer agent or Scudder Investor Services, Inc. may impose
additional conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in
additional Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a
review of portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund
reports, such as the Fund's Annual Report, may be mailed to your household
(same surname, same address). Please call 1-800-225-5163 if you wish to
receive additional shareholder reports.
Newsletters
Four times a year, Scudder sends you At the Helm, an informative newsletter
covering economic and investment developments, service enhancements and
other topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person,
Scudder Investor Services, Inc. maintains Funds Centers in Boca Raton,
Boston, Chicago, Cincinnati, Los Angeles, New York, Portland (OR), San
Diego , San Francisco and Scottsdale .
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D.
(Telephone Device for the Deaf) service. If you have access to a T.D.D.,
call 1-800-543-7916 for investment information or specific account
questions and transactions.
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for
individuals, businesses and non-profit organizations. These flexible plans
are designed for use with the Scudder Family of Funds (except Scudder
tax-free funds, which are inappropriate for such plans). Scudder Funds
offer a broad range of investment objectives and can be used to seek almost
any investment goal. Using Scudder's retirement plans can help shareholders
save on current taxes while building their retirement savings.
* Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their
taxable income, and all investment earnings accrue on a tax deferred
basis. The Scudder No-Fee IRA charges no annual custodial fee.
* 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
* Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each person
covered by the plans. Plans may be adopted individually or paired to
maximize contributions. These are sometimes known as Keogh plans.
* 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
* SEP-IRAs. Easily administered retirement plans for small businesses
and self-employed individuals. The maximum annual contribution to
SEP-IRA accounts is adjusted each year for inflation.
* Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start
with $2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian
for some of these plans and is paid an annual fee for some of the above
retirement plans. For information about establishing a Scudder No-Fee IRA,
SEP-IRA, Profit Sharing Plan, Money Purchase Pension Plan or a Scudder
Horizon Plan, please call 1-800-225-2470. For information about 401(k)s or
403(b)s please call 1-800-323-6105. To effect transactions in existing IRA,
SEP-IRA, Profit Sharing or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life
Insurance Company (in New York State, Intramerica Life Insurance Company
[S 1802]). The contract is offered by Scudder Insurance Agency, Inc. (in
New York State, Nevada and Montana, Scudder Insurance Agency of New York,
Inc.). CNL, Inc. is the Principal Underwriter. Scudder Horizon Plan is not
available in all states.
Directors and Officers
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Daniel Pierce*
Vice President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Robert G. Stone, Jr.
Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia University
Graduate School of Business
Carol L. Franklin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Douglas M. Loudon*
Vice President
Gerald J. Moran*
Vice President
Cornelia Small*
Vice President
Lawrence Teitelbaum*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Juris Padegs*
Vice President and Assistant Secretary
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
Investment products and services
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Service Corporation
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
Scudder Automated Information Line (SAIL)
1-800-343-2890
Investment Information:
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
Scudder Investor Information
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
Scudder Group Retirement Services
1-800-323-6105
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center:
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Information and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
<PAGE>
This prospectus sets forth concisely the information about Scudder Short
Term Global Income Fund, a series of Scudder Global Fund, Inc., an
open-end management investment company , that a prospective investor
should know before investing. Please retain it for future reference.
If you require more detailed information, a combined Statement of
Additional Information dated March 1, 1995 , as amended from time to
time, may be obtained without charge by writing Scudder Investor Services,
Inc., Two International Place , Boston, MA 02110- 4103 or
calling 1-800-225-2470. The Statement, which is incorporated by reference
into this prospectus, has been filed with the Securities and Exchange
Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Contents_see page 4.
Scudder Short Term Global Income Fund
Prospectus
March 1, 1995
A pure no-load(tm) (no sales charges) mutual fund series which seeks high
current income by investing primarily in high-grade money market
instruments and short-term bonds denominated in foreign currencies and the
U.S. dollar.
Expense information
How to compare a Scudder pure no-load(tm) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Short Term Global Income Fund (the
"Fund"). By reviewing this table and those in other mutual funds'
prospectuses, you can compare the Fund's fees and expenses with those of
other funds. With Scudder's pure no-load(tm) funds, you pay no commissions
to purchase or redeem shares, or to exchange from one fund to another. As a
result, all of your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses (after expense maintenance): Expenses
paid by the Fund before it distributes its net investment income,
expressed as a percentage of the Fund's average daily net assets for
the fiscal year ended October 31, 1994 .
Investment management fee 0.60
%
12b-1 fees NONE
Other expenses 0.40
%**
------
Total Fund operating expenses 1.00%**
======
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not
pay these expenses directly; they are paid by the Fund before it
distributes its net investment income to shareholders. (As noted above, the
Fund has no redemption fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
$10 $32 $55 $122
See "Fund organization_Investment adviser" for further information about
the investment management fee. This example assumes reinvestment of all
dividends and distributions and that the percentage amounts listed under
"Annual Fund operating expenses" remain the same each year. This example
should not be considered a representation of past or future expenses or
return. Actual Fund expenses and return vary from year to year and may be
higher or lower than those shown.
* You may redeem by writing or calling the Fund. If you wish to receive
your redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction
Information_Redeeming Shares."
** Until , the Adviser has agreed to maintain the total annualized
expenses of the Fund at not more than % of average daily net
assets of the Fund. If the Adviser had not decided to maintain the
Fund's expenses, the total annualized expenses of the Fund would have
been 1.15 % (of which 0.75% would have consisted of investment
management fees) for the fiscal year ended October 31, 1994 .
Financial highlights
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
audited financial statements.
If you would like more detailed information concerning the Fund's
performance, a complete portfolio listing and audited financial statements
are available in the Fund's Annual Report dated October 31, 1994 and
may be obtained without charge by writing or calling Scudder Investor
Services, Inc.
******FINANCIAL HIGHLIGHTS CHART TO BE DROPPED IN FROM
ANNUAL REPORT*******
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund
in 1928. Today, we manage in excess of $90 billion for many private
accounts and over 50 mutual fund portfolios. We manage the mutual funds in
a special program for the American Association of Retired Persons, as well
as the fund options available through Scudder Horizon Plan, a
tax-advantaged variable annuity. We also advise The Japan Fund and
nine closed-end funds that invest in countries around the world.
The Scudder Family of Funds is designed to make investing easy and less
costly. It includes money market, tax free, income and growth funds as well
as IRAs, 401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to
professional service representatives at Scudder Service Corporation and the
Scudder Investor Information department, easy exchange among funds,
shareholder reports, informative newsletters and the walk-in convenience of
Scudder Funds Centers.
All Scudder mutual funds are pure no-load(tm). This means you pay no
commissions to purchase or redeem your shares or to exchange from one fund
to another. There are no "12b-1" fees either, which many other funds now
charge to support their marketing efforts. All of your investment goes to
work for you. We look forward to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Short Term Global Income Fund
Investment objective
* high current income by investing primarily in high-grade money market
instruments and short-term bonds denominated in foreign currencies and
the U.S. dollar
Investment characteristics
* active management of currency risk to help reduce share price
volatility
* global investments primarily in government and other high-grade
securities with remaining maturities not exceeding three years
Contents
Investment objective and policies 5
Investments 5
Global investment opportunities 6
Why invest in the Fund? 7
International investment experience 7
Special risk considerations 8
Additional information about policies and investments 9
Purchases 12
Exchanges and redemptions 13
Distribution and performance information 15
Fund organization 16
Transaction information 17
Shareholder benefits 19
Directors and Officers 22
Investment products and services 23
How to contact Scudder 24
Investment objective and policies
Scudder Short Term Global Income Fund (the "Fund"), a series of Scudder
Global Fund, Inc., provides investors with easy, low-cost access to
short-term debt securities issued throughout the world. The Fund's
objective is to provide high current income by investing primarily in
high-grade money market instruments and short-term bonds denominated in
foreign currencies and the U.S. dollar.
The Fund invests primarily in individual debt obligations which have an
effective maturity or, an expected average life not exceeding three years.
Average life is a measure of the effective maturity of certain securities
held in the Fund's portfolio. The dollar-weighted effective average
maturity of the portfolio will not exceed three years. Within this
limitation, the Fund may invest in individual securities with remaining
stated maturities of more than three years. The Fund's price and yield will
fluctuate, primarily due to movement of foreign currencies against the U.S.
dollar and changes in interest rates. To the extent the Fund invests in
high-grade securities, it will be unable to avail itself of opportunities
for higher income which may be available with lower grade investments. The
Fund is not meant to be a substitute for a fixed-price money market fund.
Except as otherwise indicated, the Fund's investment objective and policies
are not fundamental and may be changed without a vote of shareholders.
Shareholders will receive written notice of any changes in the Fund's
objective. If there is a change in investment objective, shareholders
should consider whether the Fund remains an appropriate investment in light
of their then current financial position and needs. There can be no
assurance that the Fund's objective will be met.
Currency risk
It is anticipated that, under normal conditions, the Fund will provide a
higher level of income than domestic money market and short-term bond
investments due to the Fund's participation in higher yielding debt markets
outside of the United States. Since the Fund invests significantly in
securities denominated in foreign currencies, however, movements in foreign
currency exchange rates versus the U.S. dollar are likely to increase the
Fund's price variability relative to domestic short-term income funds.
Fluctuations in foreign currencies can have a positive or negative impact
on returns. Normally, to the extent that the Fund is invested in foreign
securities, a weakening in the U.S. dollar relative to the foreign
currencies underlying the Fund's investments should help increase the net
asset value of the Fund. Conversely, a strengthening in the U.S. dollar
versus the foreign currencies in which the Fund invests should have a
downward effect on the net asset value of the Fund. The Fund's adviser,
Scudder, Stevens & Clark, Inc. (the "Adviser"), will attempt to reduce
exchange rate risk through active portfolio management, including currency
hedging activities and efforts to identify bond markets with strong or
stable currencies, but it cannot completely eliminate the impact of
currency fluctuations on the investment returns of the Fund.
Investments
As a global investment, the Fund will typically invest in a variety of
high-grade domestic and foreign short-term debt securities. In addition to
U.S. dollar holdings, the Fund may invest in bonds denominated in foreign
currencies including, but not limited to, the Australian Dollar, British
Pound Sterling, Canadian Dollar, Swedish Krona, Danish Krone, and New
Zealand Dollar, as well as the Austrian Schilling, Dutch Guilder, Japanese
Yen, French Franc, Mexican Peso, Spanish Peseta, Swiss Franc, Finish
Markka, Irish Punt, Belgian Franc, Italian Lira and German Mark. In
addition, the Fund may invest in securities denominated in multi-national
currency units, such as the European Currency Unit (ECU). The currency of a
given security may be different than the currency of the country where the
security's issuer is domiciled. Although the Fund is considered
"non-diversified" for purposes of the Investment Company Act of 1940 (the
"1940 Act"), it will invest in debt securities of issuers from a minimum of
three different countries. To limit fluctuation in the Fund's net asset
value, the Fund will invest a minimum of 25% of its total assets in U.S.
dollar-denominated securities, issued domestically or abroad. Under certain
circumstances, the Fund may invest substantially all of its assets in U.S.
debt securities, including short-term money market securities.
To further limit risk, at least 65% of the Fund's investments will consist
of securities rated within the three highest rating categories of Standard
and Poor's ("S&P") (AAA, AA, A) or Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa or A) or, if not rated, will be considered by the
Adviser to be of equivalent quality in local currency terms. The Fund may
invest up to 10% of its net assets in debt securities rated lower than BBB
by S&P or Baa by Moody's, or unrated securities of equivalent
quality as determined by the Adviser. The Fund will not invest in any
securities rated B or lower. See "Risk factors" for more information.
In keeping with the Fund's high-grade emphasis, the Fund will invest
predominantly in U.S. and foreign government securities and money market
instruments. The Fund may invest in debt securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities; obligations issued
or guaranteed by foreign national governments, their agencies,
instrumentalities or political subdivisions; and debt securities issued or
guaranteed by supranational organizations such as the European Investment
Bank, Inter-American Development Bank and The World Bank. The Fund may also
invest in non-government securities including corporate debt securities,
bank or bank holding company obligations (e.g., certificates of deposit and
banker acceptances), and mortgage and other asset-backed issues.
Unlike domestic money market funds, the Fund's price will fluctuate. The
Adviser, however, actively manages the Fund in an effort to reduce the
effect of currency fluctuations and other factors on the Fund's net asset
value. The Adviser will allocate the Fund's investments among those markets
and currencies which it believes offer the most attractive combination of
high income and principal stability. In evaluating investments for the
Fund, the Adviser will analyze relative yields and appreciation potential
of securities in particular markets; world interest rate and monetary
trends; economic, political and financial market conditions in different
countries; credit quality; and the relationship of individual foreign
currencies to the U.S. dollar. The Adviser relies on internally and
externally generated financial, economic, and credit research to evaluate
alternative investment opportunities. Aside from security selection, the
Fund may seek to hedge currency exposure through the use of strategic
transactions. See "Additional Information about policies and
investments_Strategic Transactions."
Global investment opportunities
Greater portfolio diversity
While Scudder Short Term Global Income Fund is non-diversified, an
investment in the Fund can help add diversity to an investor's portfolio of
U.S. dollar-denominated bonds, which can lead to reduced volatility over
time. This results because the income and capital returns on fixed income
securities denominated in foreign currencies often diverge from those
generated by similar securities denominated in U.S. dollars. The
performance of any country's short-term bond and cash markets will reflect
the unique characteristics of that country's economy, including its rate of
inflation, its need for capital, and the outlook for its currency.
Higher potential returns
A global income portfolio is able to take advantage of a far wider range of
investment opportunities than one that is restricted to U.S. dollar
securities and may, at times, provide higher investment returns. Foreign
currency denominated bond markets have recently grown faster than the U.S.
dollar-denominated bond market, and now represent more than 50% of the
market value of the world's bond markets. Also, access to foreign bond
markets has increased in recent years as certain countries have dismantled
exchange rate controls and reduced withholding taxes.
In addition, foreign short-term debt obligations frequently offer higher
yields than similar U.S. securities, and the prices of foreign instruments
can outperform those of U.S. securities. Inefficiencies in the foreign
exchange and global debt markets can create opportunities for higher
risk-adjusted rates of return. Fluctuations in foreign currencies relative
to the U.S. dollar can strongly influence investment returns, positively or
negatively. Foreign short-term debt obligations may from time to time offer
lower yields and returns than similar U.S. securities.
Why invest in the Fund?
Scudder Short Term Global Income Fund is designed for investors seeking
high current income from a portfolio of high-grade money market instruments
and short-term bonds denominated in foreign currencies and the U.S. dollar.
The Fund is appropriate for those investors who can tolerate short-term
currency swings and other risks associated with international investing in
return for the possibility of earning a higher total rate of return than
might be available from a short-term fixed income portfolio invested solely
in U.S. securities.
The Fund may also be attractive to investors seeking to enhance the current
income and balance of an established investment portfolio. It is expected
that, under normal conditions, the Fund will provide a higher level of
income than less risky domestic money market and short-term bond
investments. Moreover, the Fund will be managed with the goal of offering
more price stability than most long-term domestic and international bond
investments.
The Fund may provide investors with an easy, convenient and economical way
to participate in attractive short-term debt markets around the globe.
Individuals and smaller institutional investors often find it expensive and
impractical to buy and sell international bonds, hold securities in
safekeeping, and transact in foreign currencies.
In addition, the Fund offers all the benefits of the Scudder Family of
Funds. Scudder, Stevens & Clark, Inc. manages a diverse family of pure
no-load(tm) funds and provides a wide range of services to help investors
meet their investment needs. Please refer to "Investment products and
services" for additional information.
International investment experience
The Adviser has been a leader in international investment management and
trading for over 40 years. Its investment company clients include Scudder
International Fund, Inc., which was incorporated in Canada in 1953 as the
first foreign investment company registered with the United States
Securities and Exchange Commission, Scudder International Bond Fund,
which invests internationally, Scudder Global Fund and Scudder Global
Small Company Fund, which invest worldwide, The Japan Fund, Inc., which
invests in Japanese issuers, Scudder Latin America Fund, which invests in
Latin American issuers, Scudder Pacific Opportunities Fund, which invests
in Pacific Basin issuers , Scudder Emerging Markets Income Fund,
which invests in debt securities issued in emerging markets and Scudder
Greater Europe Growth Fund, which invests in equity securities of European
companies . The Adviser also manages the assets of eight
closed-end investment companies investing in foreign securities: The
Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian Fund, Inc.,
The Korea Fund, Inc., The Latin America Dollar Income Fund, Inc., Scudder
New Asia Fund, Inc. , Scudder New Europe Fund, Inc. and Scudder
World Income Opportunities Fund, Inc.
As of December 31, 1994 , the Adviser was responsible for managing
more than $ billion of non-U.S. securities.
The Adviser maintains a large in-house research staff, currently manages
over $ billion in U.S. and foreign bonds, and has affiliates with
research and trading capabilities in London and Tokyo.
Special risk considerations
The Fund is intended for investors who can accept the risks associated with
investing in fixed income securities denominated in foreign currencies.
Total return from investment in the Fund will consist of income after
expenses, currency gains (or losses) and security price gains (or losses)
in terms of the local currency. For tax purposes, realized gains and losses
on currency are regarded as ordinary income and loss and could, under
certain circumstances, have an impact on distributions. The value of the
Fund's portfolio will fluctuate in response to various economic factors
including fluctuations in foreign currency exchange rates. Please refer to
"Currency risk" for additional information.
Since most of the Fund's investments are denominated in foreign currencies,
exchange rates have a significant impact on total Fund performance. For
example, a fall in the U.S. dollar's value relative to the British Pound
Sterling will increase the U.S. dollar value of a British bond held in the
portfolio, even though the price of that bond in Pound terms remains
unchanged. Conversely, if the U.S. dollar rises in value relative to the
Pound, the U.S. dollar value of a British bond will fall. Investors should
be aware that exchange rate movements can be significant and can endure for
long periods of time.
The Adviser attempts to manage exchange rate and interest rate risks
through active portfolio management. The Adviser's techniques include
management of currency, bond market and maturity exposure, and security
selection, which will reflect the Adviser's outlook for the interest rate
cycle in various countries and changes in foreign currency exchange rates.
In the markets in which the Fund invests, longer maturity bonds tend to
fluctuate more in price as interest rates change than shorter-term
instruments_again providing both opportunity and risk. There can be no
assurance of success in these attempts to minimize risk.
Investments in foreign securities involve special considerations due to
more limited information, higher brokerage costs, different accounting
standards, thinner trading markets and the likely impact of foreign taxes
on the yield from debt securities. They may also entail certain risks, such
as the possibility of one or more of the following: imposition of dividend
or interest withholding or confiscatory taxes, currency blockages or
transfer restrictions, expropriation, nationalization or other adverse
political or economic developments, less government supervision and
regulation of securities exchanges, brokers and listed companies and the
difficulty of enforcing obligations in other countries. Purchases of
foreign securities are usually made in foreign currencies and, as a result,
the Fund may incur currency conversion costs and may be affected favorably
or unfavorably by changes in the value of foreign currency against the U.S.
dollar. Further, it may be more difficult for the Fund's agents to keep
currently informed about corporate or government actions which may affect
the prices of portfolio securities. Communications between the U.S. and
foreign countries may be less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or
loss of certificates for portfolio securities. The Fund's ability and
decisions to purchase and sell portfolio securities may be affected by laws
or regulations relating to the convertibility and repatriation of assets.
Because of the Fund's investment approach, investors should not rely on an
investment in the Fund for their short-term financial needs and should not
view the Fund as a vehicle for playing short-term swings in the
international bond and foreign exchange markets. Shares of the Fund alone
should not be regarded as a complete investment program.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for
extraordinary or emergency purposes or except in connection with reverse
repurchase agreements and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.
In addition, as a matter of nonfundamental policy, the Fund may not invest
more than 10% of its net assets, in the aggregate, in securities which are
not readily marketable, repurchase agreements maturing in more than seven
days and restricted securities. The Fund may not invest more than 5% of its
assets in restricted securities. A complete description of these and other
policies and restrictions is contained under "The Fund's Investment
Objectives and Policies" in the Fund's Statement of Additional Information.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund
may enter into repurchase agreements with selected banks and
broker/dealers. Under a repurchase agreement, the Fund acquires securities,
subject to the seller's agreement to repurchase at a specified time and
price. The Fund may also enter into repurchase commitments for investment
purposes for periods of 30 days or more. Such commitments involve
investment risk similar to that of debt securities in which the Fund
invests.
When-issued securities
The Fund may purchase securities on a when-issued or forward delivery
basis, for payment and delivery at a later date. The price and yield are
generally fixed on the date of commitment to purchase. During the period
between purchase and settlement, no interest accrues to the Fund. At the
time of settlement, the market value of the security may be more or less
than the purchase price.
Mortgage and other asset-backed securities
The Fund may invest in mortgage-backed securities, which are securities
representing interests in pools of mortgage loans. The securities provide
shareholders with payments consisting of both interest and principal as the
mortgages in the underlying mortgage pools are paid off. The timely payment
of principal and interest on mortgage-backed securities issued or
guaranteed by the Government National Mortgage Association ("GNMA") is
backed by GNMA and the full faith and credit of the U.S. Government. These
guarantees, however, do not apply to the market value or yield of
mortgage-backed securities or to the value of Fund shares. Also, GNMA and
other mortgage-backed securities may be purchased at a premium over the
maturity value of the underlying mortgages. This premium is not guaranteed
and will be lost if prepayment occurs.
The Fund may also invest in securities representing interests in pools of
certain other consumer loans, such as automobile loans and credit card
receivables. In some cases, principal and interest payments are partially
guaranteed by a letter of credit from a financial institution.
Dollar roll transactions
The Fund may enter into dollar roll transactions with selected banks and
broker/dealers. Dollar roll transactions are treated as reverse repurchase
agreements for purposes of the Fund's borrowing restrictions and consist of
the sale by the Fund of mortgage-backed securities, together with a
commitment to purchase similar, but not identical, securities at a future
date, at the same price. In addition, the Fund is paid a fee as
consideration for entering into the commitment to purchase. Dollar rolls
may be renewed after cash settlement and initially may involve only a firm
commitment agreement by the Fund to buy a security.
Convertible securities
The Fund may invest in convertible securities which may offer higher income
than the common stocks into which they are convertible. The convertible
securities in which the Fund may invest consists of bonds, notes,
debentures and preferred stocks which may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of common
stock. Prior to their conversion, convertible securities may have
characteristics similar to nonconvertible securities.
Portfolio turnover
Recent economic and market conditions have necessitated more active
trading, resulting in a higher portfolio turnover rate for the Fund. A
higher rate involves greater transaction costs to the Fund and may result
in the realization of net capital gains, which would be taxable to
shareholders when distributed.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or
duration of the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts.
Such strategies are generally accepted as a part of modern portfolio
management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as
new instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as
currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to
protect against possible changes in the market value of securities held in
or to be purchased for the Fund's portfolio resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's
unrealized gains in the value of its portfolio securities, to facilitate
the sale of such securities for investment purposes, to manage the
effective maturity or duration of the Fund's portfolio, or to establish a
position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. Some Strategic Transactions
may also be used to enhance potential gain although no more than 5% of the
Fund's assets will be committed to Strategic Transactions entered into for
non-hedging purposes. Any or all of these investment techniques may be used
at any time and in any combination , and there is no particular
strategy that dictates the use of one technique rather than another, as use
of any Strategic Transaction is a function of numerous variables including
market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply
with applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial
futures and options thereon will be purchased, sold or entered into only
for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors_Strategic
Transactions and derivatives " for more information.
Risk factors
The Fund's risks are determined by the nature of the securities held and
the portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques
that the Fund may use from time to time.
Bonds. The Fund will invest no more than 10% of its total assets in debt
securities rated below investment grade (i.e., below BBB by S&P or Baa by
Moody's) or in unrated securities of equivalent quality as determined by
the Adviser. Securities rated below investment-grade are commonly referred
to as "junk bonds" and usually entail greater risk (including the
possibility of default or bankruptcy of the issuers), and generally involve
greater price volatility and higher degrees of speculation with respect to
the payment of principal and interest. In addition, the trading market for
those securities is generally less liquid than for higher-rated securities
and the Fund may have difficulty disposing of these securities at the time
it may wish to do so. The lack of a liquid secondary market for certain
securities may also make it more difficult for a Fund to obtain accurate
market quotations for purposes of valuing its portfolio and calculating its
net asset value. Prices for below investment-grade securities may be
affected by legislative and regulatory developments.
Non-diversified investment company. As a "non-diversified" investment
company, the Fund may invest a greater proportion of its assets in the
securities of a smaller number of issuers and therefore may be subject to
greater market and credit risk than a more broadly diversified portfolio.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted.
In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities under a repurchase agreement,
the Fund may encounter delay and incur costs before being able to sell the
securities. Also, if the seller defaults, the value of such securities may
decline before the Fund is able to dispose of them.
Mortgage and other asset-backed securities. Unscheduled or early payments
on the underlying mortgages may shorten the securities' effective
maturities and lessen their growth potential. The Fund may agree to
purchase or sell these securities with payment and delivery taking place at
a future date. A decline in interest rates may lead to a faster rate of
repayment of the underlying mortgages, and expose the Fund to a lower rate
of return upon reinvestment. To the extent that such mortgage-backed
securities are held by the Fund, the prepayment right of mortgagors may
limit the increase in net asset value of the Fund because the value of the
mortgage-backed securities held by the Fund may not appreciate as rapidly
as the price of non-callable debt securities.
(Continued on page 14)
Purchases
Opening an account
Minimum initial investment: $1,000; IRAs $500
Group retirement plans (401(k), 403(b), etc.) have similar or lower
minimums. See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send your completed and signed application and check
by regular mail to: or by express,
registered,or
certified mail to:
The Scudder Funds The Scudder Funds
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 02370-1052
* By Wire
Please see Transaction information_Purchasing shares_ By wire
following these tables for details, including the ABA wire transfer
number. Then call 1-800-225-5163 for instructions.
* In Person
Visit one of our Funds Centers to complete your application with the
help of a Scudder representative. Funds Center locations are listed
under Shareholder benefits.
Purchasing additional shares
Minimum additional investment: $100; IRAs $50
Group retirement plans (401(k), 403(b), etc.) have similar or lower
minimums. See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send a check with a Scudder investment slip, or with a letter of
instruction including your account number and the complete Fund name,
to the appropriate address listed above.
* By Wire
Please see Transaction information_Purchasing shares_ By wire
following these tables for details, including the ABA wire transfer
number.
* In Person
Visit one of our Funds Centers to make an additional investment in
your Scudder fund account. Funds Center locations are listed under
Shareholder benefits.
* By Automatic Investment Plan ($50 minimum)
You may arrange to make investments on a regular basis through
automatic deductions from your bank checking account. Please call
1-800-225-5163 for more information and an enrollment form.
Exchanges and redemptions
Exchanging shares
Minimum investments: $1,000 to establish a new account; $100 to exchange
among existing accounts
* By Tele phone
To speak with a service representative, call 1-800-225-5163 from 8
a.m. to 8 p.m. eastern time or to access SAIL(tm), Scudder's
Automated Information Line, call 1-800-343-2890 (24 hours a day).
* By Mail or Fax
Print or type your instructions and include:
- the name of the Fund and the account number you are exchanging
from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime
phone number.
Send your instructions
by regular mail to: or by express, or by fax to:
registered, or
certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 02370-1052
Redeeming shares
* By Tele phone
To speak with a service representative, call 1-800-225-5163 from 8
a.m. to 8 p.m. eastern time or to access SAIL(tm), Scudder's
Automated Information Line, call 1-800-343-2890 (24 hours a day). You
may have redemption proceeds sent to your predesignated bank
account, or redemption proceeds of up to $50,000 sent to
your address of record.
* By Mail or Fax
Send your instructions for redemption to the appropriate address or
fax number above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime
phone number.
A signature guarantee is required for redemptions over $50,000. See
Transaction information_Redeeming shares following these tables.
* By Automatic Withdrawal Plan
You may arrange to receive automatic cash payments periodically if the
value of your account is $10,000 or more. Call 1-800-225-5163 for more
information and an enrollment form.
(Continued from page 11)
In addition to prepayment risk, securities representing pools of certain
consumer loans present certain risks that are not presented by
mortgage-backed securities. These securities may not have the benefit of
any security interest in the underlying assets. Also, there is the
possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Dollar roll transactions. If the broker/dealer to whom the Fund sells the
securities becomes insolvent, the Fund's right to purchase or repurchase
the securities may be restricted; the value of the securities may change
adversely over the term of the dollar roll; the securities that the Fund is
required to repurchase may be worth less than the securities that the Fund
originally held, and the return earned by the Fund with the proceeds of a
dollar roll may not exceed transaction costs.
Strategic Transactions and derivatives . Strategic Transactions,
including derivative contracts , have risks associated with them
including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market
movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used.
Use of put and call options may result in losses to the Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions can result in the
Fund incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements or the inability
to deliver or receive a specified currency. The use of options and futures
transactions entails certain other risks. In particular, the variable
degree of correlation between price movements of futures contracts and
price movements in the related portfolio position of the Fund creates the
possibility that losses on the hedging instrument may be greater than gains
in the value of the Fund's position. In addition, futures and options
markets may not be liquid in all circumstances and certain over-the-counter
options may have no markets. As a result, in certain markets, the Fund
might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures contracts and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to
limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than
would purchases of options, where the exposure is limited to the cost of
the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such
losses can be greater than if the Strategic Transactions had not been
utilized. The Strategic Transactions that the Fund may use and some of
their risks are described more fully in the Fund's Statement of Additional
Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund's dividends from net investment income are declared daily and
distributed monthly. The Fund intends to distribute net realized capital
gains after utilization of capital loss carryforwards and net currency
gains, if any, in December to prevent application of a federal excise tax.
Any dividends or capital gains distributions declared in October, November
or December with a record date in such a month and paid during the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared.
According to preference, shareholders may receive distributions in cash or
have them reinvested in additional shares of the Fund. If an investment is
in the form of a retirement plan, all dividends and capital gains
distributions must be reinvested into the account.
Generally, dividends from net investment income are taxable to investors as
ordinary income. Certain realized gains or losses on the sale or retirement
of international bonds held by the Fund, to the extent attributable to
fluctuations in currency exchange rates, as well as certain other gains or
losses attributable to exchange rate fluctuations, must be treated as
ordinary income or loss. Such income or loss may increase or decrease (or
possibly eliminate) the Fund's income available for distribution to
shareholders. If, under the rules governing the tax treatment of foreign
currency gains and losses, the Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the
Fund may be treated for federal income tax purposes as a non-taxable
return of capital distribution . Generally, a shareholder's tax
basis in Fund shares will be reduced to the extent that an amount
distributed to the shareholder is treated as a return of capital. The Fund
may reduce its daily dividend to lessen the effect of these rules. If the
Fund's income is increased under the foreign currency taxation rules, the
Fund intends to declare additional distributions of such income in
December.
Long-term capital gains distributions, if any, are taxable as long-term
capital gains regardless of the length of time you have owned your shares.
Short-term capital gains and other distributions are taxable as ordinary
income. Shareholders may be able to claim a credit or deduction on their
income tax returns for their pro rata portions of qualified taxes paid by
the Fund to foreign countries.
The Fund sends detailed tax information to shareholders about the amount
and type of its distributions by January 31 of each year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature, or shareholder reports. All performance
figures are historical, show the performance of a hypothetical investment
and are not intended to indicate future performance. The "yield" of the
Fund refers to income of an investment in the Fund over a specified 30-day
(one month) period. Yield is expressed as an annualized percentage. "Total
return" is the change in value of an investment in the Fund for a specified
period. The "average annual total return" of the Fund is the average annual
compound rate of return of an investment in the Fund assuming the
investment has been held for one year and the life of the Fund as of a
stated ending date. "Cumulative total return" represents cumulative change
in value of an investment in the Fund for various periods. Total return
calculations assume that all dividends and capital gains distributions
during the period were reinvested in shares of the Fund. "Capital change"
measures return from capital, including reinvestment of any capital gains
distributions but does not include reinvestment of dividends.
Performance will vary based upon, among other things, changes in market
conditions and the level of the Fund's expenses.
Fund organization
The Fund is a non-diversified series of Scudder Global Fund, Inc. (the
"Corporation"), an open-end, management investment company registered under
the 1940 Act. The Corporation was organized as a Maryland corporation in
May 1986.
The Fund's activities are supervised by the Corporation's Board of
Directors. Shareholders have one vote for each share held on matters on
which they are entitled to vote. The Corporation is not required to hold
and has no current intention of holding annual shareholder meetings,
although special meetings may be called for purposes such as electing or
removing Directors, changing fundamental investment policies or approving
an investment advisory contract. Shareholders will be assisted in
communicating with other shareholders in connection with removing a
Director as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens &
Clark, Inc., a Delaware corporation, to manage the Fund's daily investment
and business affairs subject to the policies established by the Board of
Directors. The Directors have overall responsibility for the management of
the Fund under Maryland law.
The Adviser receives monthly an investment advisory fee for its services
equal to 0.75% for the first $1 billion of the average daily net assets of
the Fund and 0.70% of the average daily net assets of the Fund exceeding $1
billion on an annual basis. The fee is graduated so that increases in the
Fund's net assets may result in a lower annual fee rate and decreases in
the Fund's net assets may result in a higher annual fee rate. The fee is
payable monthly, provided that the Fund will make such interim payments as
may be requested by the Adviser not to exceed 75% of the amount of the fee
then accrued on the books of the Fund and unpaid. This fee is higher than
that charged many bond funds which invest primarily in U.S. debt
securities. However, management of the Fund involves analyzing market,
credit and currency relationships in a number of economies throughout the
world.
The Adviser has agreed not to impose all or a portion of its investment
management fee and to take other action, to the extent necessary, to
maintain the annualized expenses of the Fund at not more than % of
average daily net assets of the Fund until .
For the fiscal year ended October 31, 1994 , the Adviser received an
investment management fee of 0.60 % of the Fund's average daily net
assets on an annual basis.
All the Fund's expenses are paid out of gross investment income.
Shareholders pay no direct charges or fees for investment or administrative
services.
Scudder, Stevens & Clark, Inc., is located at
345 Park Avenue, New York, New York.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts
02107-2291, a wholly-owned subsidiary of the Adviser, is the transfer,
shareholder servicing and dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser,
is the Fund's principal underwriter. Scudder Investor Services, Inc.
confirms, as agent, all purchases of shares of the Fund. Scudder Investor
Information is a telephone information service provided by Scudder Investor
Services, Inc.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share
after the Fund's transfer agent in Boston receives the purchase request in
good order. Purchases are made in full and fractional shares. (See "Share
price.")
By check. If you purchase shares with a check that does not clear, your
purchase will be canceled and you will be subject to any losses or
fees incurred in the transaction. Checks must be drawn on or payable
through a U.S. bank. If you purchase shares by check and redeem them within
seven business days of purchase, the Fund may hold redemption proceeds
until the purchase check has cleared, which may take up to seven business
days. If you purchase shares by federal funds wire, you may avoid this
delay. Redemption or exchange requests by telephone prior to the expiration
of the seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at
1-800-225-5163 to obtain an account number. A representative will instruct
you to send a completed, signed application to the transfer agent in
Boston. Accounts cannot be opened without a completed, signed application
and a Scudder fund account number. Contact your bank to arrange a wire
transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
_ the name of the fund in which the money is to be invested,
_ the account number of the fund, and
_ the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By exchange. Your new account will have the same registration and address
as your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for
more information, including information about the transfer of special
account features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund)
without redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If
you elected telephone redemption to your bank on your application, you can
call to request that federal funds be sent to your authorized bank account.
If you did not elect telephone redemption to your bank on your application,
call 1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested.
If your bank cannot receive federal reserve wires, redemption
proceeds will be mailed to your bank. There will be a $5 charge for
all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until
the Fund's transfer agent has received your completed and signed
application. Telephone redemption is not available for shares held in
Scudder IRA accounts and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
Signature guarantees. For your protection and to prevent fraudulent
redemptions, on written redemption requests in excess of $50,000 we require
an original signature and an original signature guarantee for each person
in whose name the account is registered. (The Fund reserves the right,
however, to require a signature guarantee for all redemptions.) You can
obtain a signature guarantee from most banks, credit unions or savings
associations, or from broker/dealers, municipal securities broker/dealers,
government securities broker/dealers, national securities exchanges,
registered securities associations, or clearing agencies deemed eligible by
the Securities and Exchange Commission. Signature guarantees by notaries
public are not acceptable. Redemption requirements for corporations, other
organizations, trusts, fiduciaries, agents, institutional investors and
retirement plans may be different from those for regular accounts. For more
information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and
the right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds
be sent to a predesignated bank account. The Fund uses procedures
designed to give reasonable assurance that telephone instructions are
genuine, including recording telephone calls, testing a caller's identity
and sending written confirmation of telephone transactions. If the Fund
does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it
reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset
value. The Fund's custodian, Brown Brothers Harriman & Co., determines net
asset value per share as of the close of regular trading on the New York
Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on each day
the Exchange is open for trading. Net asset value per share is calculated
by dividing the value of total Fund assets, less all liabilities, by the
total number of shares outstanding.
Processing time
All purchase and redemption requests must be received in good order by the
Fund's transfer agent in Boston. Those requests received by the close of
regular trading on the Exchange are executed at the net asset value per
share calculated at the close of trading that day. Purchase and redemption
requests received after the close of regular trading on the Exchange will
be executed the following business day. Purchases made by federal funds
wire before noon eastern time will begin earning income that day; all other
purchases received before the close of regular trading on the Exchange will
begin earning income the next business day. Redeemed shares will earn
income on the day on which the redemption request is executed.
If you wish to make a purchase of $500,000 or more, you should notify
Scudder Service Corporation by calling 1-800-225-5163.
The Fund will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven days (or longer
in the case of shares recently purchased by check).
Tax information
A redemption of shares, including an exchange into another Scudder fund, is
a sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and
redemption and exchange proceeds from accounts (other than those of certain
exempt payees) without a certified Social Security or tax identification
number and certain other certified information or upon notification from
the IRS or a broker that withholding is required. The Fund reserves the
right to reject new account applications without a certified Social
Security or tax identification number. The Fund also reserves the right,
following 30 days' notice, to redeem all shares in accounts without a
certified Social Security or tax identification number. A shareholder may
avoid involuntary redemption by providing the Fund with a tax
identification number during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which
amount may be changed by the Board of Directors. Scudder retirement plans
have similar or lower minimum share balance requirements. The Fund reserves
the right, following 60 days' written notice to shareholders, to redeem all
shares in sub-minimum accounts, including accounts of new investors, where
a reduction in value has occurred due to a redemption or exchange out of
the account. Reductions in value that result solely from market activity
will not trigger an involuntary redemption. The Fund will mail the proceeds
of the redeemed account to the shareholder. The shareholder may restore the
share balance to $1,000 or more during the 60-day notice period and must
maintain it at no lower than that minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is
made at an investor's election through a member of the National Association
of Securities Dealers, Inc., other than Scudder Investor Services, Inc.,
that member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen
by the Fund and valued as they are for purposes of computing the Fund's net
asset value (a redemption-in-kind). If payment is made in securities, a
shareholder may incur transaction expenses in converting these securities
to cash. The Corporation has elected, however, to be governed by Rule 18f-1
under the 1940 Act, as a result of which the Fund is obligated to redeem
shares, with respect to any one shareholder during any 90-day period,
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of the period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced
investment management firms, actively manages your Scudder fund investment.
Professional management is an important advantage for investors who do not
have the time or expertise to invest directly in individual securities.
A team approach to investing
Scudder Short Term Global Income Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are
supported by Scudder's large staff of economists, research analysts,
traders, and other investment specialists who work in Scudder's offices
across the United States and abroad. Scudder believes its team approach
benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Margaret Craddock has set the Fund's investment
strategy and overseen its daily operation since she joined Scudder in 1991.
Ms. Craddock has seven years of experience in global fixed-income
research and investing. Gary P. Johnson, Portfolio Manager, concentrates on
the Fund's hedging strategies and research, a role he has filled since the
Fund commenced operations. Mr. Johnson joined Scudder in 1987 and has
worked with quantitative analysis and strategic trading since 1982.
Lawrence Teitelbaum, Portfolio Manager, contributes expertise on global
interest rates and currency strategies, a role he assumed when he joined
Scudder in 1993. Mr. Teitelbaum has worked with global fixed-income
investments and strategies since 1981.
SAIL(tm)_Scudder Automated Information Line
For touchtone access to account information, prices and yields, or to
perform transactions in existing Scudder fund accounts, shareholders can
call Scudder's Automated Information Line (SAIL) at 1-800-343-2890. During
periods of extreme economic or market changes, or other conditions, it may
be difficult for you to effect telephone transactions in your account. In
such an event you should write to the Fund; please see "How to contact
Scudder" for the address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net
asset value. You can move your investments among money market, income, tax
free and growth funds with a simple toll-free call or, if you prefer, by
sending your instructions through the mail or by fax. Telephone and fax
redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some
cases, the transfer agent or Scudder Investor Services, Inc. may impose
additional conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in
additional Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a
review of portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund
reports, such as the Fund's Annual Report, may be mailed to your household
(same surname, same address). Please call 1-800-225-5163 if you wish to
receive additional shareholder reports.
Newsletters
Four times a year, Scudder sends you At the Helm, an informative newsletter
covering economic and investment developments, service enhancements and
other topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person,
Scudder Investor Services, Inc. maintains Funds Centers in Boca Raton,
Boston, Chicago, Cincinnati, Los Angeles, New York, Portland (OR), San
Diego , San Francisco and Scottsdale .
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D.
(Telephone Device for the Deaf) service. If you have access to a T.D.D.,
call 1-800-543-7916 for investment information or specific account
questions and transactions.
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for
individuals, businesses and non-profit organizations. These flexible plans
are designed for use with the Scudder Family of Funds (except Scudder
tax-free funds, which are inappropriate for such plans). Scudder Funds
offer a broad range of investment objectives and can be used to seek almost
any investment goal. Using Scudder's retirement plans can help shareholders
save on current taxes while building their retirement savings.
* Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their
taxable income, and all investment earnings accrue on a tax deferred
basis. The Scudder No-Fee IRA charges no annual custodial fee.
* 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
* Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each person
covered by the plans. Plans may be adopted individually or paired to
maximize contributions. These are sometimes known as Keogh plans.
* 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
* SEP-IRAs. Easily administered retirement plans for small businesses
and self-employed individuals. The maximum annual contribution to
SEP-IRA accounts is adjusted each year for inflation.
* Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start
with $2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian
for some of these plans and is paid an annual fee for some of the above
retirement plans. For information about establishing a Scudder No-Fee IRA,
SEP-IRA, Profit Sharing Plan, Money Purchase Pension Plan or a Scudder
Horizon Plan, please call 1-800-225-2470. For information about 401(k)s or
403(b)s please call 1-800-323-6105. To effect transactions in existing IRA,
SEP-IRA, Profit Sharing or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life
Insurance Company (in New York State, Intramerica Life Insurance Company [S
1802]). The contract is offered by Scudder Insurance Agency, Inc. (in New
York State, Nevada and Montana, Scudder Insurance Agency of New York,
Inc.). CNL, Inc. is the Principal Underwriter. Scudder Horizon Plan is not
available in all states.
Directors and Officers
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Daniel Pierce*
Vice President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Robert G. Stone, Jr.
Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia University
Graduate School of Business
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Douglas M. Loudon*
Vice President
Gerald J. Moran*
Vice President
Cornelia Small*
Vice President
Lawrence Teitelbaum*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Juris Padegs*
Vice President and Assistant Secretary
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
Investment products and services
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Service Corporation
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
Scudder Automated Information Line (SAIL)
1-800-343-2890
Investment Information:
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
Scudder Investor Information
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
Scudder Group
Retirement Services
1-800-323-6105
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center:
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Information and Scudder Funds Centers are services
provided through Scudder
Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
<PAGE>
SCUDDER GLOBAL SMALL COMPANY FUND
A Pure No-Load(tm) (No Sales Charges) Mutual Fund Series Which Seeks
Above-Average Capital Appreciation over the Long Term by Investing
Primarily in the Equity Securities of Small Companies Located Throughout
the World
and
SCUDDER SHORT TERM GLOBAL INCOME FUND
A Pure No-Load(tm) (No Sales Charges) Mutual Fund Series Which Seeks
High Current Income by Investing Primarily in High-Grade Money
Market Instruments and in Short-Term Bonds Denominated
in Foreign Currencies and the U.S. Dollar
STATEMENT OF ADDITIONAL INFORMATION
March 1, 199 5
This combined Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Scudder Global Small
Company Fund dated March 1, 199 5 and the prospectus of Scudder Short
Term Global Income Fund dated March 1, 199 5 , each as amended from
time to time, copies of which may be obtained without charge by writing to
Scudder Investor Services, Inc., Two International Place , Boston,
Massachusetts 02110- 4103 .
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES 1
General Investment Objective and Policies of Scudder Global 1
Small Company Fund
General Investment Objective and Policies of Scudder Short Term 2
Global Income Fund
Risk Factors 3
Specialized Investment Techniques 5
Investment Restrictions 17
PURCHASES 20
Additional Information About Opening an Account 20
Additional Information About Making Subsequent Investments by 20
Telephone Order
Checks 21
Wire Transfer of Federal Funds 21
Share Price 21
Share Certificates 22
Other Information 22
EXCHANGES AND REDEMPTIONS 22
Exchanges 22
Redemption by Telephone 23
Redemption by Mail or Fax 24
Redemption-in-Kind 24
Other Information 24
FEATURES AND SERVICES OFFERED BY THE FUNDS 25
The Pure No-Load(tm)Concept 25
Distribution Plans 26
Diversification 26
Scudder Funds Centers 27
Reports to Shareholders 27
Transaction Summaries 27
THE SCUDDER FAMILY OF FUNDS 27
SPECIAL PLAN ACCOUNTS 30
Scudder 401(k): Cash or Deferred Profit-Sharing Plan 31
Scudder IRA: Individual Retirement Account 31
Scudder 403(b) Plan 32
Automatic Withdrawal Plan 32
Group or Salary Deduction Plan 32
Automatic Investment Plan 33
Uniform Transfers/Gifts to Minors Act 33
Scudder Trust Company 33
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS 33
PERFORMANCE INFORMATION 34
Average Annual Total Return 34
Cumulative Total Return 34
Total Return 35
Capital Change 35
Yield of Global Income Fund 35
Comparison of Portfolio Performance 36
ORGANIZATION OF THE FUNDS 40
INVESTMENT ADVISER 41
DIRECTORS AND OFFICERS 43
REMUNERATION 46
DISTRIBUTOR 47
TAXES 48
PORTFOLIO TRANSACTIONS 52
Brokerage 52
Portfolio Turnover 53
NET ASSET VALUE 53
ADDITIONAL INFORMATION 54
Experts 54
Other Information 54
FINANCIAL STATEMENTS 55
APPENDIX
</TABLE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See "Investment objective and policies" "Special risk considerations"
and "Additional information about policies and investments"
in each Fund's prospectus.)
Scudder Global Fund, Inc., a Maryland corporation of which Scudder
Global Small Company Fund ("Global Small Company Fund") and Scudder Short
Term Global Income Fund ("Global Income Fund") are series, is referred to
herein as the "Corporation". Each Fund is a pure no-load(tm), open-end
management investment company which continuously offers and redeems its
shares. The Corporation is a company of the type commonly known as a
mutual fund. Global Small Company Fund is a diversified series and Global
Income Fund is a non-diversified series of the Corporation. These series
sometimes are jointly referred to herein as the "Funds".
Changes in portfolio securities are made on the basis of investment
considerations, and it is against the policy of management to make changes
for trading purposes. Neither Fund can guarantee a gain or eliminate the
risk of loss and the net asset value of each Fund's shares will increase or
decrease with changes in the market price of that Fund's investments.
Foreign securities such as those that may be purchased by a Fund may
be subject to foreign government taxes which could reduce the yield, if
any, on such securities, although a shareholder of that Fund may, subject
to certain limitations, be entitled to claim a credit or deduction for U.S.
federal income tax purposes for his or her proportionate share of such
foreign taxes paid by the Fund. (See "TAXES.")
Because of each Fund's investment considerations discussed herein and
their investment policies, investment in shares of a Fund is not intended
to provide a complete investment program for an investor. The value of
each Fund's shares when sold may be higher or lower than when purchased.
The following objectives and policies, except as otherwise stated, are
not fundamental and may be changed without a shareholder vote. There can
be no assurance that either Fund will achieve its investment objective.
General Investment Objective and Policies of Scudder Global Small Company
Fund
Global Small Company Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of small
companies, as defined in the Fund's prospectus. The equity securities in
which the Fund will invest may be listed on U.S. or foreign securities
exchanges or traded over-the-counter, and include common stocks, preferred
stocks (either convertible or non-convertible), rights and warrants. The
Fund may also, on occasion, invest for capital appreciation in debt
securities of U.S. and foreign issuers, although it generally expects to
provide little or no current income to stockholders.
While the Fund's investment adviser, Scudder, Stevens & Clark, Inc.
(the "Adviser"), believes that investments in small companies can offer
greater growth potential than those in larger, more established firms, the
former also involve greater risk and price volatility. To the extent
consistent with the Fund's objective as described above, it is the policy
of the Fund, under usual market conditions, to diversify its portfolio
widely by company, industry and country. The Fund intends to allocate
investments among at least three countries at all times, including the
U.S.A.
Global Small Company Fund invests in companies that the Adviser
believes offer above-average earnings, cash flow or asset growth potential.
It also invests in companies which may receive greater market recognition
over time. The Adviser believes that these factors offer significant
opportunity for long-term capital appreciation. The Adviser evaluates
investments for the Fund from both a macroeconomic and microeconomic
perspective, using fundamental analysis, including field research. The
Adviser analyzes the growth potential and relative value of possible
investments. When evaluating an individual company, the Adviser takes into
consideration numerous factors, including the depth and quality of
management; a company's product line, business strategy and competitive
position; research and development efforts; financial strength, including
degree of leverage; cost structure; revenue and earnings growth potential;
and price-earnings ratios and other stock valuation measures. Secondarily,
the Adviser weighs the attractiveness of the country and region in which a
company is located.
In addition to purchasing corporate securities of non-U.S. issuers in
overseas securities markets, Global Small Company Fund may invest in
sponsored and unsponsored American Depositary Receipts (ADRs). ADRs are
receipts typically issued by a U.S. bank or trust company evidencing
ownership in the underlying securities. Transactions in these securities
may not necessarily be settled in the same currency as transactions in the
securities which they represent. Generally ADRs, in registered form, are
designed for use in U.S. securities markets.
The Fund may enter into repurchase agreements fully secured by U.S.
Government obligations (or in the case of a repurchase agreement with a
foreign bank, secured by government securities of the particular foreign
jurisdiction). The Fund may also utilize various other strategic
transactions for hedging purposes and to seek to increase gain. More
information about these investment techniques is provided under
"Specialized Investment Techniques -- Strategic Transactions."
Small Company Risk. The Adviser believes that small companies often have
sales and earnings growth rates which exceed those of larger companies, and
that such growth rates may in turn be reflected in more rapid share price
appreciation over time. However, investing in smaller company stocks
involves greater risk than is customarily associated with investing in
larger, more established companies. For example, smaller companies can
have limited product lines, markets, or financial and managerial resources.
Smaller companies may also be dependent on one or a few key persons, and
may be more susceptible to losses and risks of bankruptcy. Also, the
securities of smaller companies may be thinly traded (and therefore have to
be sold at a discount from current market prices or sold in small lots over
an extended period of time). Transaction costs in smaller company stocks
may be higher than those of larger companies.
General Investment Objective and Policies of Scudder Short Term Global
Income Fund
Global Income Fund offers investors a convenient way to invest in a
global portfolio of short-term fixed income instruments. The Fund's
objective is to provide high current income by investing primarily in
high-grade money market instruments and short-term bonds denominated in
foreign currencies and the U.S. dollar. To the extent the Fund invests in
high-grade securities, it will be unable to avail itself of opportunities
for higher income which may be available with lower grade investments.
The Fund invests primarily in individual debt obligations which have an
effective maturity or, an expected average life not exceeding three years.
Average life is a measure of the effective maturity of certain securities
held in the Fund's portfolio. The dollar-weighted effective average
maturity of the portfolio will not exceed three years. Within this
limitation, the Fund may invest in individual securities with remaining
stated maturities of more than three years. In some cases, the Adviser
will determine the average life of debt securities. In computing average
life, the Fund will have to estimate the effective portfolio maturity of
debt obligations that are subject to prepayment or redemption by the issuer
based on projected cash flows from such obligations. The Fund's
investments may include debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; obligations issued or
guaranteed by a foreign national government, its agencies,
instrumentalities or political subdivisions; and debt securities issued or
guaranteed by supranational organizations. The Fund may also invest in
high-grade non-government securities including corporate debt securities,
bank or bank holding company obligations and mortgage and other
asset-backed issues.
Bank money market instruments in which the Fund may invest may be
issued by U.S. or foreign depository institutions, foreign branches or
subsidiaries of U.S. depository institutions ("Eurodollar" obligations),
U.S. branches or subsidiaries of foreign depository institutions
("Yankeedollar" obligations) or foreign branches or subsidiaries of foreign
depository institutions. Eurodollar and Yankeedollar obligations and
obligations of branches or subsidiaries of foreign depository institutions
may be general obligations of the parent bank or may be limited to the
issuing branch or subsidiary by the terms of the specific obligations or by
government regulation. The characteristics of foreign securities may be
significantly different from those of U.S. securities and, therefore, may
pose different risks.
U.S. and foreign securities markets do not always move in step with
each other, and, as the following charts (which reflect returns on foreign
government bonds only) show, the cumulative total returns from different
markets may vary significantly.
Cumulative Total Returns of Foreign Government Bonds+
<TABLE>
<CAPTION>
1 year ending January 31, 199 5
Cumulative Total Currency Cumulative Total Return
Return - Domestic Change in U.S. Dollars*
<S> <C> <C> <C>
Australia
Canada
France
Germany TO BE UPDATED
Netherlands
Japan
Switzerland
United
Kingdom
U.S.
</TABLE>
<TABLE>
<CAPTION>
5 years ending January 31, 199 5
Cumulative Total Currency Cumulative Total Return
Return - Domestic Change in U.S. Dollars*
<S> <C> <C> <C>
Australia
Canada
France
Germany
Netherlands TO BE UPDATED
Japan
Switzerland
United
Kingdom
U.S.
</TABLE>
+ Bonds represented in this chart are Foreign Government Bonds maturing
in one-three years.
* Cumulative total return assumes all interest is reinvested.
Past market results are no guarantee of future performance. Data are
based on bonds with maturities of at least one year. Source: Salomon
Brothers World Government Bond Index.
Risk Factors
Foreign Securities. Global Small Company Fund is intended to provide
individual and institutional investors with an opportunity to invest a
portion of their assets in a diversified portfolio of securities of U.S.
and foreign companies located worldwide and is designed for long-term
investors who can accept international investment risk. Global Income Fund
is intended to provide individuals and institutional investors with an
opportunity to invest a portion of their assets in a managed group of debt
instruments denominated in a range of currencies and issued by various
entities such as governments, their agencies, instrumentalities and
political subdivisions, supranational organizations, corporations and
banks. Each Fund is designed for investors who can accept currency and
other forms of international investment risk. The Adviser believes that
allocation of each Fund's assets on a global basis decreases the degree to
which events in any one country, including the U.S., will affect an
investor's entire investment holdings. In the period since World War II,
many leading foreign economies have grown more rapidly than the U.S.
economy and from time to time have had interest rate levels that had a
higher real return than the U.S. bond market. Consequently, the securities
of foreign issuers have provided attractive returns relative to the returns
provided by the securities of U.S. issuers, although there can be no
assurance that this will be true in the future.
Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below,
which are not typically associated with investing in U.S. securities and
which may affect a Fund's performance favorably or unfavorably. As foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to
those applicable to domestic companies, there may be less publicly
available information about a foreign company than about a domestic
company. Many foreign stock markets, while growing in volume of trading
activity, have substantially less volume than that of the New York Stock
Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and
liquidity in most foreign bond markets is less than that in the U.S. market
and at times, volatility of price can be greater than in the U.S..
Further, foreign markets have different clearance and settlement procedures
and in certain markets there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result
in temporary periods when assets of a Fund are uninvested and no return is
earned thereon. The inability of a Fund to make intended security
purchases due to settlement problems could cause the Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems either could result in losses to a
Fund due to subsequent declines in value of the portfolio security or, if a
Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. Fixed commissions on some foreign
securities exchanges are generally higher than negotiated commissions on
U.S. exchanges, although the Adviser will endeavor to achieve the most
favorable net results on each Fund's portfolio transactions. Further, a
Fund may encounter difficulties or be unable to pursue legal remedies and
obtain judgment in foreign courts. There is generally less government
supervision and regulation of business and industry practices, securities
exchanges, brokers and listed companies than in the U.S. It may be more
difficult for a Fund's agents to keep currently informed about corporate
actions such as stock dividends or other matters which may affect the
prices of portfolio securities. Communications between the U.S. and
foreign countries may be less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or
loss of certificates for portfolio securities. In addition, with respect
to certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. The Adviser seeks to mitigate the risks to
each Fund associated with the foregoing considerations through investment
variation and continuous professional management.
Eastern Europe. Global Small Company Fund may invest up to 5% of its
total assets in the securities of issuers domiciled in Eastern European
countries. Investments in companies domiciled in Eastern European
countries may be subject to potentially greater risks than those of other
foreign issuers. These risks include (i) potentially less social,
political and economic stability; (ii) the small current size of the
markets for such securities and the low volume of trading, which result in
less liquidity and in greater price volatility; (iii) certain national
policies which may restrict the Fund's investment opportunities, including
restrictions on investment in issuers or industries deemed sensitive to
national interests; (iv) foreign taxation; (v) the absence of developed
legal structures governing private or foreign investment or allowing for
judicial redress for injury to private property; (vi) the absence, until
recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed
by unanticipated political or social events in such countries, or in the
countries of the former Soviet Union.
Investments in such countries involve risks of nationalization,
expropriation and confiscatory taxation. The Communist governments of a
number of East European countries expropriated large amounts of private
property in the past, in many cases without adequate compensation, and
there may be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, the Fund could lose a
substantial portion of any investments it has made in the affected
countries. Further, no accounting standards exist in East European
countries. Finally, even though certain East European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial to
the actual market values and may be adverse to the Fund's shareholders.
Foreign Currencies. Investments in foreign securities usually will
involve currencies of foreign countries. Moreover, a Fund temporarily may
hold funds in bank deposits in foreign currencies during the completion of
investment programs and may purchase forward foreign currency contracts,
foreign currency futures contracts and options on such contracts. Because
of these factors, the value of the assets of a Fund as measured in U.S.
dollars may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and a Fund may
incur costs in connection with conversions between various currencies.
Although the Funds' custodian values each Fund's assets daily in terms of
U.S. dollars, neither Fund intends to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. A Fund will do so from time
to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they
do realize a profit based on the difference (the "spread") between the
prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. A Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering
into forward or futures contracts to purchase or sell foreign currencies.
Because a Fund normally will be invested in both U.S. and foreign
securities markets, changes in the Fund's share price may have a low
correlation with movements in the U.S. markets. A Fund's share price will
reflect the movements of both the different stock and bond markets in which
it is invested and of the currencies in which the investments are
denominated; the strength or weakness of the U.S. dollar against foreign
currencies may account for part of the Fund's investment performance. U.S.
and foreign securities markets do not always move in step with each other,
and the total returns from different markets may vary significantly. The
Funds invest in many securities markets around the world in an attempt to
take advantage of opportunities wherever they may arise.
Specialized Investment Techniques
Debt Securities. If the Adviser determines that the capital
appreciation on debt securities is likely to exceed that of common stocks,
Global Small Company Fund may invest in debt securities of foreign and U.S.
issuers. Portfolio debt investments will be selected on the basis of
capital appreciation potential, by evaluating, among other things,
potential yield, if any, credit quality, and the fundamental outlooks for
currency and interest rate trends in different parts of the world, taking
into account the ability to hedge a degree of currency or local bond price
risk. Global Small Company Fund may purchase "investment-grade" bonds,
which are those rated Aaa, Aa, A or Baa by Moody's Investors Service, Inc.,
("Moody's") or AAA, AA, A or BBB by Standard & Poor's ("S&P") or, if
unrated, judged to be of equivalent quality as determined by the Adviser.
Bonds rated Baa or BBB may have speculative elements as well as
investment-grade characteristics. The Fund may also invest up to 5% of its
net assets in debt securities which are rated below investment-grade, that
is, rated below Baa by Moody's or below BBB by S&P and in unrated
securities of equivalent quality.
High Yield, High Risk Securities. Below investment grade securities
(rated Ba and lower by Moody's and BB and lower by S&P) or unrated
securities of equivalent quality, in which Global Small Company Fund may
invest up to 5% of its net assets and Global Income Fund may invest up to
10% of its assets, carry a high degree of risk (including the possibility
of default or bankruptcy of the issuers of such securities), generally
involve greater volatility of price and risk of principal and income, and
may be less liquid, than securities in the higher rating categories and are
considered speculative. The lower the ratings of such debt securities, the
greater their risks render them like equity securities. See the Appendix
to this Statement of Additional Information for a more complete description
of the ratings assigned by ratings organizations and their respective
characteristics.
Economic downturns have in the past, and could in the future,
disrupted the high yield market and impaired the ability of issuers to
repay principal and interest. Also, an increase in interest rates would
likely have a greater adverse impact on the value of such obligations than
on comparable higher quality debt securities. During an economic downturn
or period of rising interest rates, highly leveraged issues may experience
financial stress which would adversely affect their ability to service
their principal and interest payment obligations. Prices and yields of
high yield securities will fluctuate over time and, during periods of
economic uncertainty, volatility of high yield securities may adversely
affect a Fund's net asset value. In addition, investments in high yield
zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater
fluctuations in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a
decline in the value of such securities. A thin trading market may limit
the ability of a Fund to accurately value high yield securities in the
Fund's portfolio and to dispose of those securities. Adverse publicity and
investor perceptions may decrease the values and liquidity of high yield
securities. These securities may also involve special registration
responsibilities, liabilities and costs.
Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully
reflect the actual risks posed by a particular high-yield security. For
these reasons, it is the policy of the Adviser not to rely exclusively on
ratings issued by established credit rating agencies, but to supplement
such ratings with its own independent and on-going review of credit
quality. The achievement of a Fund's investment objective by investment in
such securities may be more dependent on the Adviser's credit analysis than
is the case for higher quality bonds. Should the rating of a portfolio
security be downgraded, the Adviser will determine whether it is in the
best interest of the Fund to retain or dispose of such security.
Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, new federal rules
require savings and loan institutions to gradually reduce their holdings of
this type of security. Also, Congress has from time to time considered
legislation which would restrict or eliminate the corporate tax deduction
for interest payments in these securities and regulate corporate
restructurings. Such legislation may significantly depress the prices of
outstanding securities of this type. For more information regarding tax
issues related to high yield securities, see "TAXES."
During the fiscal year ended October 31, 1994, the average monthly
dollar-weighted market value of the debt securities held by Global Income
Fund was as follows: 31.3% in Aaa/AAA-rated securities, 41.0% in
Aa/AA-rated securities, 11.5% in A-rated securities, 8.5% in Baa/BBB-rated
securities and 7.7% in Ba/BB-rated securities.
Mortgage-Backed Securities and Mortgage Pass-Through Securities.
Global Income Fund may also invest in mortgage-backed securities, which are
interests in pools of mortgage loans, including mortgage loans made by
savings and loan institutions, mortgage bankers, commercial banks and
others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private
organizations as further described below. The Fund may also invest in debt
securities which are secured with collateral consisting of mortgage-backed
securities (see "Collateralized Mortgage Obligations"), and in other types
of mortgage-related securities.
A decline in interest rates may lead to a faster rate of repayment of
the underlying mortgages, and expose the Fund to a lower rate of return
upon reinvestment. To the extent that such mortgage-backed securities are
held by the Fund, the prepayment right will tend to limit to some degree
the increase in net asset value of the Fund because the value of the
mortgage-backed securities held by the Fund may not appreciate as rapidly
as the price of non-callable debt securities.
Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified
call dates. Instead, these securities provide a monthly payment which
consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the
individual borrowers on their mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying property,
refinancing or foreclosure, net of fees or costs which may be incurred.
Some mortgage-related securities (such as securities issued by the
Government National Mortgage Association) are described as "modified
pass-through." These securities entitle the holder to receive all interest
and principal payments owed on the mortgage pool, net of certain fees, at
the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.
The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a
wholly-owned U.S. Government corporation within the Department of Housing
and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal
and interest on securities issued by institutions approved by GNMA (such as
savings and loan institutions, commercial banks and mortgage bankers) and
backed by pools of FHA-insured or VA-guaranteed mortgages. These
guarantees, however, do not apply to the market value or yield of
mortgage-backed securities or to the value of Fund shares. Also, GNMA
securities often are purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a government-sponsored corporation owned entirely by
private stockholders. It is subject to general regulation by the Secretary
of Housing and Urban Development. FNMA purchases conventional (i.e., not
insured or guaranteed by any government agency) mortgages from a list of
approved seller/servicers which include state and federally-chartered
savings and loan associations, mutual savings banks, commercial banks and
credit unions and mortgage bankers. Pass-through securities issued by FNMA
are guaranteed as to timely payment of principal and interest by FNMA but
are not backed by the full faith and credit of the U.S. Government.
FHLMC is a corporate instrumentality of the U.S. Government and was
created by Congress in 1970 for the purpose of increasing the availability
of mortgage credit for residential housing. Its stock is owned by the
twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PCs") which represent interests in conventional mortgages from FHLMC's
national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCs are not backed by the full faith
and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers
also create pass-through pools of conventional mortgage loans. Such
issuers may, in addition, be the originators and/or servicers of the
underlying mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such non-governmental issuers generally offer
a higher rate of interest than government and government-related pools
because there are no direct or indirect government or agency guarantees of
payments. However, timely payment of interest and principal of these pools
may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit.
The insurance and guarantees are issued by governmental entities, private
insurers and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets the Fund's investment quality
standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or
guarantee arrangements. Global Income Fund may buy mortgage-related
securities without insurance or guarantees, if through an examination of
the loan experience and practices of the originators/servicers and poolers,
the Adviser determines that the securities meet the Fund's quality
standards. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may
not be readily marketable.
Collateralized Mortgage Obligations ("CMO"s). A CMO is a hybrid
between a mortgage-backed bond and a mortgage pass-through security.
Similar to a bond, interest and prepaid principal are paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form
of call protection through a de facto breakdown of the underlying pool of
mortgages according to how quickly the loans are repaid. Monthly payment
of principal received from the pool of underlying mortgages, including
prepayments, is first returned to investors holding the shortest maturity
class. Investors holding the longer maturity classes receive principal
only after the first class has been retired. An investor is partially
guarded against a sooner than desired return of principal because of the
sequential payments.
In a typical CMO transaction, a corporation issues multiple series,
(e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party director as
security for the Bonds. Principal and interest payments from the
Collateral are used to pay principal on the Bonds in the order A, B, C, Z.
The Series A, B, and C bonds all bear current interest. Interest on the
Series Z Bond is accrued and added to principal and a like amount is paid
as principal on the Series A, B, or C Bond currently being paid off. When
the Series A, B, and C Bonds are paid in full, interest and principal on
the Series Z Bond begins to be paid currently. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or
savings and loan associations) to borrow against their loan portfolios.
FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt
obligations of FHLMC issued in multiple classes having different maturity
dates which are secured by the pledge of a pool of conventional mortgage
loans purchased by FHLMC. Unlike FHLMC PCs, payments of principal and
interest on the CMOs are made semiannually, as opposed to monthly. The
amount of principal payable on each semiannual payment date is determined
in accordance with FHLMC's mandatory sinking fund schedule, which, in turn,
is equal to approximately 100% of FHA prepayment experience applied to the
mortgage collateral pool. All sinking fund payments in the CMOs are
allocated to the retirement of the individual classes of bonds in the order
of their stated maturities. Payment of principal on the mortgage loans in
the collateral pool in excess of the amount of FHLMC's minimum sinking fund
obligation for any payment date are paid to the holders of the CMOs as
additional sinking fund payments. Because of the "pass-through" nature of
all principal payments received on the collateral pool in excess of FHLMC's
minimum sinking fund requirement, the rate at which principal of the CMOs
is actually repaid is likely to be such that each class of bonds will be
retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage
loans during any semiannual payment period is not sufficient to meet
FHLMC's minimum sinking fund obligation on the next sinking fund payment
date, FHLMC agrees to make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute
collateral in the event of delinquencies and/or defaults.
Other Mortgage-Backed Securities. The Adviser expects that
governmental, government-related or private entities may create mortgage
loan pools and other mortgage-related securities offering mortgage
pass-through and mortgage-collateralized investments in addition to those
described above. The mortgages underlying these securities may include
alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed rate mortgages. Global Income Fund
will not purchase mortgage-backed securities or any other assets which, in
the opinion of the Adviser, are illiquid, in accordance with the
nonfundamental investment restriction on securities which are not readily
marketable discussed below. As new types of mortgage-related securities
are developed and offered to investors, the Adviser will, consistent with
Global Income Fund's investment objective, policies and quality standards,
consider making investments in such new types of mortgage-related
securities.
Other Asset-Backed Securities. The securitization techniques used to
develop mortgage-backed securities are now being applied to a broad range
of assets. Through the use of trusts and special purpose corporations,
various types of assets, including automobile loans, computer leases and
credit card receivables, are being securitized in pass-through structures
similar to the mortgage pass-through structures described above or in a
structure similar to the CMO structure. Consistent with the Fund's
investment objectives and policies, Global Income Fund may invest in these
and other types of asset-backed securities that may be developed in the
future. In general, the collateral supporting these securities is of
shorter maturity than mortgage loans and is less likely to experience
substantial prepayments with interest rate fluctuations.
Several types of asset-backed securities have already been offered to
investors, including Certificates of Automobile Receivables(SM)
("CARS(SM)"). CARS(SM) represent undivided fractional interests in a trust
whose assets consist of a pool of motor vehicle retail installment sales
contracts and security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS(SM) are passed through monthly
to certificate holders, and are guaranteed up to certain amounts and for a
certain time period by a letter of credit issued by a financial institution
unaffiliated with the directors or originator of the Corporation. An
investor's return on CARS(SM) may be affected by early prepayment of
principal on the underlying vehicle sales contracts. If the letter of
credit is exhausted, the Corporation may be prevented from realizing the
full amount due on a sales contract because of state law requirements and
restrictions relating to foreclosure sales of vehicles and the obtaining of
deficiency judgments following such sales or because of depreciation,
damage or loss of a vehicle, the application of federal and state
bankruptcy and insolvency laws, or other factors. As a result, certificate
holders may experience delays in payments or losses if the letter of credit
is exhausted.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may not have
the benefit of any security interest in the related assets. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of
which give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. There is the possibility
that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen
the effect of failures by obligors on underlying assets to make payments,
the securities may contain elements of credit support which fall into two
categories: (i) liquidity protection, and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of
payments on the underlying pool occurs in a timely fashion. Protection
against losses resulting from default ensures ultimate payment of the
obligations on at least a portion of the assets in the pool. This
protection may be provided through insurance policies or letters of credit
obtained by the issuer or sponsor from third parties, through various means
of structuring the transaction or through a combination of such approaches.
Global Income Fund will not pay any additional or separate fees for credit
support. The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit risk
associated with the underlying assets. Delinquency or loss in excess of
that anticipated or failure of the credit support could adversely affect
the return on an investment in such a security.
Global Income Fund may also invest in residual interests in asset-
backed securities. In the case of asset-backed securities issued in a pass-
through structure, the cash flow generated by the underlying assets is
applied to make required payments on the securities and to pay related
administrative expenses. The residual in an asset-backed security pass-
through structure represents the interest in any excess cash flow remaining
after making the foregoing payments. The amount of residual cash flow
resulting from a particular issue of asset-backed securities will depend
on, among other things, the characteristics of the underlying assets, the
coupon rates on the securities, prevailing interest rates, the amount of
administrative expenses and the actual prepayment experience on the
underlying assets. Asset-backed security residuals not registered under
the Securities Act of 1933 may be subject to certain restrictions on
transferability. In addition, there may be no liquid market for such
securities.
The availability of asset-backed securities may be affected by
legislative or regulatory developments. It is possible that such
developments may require Global Income Fund to dispose of any then existing
holdings of such securities.
Convertible Securities. Each Fund may invest in convertible
securities, that is, bonds, notes, debentures, preferred stocks and other
securities which are convertible into common stock. Investments in
convertible securities can provide an opportunity for capital appreciation
and/or income through interest and dividend payments by virtue of their
conversion or exchange features.
The convertible securities in which a Fund may invest are either fixed
income or zero coupon debt securities which may be converted or exchanged
at a stated or determinable exchange ratio into underlying shares of common
stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions or scheduled changes in the exchange ratio.
Convertible debt securities and convertible preferred stocks, until
converted, have general characteristics similar to both debt and equity
securities. Although to a lesser extent than with debt securities
generally, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest
rates decline. In addition, because of the conversion or exchange feature,
the market value of convertible securities typically changes as the market
value of the underlying common stocks changes, and, therefore, also tends
to follow movements in the general market for equity securities. A unique
feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices of the
convertible securities tend to rise as a reflection of the value of the
underlying common stock, although typically not as much as the underlying
common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of
course, like all debt securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may
default on their obligations. Convertible securities generally offer lower
yields than non-convertible securities of similar quality because of their
conversion or exchange features.
Dollar Roll Transactions. Global Income Fund may enter into "dollar
roll" transactions, which consist of the sale by the Fund to a bank or
broker-dealer (the "counterparty") of GNMA certificates or other
mortgage-backed securities together with a commitment to purchase from the
counterparty similar, but not identical, securities at a future date, at
the same price. The counterparty receives all principal and interest
payments, including prepayments, made on the security while it is the
holder. The Fund receives a fee from the counterparty as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed over
a period of several months with a new purchase and repurchase price fixed
and a cash settlement made at each renewal without physical delivery of
securities. Moreover, the transaction may be preceded by a firm commitment
agreement pursuant to which the Fund agrees to buy a security on a future
date.
Global Income Fund will not use such transactions for leveraging
purposes and, accordingly, will segregate cash, U.S. government securities
or other high grade debt obligations in an amount sufficient to meet its
purchase obligations under the transactions. The Fund will also maintain
asset coverage of at least 300% for all outstanding firm commitments,
dollar rolls and other borrowings.
Dollar rolls are treated for purposes of the Investment Company Act of
1940 (the "1940 Act") as borrowings of the Fund because they involve the
sale of a security coupled with an agreement to repurchase. Like all
borrowings, a dollar roll involves costs to the Fund. For example, while
the Fund receives a fee as consideration for agreeing to repurchase the
security, the Fund forgoes the right to receive all principal and interest
payments while the counterparty holds the security. These payments to the
counterparty may exceed the fee received by the Fund, thereby effectively
charging the Fund interest on its borrowing. Further, although the Fund
can estimate the amount of expected principal prepayment over the term of
the dollar roll, a variation in the actual amount of prepayment could
increase or decrease the cost of the Fund's borrowing.
The entry into dollar rolls involves potential risks of loss which are
different from those related to the securities underlying the transactions.
For example, if the counterparty becomes insolvent, the Fund's right to
purchase from the counterparty might be restricted. Additionally, the
value of such securities may change adversely before the Fund is able to
purchase them. Similarly, the Fund may be required to purchase securities
in connection with a dollar roll at a higher price than may otherwise be
available on the open market. Since, as noted above, the counterparty is
required to deliver a similar, but not identical security to the Fund, the
security which the Fund is required to buy under the dollar roll may be
worth less than an identical security. Finally, there can be no assurance
that the Fund's use of the cash that it receives from a dollar roll will
provide a return that exceeds borrowing costs.
The Directors of the Fund have adopted guidelines to ensure that the
securities received are substantially identical to those sold. To reduce
the risk of default, the Fund will engage in such transactions only with
banks and broker-dealers selected pursuant to such guidelines.
Repurchase Agreements. Each Fund may enter into repurchase agreements
with member banks of the Federal Reserve System, any foreign bank, if the
repurchase agreement is fully secured by government securities of the
particular foreign jurisdiction, or with any domestic or foreign
broker/dealer which is recognized as a reporting government securities
dealer if the creditworthiness of the bank or broker/dealer has been
determined by the Adviser to be at least as high as that of other
obligations the relevant Fund may purchase, or to be at least equal to that
of issuers of commercial paper rated within the two highest grades assigned
by Moody's or S&P.
A repurchase agreement provides a means for a Fund to earn income on
assets for periods as short as overnight. It is an arrangement under which
the purchaser (i.e., the Fund) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a
specified time and price. Securities subject to a repurchase agreement are
held in a segregated account and the value of such securities kept at least
equal to the repurchase price on a daily basis. The repurchase price may
be higher than the purchase price, the difference being income to the Fund,
or the purchase and repurchase prices may be the same, with interest at a
stated rate due to the Fund together with the repurchase price upon
repurchase. In either case, the income to the Fund is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
Custodian or in the Federal Reserve Book Entry system.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from a Fund to the seller of the Obligation subject to the repurchase
agreement and is therefore subject to that Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by a Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the
seller. In the event of the commencement of bankruptcy or insolvency
proceedings with respect to the seller of the Obligation before repurchase
of the Obligation under a repurchase agreement, a Fund may encounter delay
and incur costs before being able to sell the security. Delays may involve
loss of interest or decline in price of the Obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor
of the seller. As an unsecured creditor, the Fund would be at risk of
losing some or all of the principal and income involved in the transaction.
As with any unsecured debt instrument purchased for the Fund, the Adviser
seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of
the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase
the Obligation, in which case a Fund may incur a loss if the proceeds to
the Fund of the sale to a third party are less than the repurchase price.
However, if the market value of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), the
Fund will direct the seller of the Obligation to deliver additional
securities so that the market value of all securities subject to the
repurchase agreement will equal or exceed the repurchase price. It is
possible that a Fund will be unsuccessful in seeking to impose on the
seller a contractual obligation to deliver additional securities.
Global Income Fund may also enter into repurchase commitments with any
party deemed creditworthy by the Adviser, including foreign banks and
broker-dealers, if the transaction is entered into for investment purposes
and the counterparty's creditworthiness is at least equal to that of
issuers of securities which the Fund may purchase. Such transactions may
not provide the Fund with collateral marked-to-market during the term of
the commitment.
Strategic Transactions and Derivatives . Each Fund may, but is not
required to, utilize various other investment strategies as described below
to hedge various market risks (such as interest rates, currency exchange
rates, and broad or specific equity or fixed-income market movements), to
manage the effective maturity or duration of fixed-income securities in
each Fund's portfolio , or to enhance potential gain. These
strategies may be executed through the use of derivative contracts.
Such strategies are generally accepted as a part of modern portfolio
management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time
as new instruments and strategies are developed or regulatory changes
occur.
In the course of pursuing these investment strategies, each Fund may
purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as
currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions"). Strategic Transactions may be used
without limit to attempt to protect against possible changes in the
market value of securities held in or to be purchased for a Fund's
portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect a Fund's unrealized gains in the value of its
portfolio securities in each Fund's portfolio, to facilitate the sale of
such securities for investment purposes, to manage the effective maturity
or duration of fixed-income securities in a Fund's portfolio, or to
establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. Some Strategic
Transactions may also be used to enhance potential gain although no more
than 5% of a Fund's assets will be committed to Strategic Transactions
entered into for non-hedging purposes. Any or all of these investment
techniques may be used at any time and in any combination and there
is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of a Fund to utilize
these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured.
Each Fund will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be
purchased, sold or entered into only for bona fide hedging, risk management
or portfolio management purposes and not for speculative purposes.
Strategic Transactions, including derivative contracts , have
risks associated with them including possible default by the other party to
the transaction, illiquidity and, to the extent the Adviser's view as to
certain market movements is incorrect, the risk that the use of such
Strategic Transactions could result in losses greater than if they had not
been used. Use of put and call options may result in losses to a Fund,
force the sale or purchase of portfolio securities at inopportune times or
for prices higher than (in the case of put options) or lower than (in the
case of call options) current market values, limit the amount of
appreciation a Fund can realize on its investments or cause a Fund to hold
a security it might otherwise sell. The use of currency transactions can
result in a Fund incurring losses as a result of a number of factors
including the imposition of exchange controls, suspension of settlements,
or the inability to deliver or receive a specified currency. The use of
options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of
a Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition,
futures and options markets may not be liquid in all circumstances and
certain over-the-counter options may have no markets. As a result, in
certain markets, a Fund might not be able to close out a transaction
without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the
risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is
limited to the cost of the initial premium. Losses resulting from the use
of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions
had not been utilized.
General Characteristics of Options. Put options and call options typically
have similar structural characteristics and operational mechanics
regardless of the underlying instrument on which they are purchased or
sold. Thus, the following general discussion relates to each of the
particular types of options discussed in greater detail below. In
addition, many Strategic Transactions involving options require segregation
of Fund assets in special accounts, as described below under "Use of
Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the
underlying security, commodity, index, currency or other instrument at the
exercise price. For instance, a Fund's purchase of a put option on a
security might be designed to protect its holdings in the underlying
instrument (or, in some cases, a similar instrument) against a substantial
decline in the market value by giving the Fund the right to sell such
instrument at the option exercise price. A call option, upon payment of a
premium, gives the purchaser of the option the right to buy, and the seller
the obligation to sell, the underlying instrument at the exercise price. A
Fund's purchase of a call option on a security, financial future, index,
currency or other instrument might be intended to protect a Fund against an
increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any
time during the option period while a European style put or call option may
be exercised only upon expiration or during a fixed period prior thereto.
Each Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are
issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties
to such options. The discussion below uses the OCC as an example, but is
also applicable to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or
currency, although in the future cash settlement may become available.
Index options and Eurodollar instruments are cash settled for the net
amount, if any, by which the option is "in-the-money" (i.e., where the
value of the underlying instrument exceeds, in the case of a call option,
or is less than, in the case of a put option, the exercise price of the
option) at the time the option is exercised. Frequently, rather than
taking or making delivery of the underlying instrument through the process
of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of
the new option.
A Fund's ability to close out its position as a purchaser or seller of
an OCC or exchange listed put or call option is dependent, in part, upon
the liquidity of the option market. Among the possible reasons for the
absence of a liquid option market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions
imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of
options or underlying securities including reaching daily price limits;
(iv) interruption of the normal operations of the OCC or an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current
trading volume; or (vi) a decision by one or more exchanges to discontinue
the trading of options (or a particular class or series of options), in
which event the relevant market for that option on that exchange would
cease to exist, although outstanding options on that exchange would
generally continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the
hours during which the underlying financial instruments are traded. To the
extent that the option markets close before the markets for the underlying
financial instruments, significant price and rate movements can take place
in the underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers,
financial institutions or other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. In contrast to exchange listed
options, which generally have standardized terms and performance mechanics,
all the terms of an OTC option, including such terms as method of
settlement, term, exercise price, premium, guarantees and security, are set
by negotiation of the parties. Each Fund will only sell OTC options (other
than OTC currency options) that are subject to a buy-back provision
permitting the Fund to require the Counterparty to sell the option back to
the Fund at a formula price within seven days. Each Fund expects generally
to enter into OTC options that have cash settlement provisions, although it
is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails
to make or take delivery of the security, currency or other instrument
underlying an OTC option it has entered into with a Fund or fails to make a
cash settlement payment due in accordance with the terms of that option,
the Fund will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Accordingly, the Adviser must
assess the creditworthiness of each such Counterparty or any guarantor or
credit enhancement of the Counterparty's credit to determine the likelihood
that the terms of the OTC option will be satisfied. Each Fund will engage
in OTC option transactions only with U.S. government securities dealers
recognized by the Federal Reserve Bank of New York as "primary dealers", or
broker dealers, domestic or foreign banks or other financial institutions
which have received (or the guarantors of the obligation of which have
received) a short-term credit rating of A-1 from S&P or P-1 from Moody's or
an equivalent rating from any other nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions,
are determined to be of equivalent credit quality by the Adviser. The
staff of the SEC currently takes the position that OTC options purchased by
a Fund, and portfolio securities "covering" the amount of a Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back
plus the in-the-money amount, if any) are illiquid, and are subject to the
Fund's limitation on investing no more than 10% of its assets in illiquid
securities.
If a Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease
in the value of the underlying securities or instruments in its portfolio
or will increase the Fund's income. The sale of put options can also
provide income.
Each Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate
debt securities, equity securities (including convertible securities) and
Eurodollar instruments that are traded on U.S. and foreign securities
exchanges and in the over-the-counter markets, and on securities indices,
currencies and futures contracts. All calls sold by a Fund must be
"covered" (i.e., the Fund must own the securities or futures contract
subject to the call) or must meet the asset segregation requirements
described below as long as the call is outstanding. Even though a Fund
will receive the option premium to help protect it against loss, a call
sold by a Fund exposes the Fund during the term of the option to possible
loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a
security or instrument which it might otherwise have sold.
Each Fund may purchase and sell put options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, foreign
sovereign debt, corporate debt securities, equity securities (including
convertible securities) and Eurodollar instruments (whether or not it holds
the above securities in its portfolio), and on securities indices,
currencies and futures contracts other than futures on individual corporate
debt and individual equity securities. Each Fund will not sell put options
if, as a result, more than 50% of the Fund's assets would be required to be
segregated to cover its potential obligations under such put options other
than those with respect to futures and options thereon. In selling put
options, there is a risk that the Fund may be required to buy the
underlying security at a disadvantageous price above the market price.
General Characteristics of Futures. Each Fund may enter into financial
futures contracts or purchase or sell put and call options on such futures
as a hedge against anticipated interest rate, currency or equity market
changes, for duration management and for risk management purposes. Futures
are generally bought and sold on the commodities exchanges where they are
listed with payment of initial and variation margin as described below.
The sale of a futures contract creates a firm obligation by a Fund, as
seller, to deliver to the buyer the specific type of financial instrument
called for in the contract at a specific future time for a specified price
(or, with respect to index futures and Eurodollar instruments, the net cash
amount). Options on futures contracts are similar to options on securities
except that an option on a futures contract gives the purchaser the right
in return for the premium paid to assume a position in a futures contract
and obligates the seller to deliver such position.
Each Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the Commodity Futures Trading
Commission and will be entered into only for bona fide hedging, risk
management (including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option
thereon requires a Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount
of the contract (but may be higher in some circumstances). Additional cash
or assets (variation margin) may be required to be deposited thereafter on
a daily basis as the mark to market value of the contract fluctuates. The
purchase of an option on financial futures involves payment of a premium
for the option without any further obligation on the part of the Fund. If a
Fund exercises an option on a futures contract it will be obligated to post
initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can
be offset prior to settlement at an advantageous price, nor that delivery
will occur.
Neither Fund will enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of
the amount of its initial margin and premiums on open futures contracts and
options thereon would exceed 5% of a Fund's total assets (taken at current
value); however, in the case of an option that is in-the-money at the time
of the purchase, the in-the-money amount may be excluded in calculating the
5% limitation. The segregation requirements with respect to futures
contracts and options thereon are described below.
Options on Securities Indices and Other Financial Indices. Each Fund also
may purchase and sell call and put options on securities indices and other
financial indices and in so doing can achieve many of the same objectives
it would achieve through the sale or purchase of options on individual
securities or other instruments. Options on securities indices and other
financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, they settle by cash settlement, i.e., an option on an index
gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is
based exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option (except if, in the case of an OTC
option, physical delivery is specified). This amount of cash is equal to
the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery
of this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry
or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to
options on securities.
Currency Transactions. Each Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings
denominated in particular currencies against fluctuations in relative
value. Currency transactions include forward currency contracts, exchange
listed currency futures, exchange listed and OTC options on currencies, and
currency swaps. A forward currency contract involves a privately
negotiated obligation to purchase or sell (with delivery generally
required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at
a price set at the time of the contract. A currency swap is an agreement
to exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap, which is
described below. A Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations of
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from a NRSRO or are
determined to be of equivalent credit quality by the Adviser.
Each Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction
with respect to specific assets or liabilities of the Fund, which will
generally arise in connection with the purchase or sale of its portfolio
securities or the receipt of income therefrom. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency.
Neither Fund will enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at
the time of entering into the transaction) of the securities held in its
portfolio that are denominated or generally quoted in or currently
convertible into such currency, other than with respect to proxy hedging or
cross hedging as described below.
Each Fund may also cross-hedge currencies by entering into
transactions to purchase or sell one or more currencies that are expected
to decline in value relative to other currencies to which the Fund has or
in which the Fund expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, each Fund may also engage
in proxy hedging. Proxy hedging is often used when the currency to which
the Fund's portfolio is exposed is difficult to hedge or to hedge against
the dollar. Proxy hedging entails entering into a commitment or option to
sell a currency whose changes in value are generally considered to be
correlated to a currency or currencies in which some or all of a Fund's
portfolio securities are or are expected to be denominated, in exchange for
U.S. dollars. The amount of the commitment or option would not exceed the
value of the Fund's securities denominated in correlated currencies. For
example, if the Adviser considers that the Austrian schilling is correlated
to the German deutschemark (the "D-mark"), a Fund holds securities
denominated in schillings and the Adviser believes that the value of
schillings will decline against the U.S. dollar, the Adviser may enter into
a commitment or option to sell D-marks and buy dollars. Currency hedging
involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to
the Fund if the currency being hedged fluctuates in value to a degree or in
a direction that is not anticipated. Further, there is the risk that the
perceived correlation between various currencies may not be present or may
not be present during the particular time that a Fund is engaging in proxy
hedging. If a Fund enters into a currency hedging transaction, a Fund will
comply with the asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency
control is of great importance to the issuing governments and influences
economic planning and policy, purchases and sales of currency and related
instruments can be negatively affected by government exchange controls,
blockages, and manipulations or exchange restrictions imposed by
governments. These can result in losses to a Fund if it is unable to
deliver or receive currency or funds in settlement of obligations and could
also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs. Buyers and
sellers of currency futures are subject to the same risks that apply to the
use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in
the issuing nation. Trading options on currency futures is relatively new,
and the ability to establish and close out positions on such options is
subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors
extrinsic to that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions,
multiple currency transactions (including forward currency contracts) and
multiple interest rate transactions and any combination of futures,
options, currency and interest rate transactions ("component"
transactions), instead of a single Strategic Transaction, as part of a
single or combined strategy when, in the opinion of the Adviser, it is in
the best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its component
transactions. Although combined transactions are normally entered into
based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks
or hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into
which each Fund may enter are interest rate, currency and index swaps and
the purchase or sale of related caps, floors and collars. Each Fund
expects to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. Each Fund intends to use these
transactions as hedges and not as speculative investments and will not sell
interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by a Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange
cash flows on a notional amount of two or more currencies based on the
relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to
the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments
on a notional principal amount from the party selling such floor to the
extent that a specified index falls below a predetermined interest rate or
amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as
these swaps, caps, floors and collars are entered into for good faith
hedging purposes, the Adviser and the Fund believe such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not
treat them as being subject to its borrowing restrictions. Neither Fund
will enter into any swap, cap, floor or collar transaction unless, at the
time of entering into such transaction, the unsecured long-term debt of the
Counterparty, combined with any credit enhancements, is rated at least A by
S&P or Moody's or has an equivalent rating from an NRSRO or is determined
to be of equivalent credit quality by the Adviser. If there is a default
by the Counterparty, a Fund may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. Each Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank
Offered Rate ("LIBOR"), although foreign currency-denominated instruments
are available from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds and sellers to
obtain a fixed rate for borrowings. A Fund might use Eurodollar futures
contracts and options thereon to hedge against changes in LIBOR, to which
many interest rate swaps and fixed income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside
the U.S., Strategic Transactions may not be regulated as rigorously as in
the U.S., may not involve a clearing mechanism and related guarantees, and
are subject to the risk of governmental actions affecting trading in, or
the prices of, foreign securities, currencies and other instruments. The
value of such positions also could be adversely affected by: (i) other
complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions,
(iii) delays in the Fund's ability to act upon economic events occurring in
foreign markets during non-business hours in the U.S., (iv) the imposition
of different exercise and settlement terms and procedures and margin
requirements than in the U.S., and (v) lower trading volume and liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions,
in addition to other requirements, require that the Fund segregate liquid
high grade assets with its custodian to the extent Fund obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any
obligation by a Fund to pay or deliver securities or assets must be covered
at all times by the securities, instruments or currency required to be
delivered, or, subject to any regulatory restrictions, an amount of cash or
liquid high grade securities at least equal to the current amount of the
obligation must be segregated with the custodian. The segregated assets
cannot be sold or transferred unless equivalent assets are substituted in
their place or it is no longer necessary to segregate them. For example, a
call option written by a Fund will require the Fund to hold the securities
subject to the call (or securities convertible into the needed securities
without additional consideration) or to segregate liquid high-grade
securities sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by a Fund on an index will require the Fund
to own portfolio securities which correlate with the index or to segregate
liquid high grade assets equal to the excess of the index value over the
exercise price on a current basis. A put option written by a Fund requires
the Fund to segregate liquid, high grade assets equal to the exercise
price.
Except when a Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency
or liquid securities denominated in that currency equal to the Fund's
obligations or to segregate liquid high grade assets equal to the amount of
the Fund's obligation.
OTC options entered into by a Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange
listed index options, will generally provide for cash settlement. As a
result, when the Fund sells these instruments it will only segregate an
amount of assets equal to its accrued net obligations, as there is no
requirement for payment or delivery of amounts in excess of the net amount.
These amounts will equal 100% of the exercise price in the case of a non
cash-settled put, the same as an OCC guaranteed listed option sold by the
Fund, or the in-the-money amount plus any sell-back formula amount in the
case of a cash-settled put or call. In addition, when a Fund sells a call
option on an index at a time when the in-the-money amount exceeds the
exercise price, the Fund will segregate, until the option expires or is
closed out, cash or cash equivalents equal in value to such excess. OCC
issued and exchange listed options sold by the Fund other than those above
generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an
amount of assets equal to the full value of the option. OTC options
settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options
settling with physical delivery.
In the case of a futures contract or an option thereon, a Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
With respect to swaps, a Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to
each swap on a daily basis and will segregate an amount of cash or liquid
high grade securities having a value equal to the accrued excess. Caps,
floors and collars require segregation of assets with a value equal to the
Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. Each Fund may also enter into
offsetting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related options
and Strategic Transactions. For example, a Fund could purchase a put
option if the strike price of that option is the same or higher than the
strike price of a put option sold by the Fund. Moreover, instead of
segregating assets if a Fund held a futures or forward contract, it could
purchase a put option on the same futures or forward contract with a strike
price as high or higher than the price of the contract held. Other
Strategic Transactions may also be offset in combinations. If the
offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such
time, assets equal to any remaining obligation would need to be segregated.
Each Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. (See "TAXES.")
Investment Restrictions
Unless specified to the contrary, the following restrictions are
fundamental policies and may not be changed with respect to each of the
Funds without the approval of a majority of the outstanding voting
securities of such Fund which, under the 1940 Act and the rules thereunder
and as used in this Statement of Additional Information, means the lesser
of (1) 67% of the shares of such Fund present at a meeting if the holders
of more than 50% of the outstanding shares of such Fund are present in
person or by proxy, or (2) more than 50% of the outstanding shares of such
Fund. Any nonfundamental policy of a Fund may be modified by the Fund's
Board of Directors without a vote of the Fund's shareholders.
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an
excess over the percentage occurs immediately after, and is caused by, an
acquisition or encumbrance of securities or assets of, or borrowings by,
the Funds.
As a matter of fundamental policy, each Fund may not:
1. borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse
repurchase agreements provided that the Fund maintains asset
coverage of 300% for all borrowings;
2. purchase or sell real estate (except that the Fund may invest in
(i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or
interests therein, and that the Fund reserves freedom of action
to hold and to sell real estate acquired as a result of the
Fund's ownership of securities); or purchase or sell physical
commodities or contracts relating to physical commodities;
3. act as an underwriter of securities issued by others, except to
the extent that it may be deemed an underwriter in connection
with the disposition of portfolio securities of the Fund;
4. issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for
shares of the separate classes or series of the Corporation;
provided that collateral arrangements with respect to
currency-related contracts, futures contracts, options or other
permitted investments, including deposits of initial and
variation margin, are not considered to be the issuance of senior
securities for purposes of this restriction;
5. purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to
be invested in the securities of one or more issuers having their
principal business activities in the same industry, provided that
there is no limitation with respect to investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (for the purposes of this restriction,
telephone companies are considered to be in a separate industry
from gas and electric public utilities, and wholly-owned finance
companies are considered to be in the industry of their parents
if their activities are primarily related to financing the
activities of their parents).
6. (Global Small Company Fund only) with respect to 75% of its total
assets taken at market value purchase more than 10% of the voting
securities of any one issuer, or invest more than 5% of the value
of its total assets in the securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of closed end
investment companies;
7. (Global Small Company Fund only) make loans to other persons,
except (a) loans of portfolio securities, provided collateral is
maintained at not less than 100% by marking to market daily, and
(b) to the extent the entry into repurchase agreements and the
purchase of debt securities in accordance with its investment
objective and investment policies may be deemed to be loans; or
8. (Global Income Fund only) make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent the entry
into repurchase agreements and the purchase of debt securities in
accordance with its investment objectives and investment policies
may be deemed to be loans.
As a matter of nonfundamental policy, each Fund may not:
(a) purchase or retain securities of any open-end investment company,
or securities of closed-end investment companies except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchases, or except when
such purchase, though not made in the open market, is part of a
plan of merger, consolidation, reorganization or acquisition of
assets; in any event the Fund may not purchase more than 3% of
the outstanding voting securities of another investment company,
may not invest more than 5% of its total assets in another
investment company, and may not invest more than 10% of its total
assets in other investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer, director
or trustee of the Fund or a member, officer, director or trustee
of the investment adviser of the Fund if one or more of such
individuals owns beneficially more than one-half of one percent
(1/2%) of the outstanding shares or securities or both (taken at
market value) of such issuer and such individuals owning more
than one-half of one percent (1/2%) of such shares or securities
together own beneficially more than 5% of such shares or
securities or both;
(d) invest more than 10% of its net assets in securities which are
not readily marketable, the disposition of which is restricted
under Federal securities laws, or in repurchase agreements not
terminable within 7 days, and the Fund will not invest more than
5% of its total assets in restricted securities;
(e) purchase securities of any issuer with a record of less than
three years continuous operations, including predecessors, and in
equity securities which are not readily marketable except U.S.
Government securities, securities of such issuers which are rated
by at least one nationally recognized statistical rating
organization, municipal obligations and obligations issued or
guaranteed by any foreign government or its agencies or
instrumentalities, if such purchase would cause the investments
of the Fund in all such issuers to exceed 5% of the total assets
of the Fund taken at market value;
(f) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund at
any time do not exceed 20% of its net assets; or sell put options
on securities if, as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of the
Fund's net assets;
(g) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate
initial margin with respect to all futures contracts entered into
on behalf of the Fund and the premiums paid for options on
futures contracts does not exceed 5% of the Fund's total assets
provided that in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded in
computing the 5% limit.
(h) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which own
or invest in such interests);
(i) purchase or sell real estate limited partnership interests;
(j) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the time
any loan is made; all loans of portfolio securities will be fully
collateralized and marked to market daily. Each Fund has no
current intention of making loans of portfolio securities that
would amount to greater than 5% of its total assets;
(k) (Global Small Company Fund only) borrow money (including reverse
repurchase agreements) in excess of 5% of its total assets (taken
at market value) except for temporary or emergency
purposes or borrow other than from banks;
(l) (Global Income Fund only) borrow money in excess of 5% of its
total assets (taken at market value) except for temporary or
emergency purposes or borrow other than from banks; however,
in the case of reverse repurchase agreements, the Fund may invest
in such agreements with other than banks subject to total asset
coverage of 300% for such agreements and all borrowing;
(m) (Global Income Fund only) purchase securities on margin or make
short sales, unless by virtue of its ownership of other
securities, it has the right to obtain securities equivalent in
kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions, except in
connection with arbitrage transactions, and except that the Fund
may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities;
(n) (Global Small Company Fund only) purchase securities on margin or
make short sales unless, by virtue of its ownership of other
securities, it has the right to obtain securities equivalent in
kind and amount to the securities sold at no added cost and, if
the right is conditional, the sale is made upon the same
conditions, except in connection with arbitrage transactions and
except that the Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities;
(o) (Global Small Company Fund only) purchase warrants if as a result
warrants taken at the lower of cost or market value would
represent more than 10% of the value of the Portfolio's net
assets or more than 2% of its net assets in warrants that are not
listed on the New York or American Stock Exchanges or on an
exchange with comparable listing requirements (for this purpose,
warrants attached to securities will be deemed to have no value);
or
(p) (Global Income Fund only) purchase warrants if as a result
warrants taken at the lower of cost or market value would
represent more than 5% of the value of the Fund's net assets or
more than 2% of its net assets in warrants that are not listed on
the New York or American Stock Exchanges or on an exchange with
comparable listing requirements (for this purpose, warrants
attached to securities will be deemed to have no value).
If a percentage restriction on investment or utilization of assets as
set forth under "Investment Restrictions" and "Other Investment Policies"
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value or the total cost of a
Fund's assets will not be considered a violation of the restriction.
PURCHASES
(See "Purchases" and "Transaction Information" in the Funds' prospectuses.)
Additional Information About Opening an Account
With respect to Global Small Company Fund clients having a regular
investment counsel account with the Adviser or its affiliates and members
of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the
National Association of Securities Dealers, Inc. ("NASD") and banks may, if
they prefer, subscribe initially for at least $1,000 of Fund shares through
Scudder Investor Services, Inc. (the "Distributor") by letter, fax, or
telephone.
Shareholders of other Scudder funds who have submitted an account
application and have certified a taxpayer identification number, clients
having a regular investment counsel account with the Adviser or its
affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate
families, members of the NASD, and banks may open an account by wire.
These investors must call 1-800-225-5163 to get an account number. During
the call, the investor will be asked to indicate the Fund name, amount to
be wired ($1,000 minimum), name of bank or trust company from which the
wire will be sent, the exact registration of the new account, the taxpayer
identification or social security number, address and telephone number.
The investor must then call the bank to arrange a wire transfer to State
Street Bank, Attention: Mutual Funds, 225 Franklin Street, Boston, MA
02110. The investor must give the Scudder fund name, account name and the
new account number. Finally, the investor must send the completed and
signed application to the Fund promptly.
The minimum initial purchase amount is less than $1,000 under certain
special plan accounts.
Additional Information About Making Subsequent Investments by Telephone
Order
With respect to Global Small Company Fund, subsequent purchase orders
for $10,000 or more, and for an amount not greater than four times the
value of the shareholder's account, may be placed by telephone, fax, etc.,
by established shareholders (except by Scudder Individual Retirement
Account (IRA), Scudder pension and profit sharing, Scudder 401(k) and
Scudder 403(b) Planholders), members of the NASD and banks. Orders placed
in this manner may be directed to any Scudder Investor Services, Inc.
office listed in the Fund's prospectus. A two-part invoice of the purchase
will be mailed out promptly following receipt of a request to buy. Payment
should be attached to a copy of the invoice for proper identification.
Federal regulations require that payment be received within seven business
days. If payment is not received within that time, the shares may be
canceled. In the event of such cancellation or cancellation at the
purchaser's request, the purchaser will be responsible for any loss
incurred by the Fund or the principal underwriter by reason of such
cancellation. If the purchaser is a shareholder, the Corporation shall
have the authority, as agent of the shareholder, to redeem shares in the
account to reimburse the Fund or the principal underwriter for the loss
incurred. Net losses on such transactions which are not recovered from the
purchaser will be absorbed by the principal underwriter. Any net profit on
the liquidation of unpaid shares will accrue to the Fund.
Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn
on, or payable through, a U.S. bank.
If shares are purchased by a check which proves to be uncollectible,
the Corporation reserves the right to cancel the purchase immediately and
the purchaser will be responsible for any loss incurred by a Fund or the
principal underwriter by reason of such cancellation. If the purchaser is
a shareholder, the Corporation shall have the authority, as agent of the
shareholder, to redeem shares in the account to reimburse a Fund or the
principal underwriter for the loss incurred. Investors whose orders have
been canceled may be prohibited from or restricted in placing future orders
in any of the Scudder funds.
Wire Transfer of Federal Funds
To purchase shares of Global Income Fund and obtain the same day
dividend you must have your bank forward federal funds by wire transfer and
provide the required account information so as to be available to the Fund
prior to twelve o'clock noon eastern time on that day. If you wish to make
a purchase of $500,000 or more you should notify the Fund's transfer agent,
Scudder Service Corporation (the "Transfer Agent") of such a purchase by
calling 1-800-225-5163. If either the federal funds or the account
information is received after twelve o'clock noon eastern time, but both
the funds and the information are made available before the close of
regular trading on the New York Stock Exchange (the "Exchange") (normally 4
p.m. eastern time) on any business day, shares will be purchased at net
asset value determined on that day but will not receive the dividend; in
such cases, dividends commence on the next business day.
To obtain the net asset value determined as of the close of regular
trading on the Exchange on a selected day, your bank must forward federal
funds by wire transfer and provide the required account information so as
to be available to the Fund prior to the close of regular trading on the
Exchange (normally 4 p.m. eastern time).
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, each Fund pays a fee for receipt by State
Street Bank and Trust Company of "wired funds," and the right to charge
investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays are Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day
(November 11). Investors are not able to purchase shares by wiring federal
funds on such holidays because State Street Bank is not open to receive
such federal funds on behalf of a Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset
value normally will be computed as of the close of regular trading on the
Exchange on each day during which the Exchange is open for trading. Orders
received after the close of regular trading on the Exchange will be
executed at the net asset value per share on the next business day. If the
order has been placed by a member of the NASD, other than Scudder Investor
Services, Inc. (the "Distributor"), it is the responsibility of that member
broker, rather than a Fund, to forward the purchase order to the Transfer
Agent in Boston by the close of regular trading on the Exchange.
Share Certificates
Due to the desire of the Corporation to afford ease of redemption,
certificates will not be issued to indicate ownership in a Fund.
Other Information
If purchases or redemptions of a Fund's shares are arranged and
settlement is made, at an investor's election, through a member of the
NASD, other than the Distributor, that member may, at its discretion,
charge a fee for that service. The Board of Directors, on behalf of a
Fund, and the Distributor, the Funds' principal underwriter, each has the
right to limit the amount of purchases by, and to refuse to sell to any
person. The Directors and the Distributor each may suspend or terminate the
offering of shares of the Fund at any time.
The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders
without a certified tax identification number and certain other certified
information (e.g., certification of exempt status from exempt
organizations) will be returned to the investor.
The Corporation may issue shares of either Fund at net asset value in
connection with any merger or consolidation with, or acquisition of the
assets of, any investment company (or series thereof) or personal holding
company, subject to the requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and Redemptions" and "Transaction information" in the
Funds' prospectuses.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange
either may be an additional investment into an existing account or may
involve opening a new account in the other fund. When an exchange involves
a new account, the new account will be established with the same
registration, tax identification number, address, telephone redemption
option, "Scudder Automated Information Line" (SAIL) transaction
authorization and dividend option as the existing account. Other features
will not carry over automatically to the new account. Exchanges to a new
fund account must be for a minimum of $1,000. When an exchange represents
an additional investment into an existing account, the account receiving
the exchange proceeds must have identical registration, address, and
account options/features as the account of origin. Exchanges into an
existing account must be for $100 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request
must be in writing and must contain a signature guarantee as described
under "Transaction Information--Redeeming shares--Signature guarantees" in
the Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective
net asset values determined on that day. Exchange orders received after
the close of regular trading on the Exchange will be executed on the
following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder Fund to
an existing account in another Scudder Fund through Scudder's Automatic
Exchange Program. Exchanges must be for a minimum of $50. Shareholders
may add this free feature over the phone or in writing. Automatic
Exchanges will continue until the shareholder requests by phone or in
writing to have the feature removed, or until the originating account is
depleted. The Corporation and the Transfer Agent each reserves the right
to suspend or terminate the privilege of the Automatic Exchange Program at
any time.
No commission is charged to the shareholder for any exchange described
above. An exchange into another Scudder fund is a redemption of shares,
and therefore may result in tax consequences (gain or loss) to the
shareholder, and the proceeds of such an exchange may be subject to backup
withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Corporation
employs procedures, including recording telephone calls, testing a caller's
identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the
Corporation does not follow such procedures, it may be liable for losses
due to unauthorized or fraudulent telephone instructions. The Corporation
will not be liable for acting upon instructions communicated by telephone
that it reasonably believes to be genuine. The Corporation and the
Transfer Agent each reserves the right to suspend or terminate the
privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from Scudder Investor Services, Inc. a
prospectus of the Scudder fund into which the exchange is being
contemplated.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
Shareholders currently receive the right automatically, without having
to elect it, to redeem up to $50,000 to their address of record.
Shareholders may also request by telephone to have the proceeds mailed or
wired to their predesignated bank account. In order to request redemptions
by telephone, shareholders must have completed and returned to the Transfer
Agent the application, including the designation of a bank account to which
the redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section
on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit-Sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption payments should
either return a Telephone Redemption Option Form (available upon
request) or send a letter identifying the account and specifying
the exact information to be changed. The letter must be signed
exactly as the shareholder's name(s) appears on the account. A
signature and a signature guarantee are required for each person
in whose name the account is registered.
Telephone redemption is not available with respect to shares
represented by share certificates or shares held in certain retirement
accounts.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a
$5 charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a
participant in the Federal Reserve System, redemption proceeds must be
wired through a commercial bank which is a correspondent of the savings
bank. As this may delay receipt by the shareholder's account, it is
suggested that investors wishing to use a savings bank discuss wire
procedures with their bank and submit any special wire transfer information
with the telephone redemption authorization. If appropriate wire
information is not supplied, redemption proceeds will be mailed to the
designated bank.
The Corporation employs procedures, including recording telephone
calls, testing a caller's identity, and sending written confirmation of
telephone transactions, designed to give reasonable assurance that
instructions communicated by telephone are genuine, and to discourage
fraud. To the extent that the Corporation does not follow such procedures,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions. The Corporation will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption requests by telephone (technically a repurchase by
agreement between the Fund and the shareholder) of shares purchased by
check will not be accepted until the purchase check has cleared which may
take up to seven business days.
Redemption by Mail or Fax
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted
to, stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax required
in some states when settling estates.
It is suggested that shareholders holding shares registered in other
than individual names contact the Transfer Agent prior to redemptions to
ensure that all necessary documents accompany the request. When shares are
held in the name of a corporation, trust, fiduciary agent, attorney or
partnership, the Transfer Agent requires, in addition to the stock power,
certified evidence of authority to sign. These procedures are for the
protection of shareholders and should be followed to ensure prompt payment.
Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within seven business
days after receipt by the Transfer Agent of a request for redemption that
complies with the above requirements. Delays of more than seven days of
payment for shares tendered for repurchase or redemption may result, but
only until the purchase check has cleared.
The requirements for IRA redemptions are different from those regular
accounts. For more information call 1-800-225-5163.
Redemption-in-Kind
The Corporation reserves the right, if conditions exist which make
cash payments undesirable, to honor any request for redemption or
repurchase order by making payment in whole or in part in readily
marketable securities chosen by the Corporation and valued as they are for
purposes of computing a Fund's net asset value (a redemption-in-kind). If
payment is made in securities, a shareholder may incur transaction expenses
in converting these securities into cash. The Corporation has elected,
however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Corporation is obligated to redeem shares, with respect to any
one shareholder during any 90-day period, solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the relevant Fund at the
beginning of the period.
Other Information
Clients, officers or employees of the Adviser or of an affiliated
organization, and members of such clients', officers' or employees'
immediate families, banks and members of the NASD may direct repurchase
requests to the Corporation through Scudder Investor Services, Inc. at
Two International Place , Boston, Massachusetts 02110- 4103 by
letter, fax, TWX, or telephone. A two-part confirmation will be mailed out
promptly after receipt of the redemption request. A written request in
good order as described above and any certificates with proper signature
guarantee, as described in each Fund's prospectus under "Transaction
information--Redeeming shares--Signature guarantees," should be sent
with a copy of the invoice to Scudder Service Corporation, Confirmed
Processing Department, Two International Place , Boston,
Massachusetts 02110. Failure to deliver shares or required documents (see
above) by the settlement date may result in cancellation of the trade and
the shareholder will be responsible for any loss incurred by a Fund or the
principal underwriter by reason of such cancellation. The Corporation
shall have the authority, as agent of the shareholder, to redeem shares in
the account to reimburse a Fund or the principal underwriter for the loss
incurred. Net losses on such transactions which are not recovered from the
shareholder will be absorbed by the principal underwriter. Any net gains
so resulting will accrue to a Fund. For this group, repurchases will be
carried out at the net asset value next computed after such repurchase
requests have been received. The arrangements described in this paragraph
for repurchasing shares are discretionary and may be discontinued at any
time.
If a shareholder redeems all shares in the account, the shareholder
will receive, in addition to the net asset value thereof, all declared but
unpaid dividends thereon. The value of shares redeemed or repurchased may
be more or less than the shareholder's cost depending on the net asset
value at the time of redemption or repurchase. The Corporation does not
impose a redemption or repurchase charge although wire charges may be
applicable for redemption proceeds wired to an investor's bank account.
Redemption of shares, including an exchange into another series of the
Corporation or into another Scudder fund, may result in tax consequences
(gain or loss) to the shareholder and the proceeds of such redemptions may
be subject to backup withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, directors or custodian of the Plan for the
requirements.
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and receive payment therefore may be
suspended at times (a) during which the Exchange is closed, other than
customary weekend and holiday closings, (b) during which trading on the
Exchange is restricted, (c) during which an emergency exists as a result of
which disposal by the Corporation of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the
Corporation fairly to determine the value of its net assets, or (d) during
which a governmental body having jurisdiction over the Corporation may by
order permit such a suspension for the protection of the Corporation's
shareholders; provided that applicable rules and regulations of the SEC (or
any succeeding governmental authority) shall govern as to whether the
conditions prescribed in (b), (c) or (d) exist.
If transactions at any time reduce a shareholder's account balance to
below $1,000 in value, the Corporation may notify the shareholder that,
unless the account balance is brought up to at least $1,000, the
Corporation will redeem all shares in the Fund and close the account by
sending redemption proceeds to the shareholder. The shareholder has sixty
days to bring the account balance up to $1,000 before any action will be
taken by the Corporation. (This policy applies to accounts of new
shareholders, but does not apply to certain Special Plan Accounts.) The
Directors have the authority to change the minimum account size.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in the Funds' prospectuses.)
The Pure No-Load(tm) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from
the vast majority of mutual funds available today. The primary distinction
is between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees
are distribution-related fees charged against fund assets and are distinct
from service fees, which are charged for personal services and/or
maintenance of shareholder accounts. Asset-based sales charges and service
fees are typically paid pursuant to distribution plans adopted under 12b-1
under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed.
The maximum front-end or back-end load varies, and depends upon whether or
not a fund also charges a 12b-1 fee and/or a service fee or offers
investors various sales-related services such as dividend reinvestment.
The maximum charge for a 12b-1 fee is 0.75% of a fund's average annual net
assets, and the maximum charge for a service fee is 0.25% of a fund's
average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual
fund can call itself a "no-load" fund only if the 12b-1 fee and/or service
fee does not exceed 0.25% of a fund's average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(tm)
to distinguish Scudder funds from other no-load mutual funds. Scudder
pioneered the no-load concept when it created the nation's first no-load
fund in 1928, and later developed the nation's first family of no-load
mutual funds.
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same
amount in a load fund that collects an 8.50% front-end load, a load fund
that collects only a 0.75% 12b-1 and/or service fee, and a no-load fund
charging only a 0.25% 12b-1 and/or service fee. The hypothetical figures
in the chart show the value of an account assuming a constant 10% rate of
return over the time periods indicated and reinvestment of dividends and
distributions.
<TABLE>
<CAPTION>
Scudder Load Fund No-Load Fund
Pure No- 8.50% Load with 0.75% with 0.25%
YEARS Load(tm) Fund Fund 12b-1 Fee 12b-1 Fee
----- ------------- ---- --------- ---------
<C> <C> <C> <C> <C>
10 $25,937 $23,733 $24,222 $25,354
15 41,772 38,222 37,698 40,371
20 67,275 61,557 58,672 64,282
</TABLE>
Investors are encouraged to review the fee tables on page 2 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Distribution Plans
Investors have freedom to choose whether to receive cash or to
reinvest any dividends from net investment income or distributions from
realized capital gains in additional shares of the same Fund. A change of
instructions for the method of payment must be received by the Transfer
Agent at least five days prior to a dividend record date. However,
shareholders authorizing telephone transactions may change their dividend
option by calling 1-800-225-5163.
Reinvestment is usually made at the closing net asset value determined
on the business day following the record date. Investors may leave
standing instructions with the Transfer Agent designating their option for
either reinvestment or cash distribution of any income dividends or capital
gains distributions. If no election is made, dividends and distributions
will be invested in additional shares of the relevant Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of
record is with a member bank of the Automated Clearing House Network (ACH)
can have income and capital gains distributions automatically deposited to
their personal bank account usually within three business days after the
Fund pays its distribution. A DistributionsDirect request form can be
obtained by calling 1-800-225-5163. Confirmation statements will be mailed
to shareholders as notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement
plan accounts, the reinvestment of dividends and capital gains is also
required.
Diversification
Your investment in Global Small Company Fund represents an interest in
a large, diversified portfolio of carefully selected securities.
Diversification may protect you against the possible risks of concentrating
in fewer securities or in a specific market section.
Scudder Funds Centers
Investors may visit any of the Centers maintained by Scudder Investor
Services, Inc. listed in each Fund's prospectus. The Centers are designed
to provide individuals with services during any business day. Investors
may pick up literature or find assistance with opening an account, adding
monies or special options to existing accounts, making exchanges within the
Scudder Family of Funds, redeeming shares or opening retirement plans.
Checks should not be mailed to the Centers but should be mailed to "The
Scudder Funds" at the address listed under "How to contact Scudder" in each
Fund's prospectus.
Reports to Shareholders
The Corporation issues to each Fund's shareholders un audited
semiannual and audited financial statements, including a list of
investments held and statements of assets and liabilities, statements of
operations, statements of changes in net assets and supplementary
information.
Transaction Summaries
Annual summaries of all transactions in each Fund account are
available to shareholders. The summaries may be obtained by calling 1-
800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Fund's prospectus.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist
investors in choosing a Scudder fund, descriptions of the Scudder funds'
objectives follow. Initial purchases in each Scudder fund must be at least
$1,000 or $500 in the case of IRAs. Subsequent purchases must be for $100
or more. Minimum investments for special plan accounts may be lower.
MONEY MARKET
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity
and stability of capital and consistent therewith to provide current
income through investment in a supervised portfolio of U.S. Government
and U.S. Government guaranteed obligations with maturities of not more
than 762 calendar days. The Fund intends to seek to maintain a
constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible.
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible
enhancement of principal value by actively managing currency, bond
market and maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate-and
long-term bonds.
Scudder Short Term Global Income Fund seeks to provide high current
income from a portfolio of high-grade money market instruments and
short-term bonds denominated in foreign currencies and the U.S.
dollar.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization
of reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in
investment-grade municipal securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is
exempt from regular federal income tax primarily through investments
in long-term municipal securities with an emphasis on high quality.
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from
New York state, New York City and regular federal income taxes through
the professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state,
municipal and local government obligations.
Scudder Pennsylvania Tax
Free Fund* seeks to provide income exempt from both Pennsylvania and
regular federal income taxes through a portfolio consisting of
Pennsylvania state, municipal and local government obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Capital Growth Fund seeks to maximize long-term growth of
capital through a broad and flexible investment program emphasizing
common stocks.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Global Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable equity securities
selected on a worldwide basis. It may also invest in debt securities
of U.S. and foreign issuers. Income is an incidental consideration.
Scudder Global Small Company Fund seeks above-average capital
appreciation over the long term by investing primarily in the equity
securities of small companies located throughout the world.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Quality Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Value Fund seeks long-term growth of capital through
investment in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
* These funds are not available for sale in all states. For
information, contact Scudder Investor Services, Inc.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds,"
and in other leading newspapers throughout the country. Investors will
notice the net asset value and offering price are the same, reflecting the
fact that no sales commission or "load" is charged on the sale of shares of
the Scudder Funds. The latest seven-day yields for the money-market funds
can be found every Monday and Thursday in the "Money-Market Funds" section
of The Wall Street Journal. This information also may be obtained by
calling the Scudder Automated Information Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and
diversified investment portfolios; pure no-load funds with no commissions
to purchase or redeem shares or Rule 12b-1 distribution fees; individual
attention from a Scudder Service Representative; easy telephone exchanges
into Scudder money market, tax free, income, and growth funds; shares
redeemable at net asset value at any time.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans", "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By Automatic Withdrawal
Plan" in the Fund's prospectus.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be
obtained by contacting Scudder Investor Services, Inc., Two
International Place , Boston, Massachusetts 02110- 4103 or by
calling toll free, 1-800-225-2470. It is advisable for an investor
considering the funding of the investment plans described below to consult
with an attorney or other investment or tax adviser with respect to the
suitability requirements and tax aspects thereof.
Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of
the Plan which includes a cash-or-deferred feature) or a Scudder Money
Purchase Pension Plan (jointly referred to as the Scudder Retirement Plans)
adopted by a corporation, a self-employed individual or a group of
self-employed individuals (including sole proprietorships and
partnerships), or other qualifying organization. Each of these forms was
approved by the IRS as a prototype. The IRS's approval of an employer's
plan under Section 401(a) of the Internal Revenue Code will be greatly
facilitated if it is in such approved form. Under certain circumstances,
the IRS will assume that a plan, adopted in this form, after special notice
to any employees, meets the requirements of Section 401(a) of the Internal
Revenue Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of each Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including
sole proprietors and partnerships), or other qualifying organization. This
plan has been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of each Fund may be purchased as the underlying investment for
an Individual Retirement Account which meets the requirements of Section
408(a) of the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or
a tax-deferred annuity program (a "qualified plan"), and a married
individual who is not an active participant in a qualified plan and whose
spouse is also not an active participant in a qualified plan, are eligible
to make tax deductible contributions of up to $2,000 to an IRA prior to the
year such individual attains age 70 1/2. In addition, certain individuals
who are active participants in qualified plans (or who have spouses who are
active participants) are also eligible to make tax-deductible contributions
to an IRA; the annual amount, if any, of the contribution which such an
individual will be eligible to deduct will be determined by the amount of
his, her, or their adjusted gross income for the year. Whenever the
adjusted gross income limitation prohibits an individual from contributing
what would otherwise be the maximum tax-deductible contribution he or she
could make, the individual will be eligible to contribute the difference to
an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA
each year (up to $2,250 for married couples if one spouse has earned income
of no more than $250). All income and capital gains derived from IRA
investments are reinvested and compound tax-deferred until distributed.
Such tax-deferred compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5,
10, and 15%. (At withdrawal, accumulations in this table will be taxable.)
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
Starting
Age of Annual Rate
of Return
Contributions 5% 10% 15%
- ------------- ---- ---- ----
<S> <C> <C> <C>
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming
average annual returns of 5, 10 and 15%. (At withdrawal, a portion of the
accumulation in this table will be taxable.)
<TABLE>
<CAPTION>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
Starting
Age of Annual Rate
of Return
Contributions 5% 10% 15%
- ------------- ---- ---- ----
<S> <C> <C> <C>
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of each Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7)
of the Internal Revenue Code. In general, employees of tax-exempt
organizations described in Section 501(c)(3) of the Internal Revenue Code
(such as hospitals, churches, religious, scientific, or literary
organizations and educational institutions) or a public school system are
eligible to participate in a 403(b) plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders who currently own or purchase $10,000
or more of shares of a Fund may establish an Automatic Withdrawal Plan.
The investor can then receive monthly, quarterly or periodic redemptions
from his or her account for any designated amount of $50 or more. Payments
are mailed at the end of each month. The check amounts may be based on the
redemption of a fixed dollar amount, fixed share amount, percent of account
value or declining balance. The Plan provides for income dividends and
capital gains distributions, if any, to be reinvested in additional shares.
Shares are then liquidated as necessary to provide for withdrawal payments.
Since the withdrawals are in amounts selected by the investor and have no
relationship to yield or income, payments received cannot be considered as
yield or income on the investment and the resulting liquidations may
deplete or possibly extinguish the initial investment. Requests for
increases in withdrawal amounts or to change payee must be submitted in
writing, signed exactly as the account is registered and contain signature
guarantee(s) as described under "Transaction information--Redeeming shares-
- -Signature guarantees" in the Fund's prospectus. Any such requests must be
received by the Fund's transfer agent by the 15th of the month in which
such change is to take effect. An Automatic Withdrawal Plan may be
terminated at any time by the shareholder, the Corporation or its agent on
written notice, and will be terminated when all shares of the Fund under
the Plan have been liquidated or upon receipt by the Corporation of notice
of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling 1-
800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services,
Inc. for forwarding regular investments through a single source. The
minimum annual investment is $240 per investor which may be made in
monthly, quarterly, semiannual or annual payments. The minimum monthly
deposit per investor is $20. Except for directors or custodian fees for
certain retirement plans, at present there is no separate charge for
maintaining group or salary deduction plans; however, the Corporation and
its agents reserve the right to establish a maintenance charge in the
future depending on the services required by the investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that
the shareholder ceases participating in the group plan prior to investment
of $1,000 per individual or in the event of a redemption which occurs prior
to the accumulation of that amount or which reduces the account value to
less than $1,000 and the account value is not increased to $1,000 within a
reasonable time after notification. An investor in a plan who has not
purchased shares for six months shall be presumed to have stopped making
payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through
automatic deductions from checking accounts by completing the appropriate
form and providing the necessary documentation to establish this service.
The minimum investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing
whereby a specific dollar amount is invested at regular intervals. By
investing the same dollar amount each period, when shares are priced low
the investor will purchase more shares than when the share price is higher.
Over a period of time this investment approach may allow the investor to
reduce the average price of the shares purchased. However, this investment
approach does not assure a profit or protect against loss. This type of
regular investment program may be suitable for various investment goals
such as, but not limited to, college planning or saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts
for minors. The minimum initial investment is $1,000 unless the donor
agrees to continue to make regular share purchases for the account through
Scudder's Automatic Investment Plan (AIP). In this case, the minimum
initial investment is $500.
The Corporation reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in
the event that regular investments to the account cease before the $1,000
minimum is reached.
Scudder Trust Company
Annual service fees are paid by each Fund to Scudder Trust Company, an
affiliate of the Adviser, for certain retirement plan accounts and are
included in the fees paid to the Transfer Agent.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends and
capital gains distributions" in the Funds' prospectuses.)
Each Fund intends to follow the practice of distributing substantially
all of its investment company taxable income which includes any excess of
net realized short-term capital gains over net realized long-term capital
losses. Each Fund may follow the practice of distributing the entire
excess of net realized long-term capital gains over net realized short-term
capital losses. However, a Fund may retain all or part of such gain for
reinvestment, after paying the related federal taxes for which shareholders
may then be able to claim a credit against their federal tax liability.
(See "TAXES.")
If a Fund does not distribute the amount of capital gain and/or
ordinary income required to be distributed by an excise tax provision of
the Internal Revenue Code, the Fund may be subject to that excise tax.
(See "TAXES.") In certain circumstances, a Fund may determine that it is
in the interest of shareholders to distribute less than the required
amount.
Global Small Company Fund intends to distribute investment company
taxable income in December each year. Global Small Company Fund intends to
declare in December any net realized capital gains resulting from its
investment activity. The Fund intends to distribute the December dividends
and capital gains either in December or in the following January. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as
if received on December 31 of the calendar year declared. Additional
distributions may be made if necessary.
Both types of distributions will be made in shares of the Fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent.
Global Income Fund intends to declare daily and distribute monthly
substantially all of its net investment income resulting from Fund
investment activity. Distributions, if any, of net realized capital gains
will normally be made in December. Distributions of certain realized gains
or losses on the sale or retirement of securities denominated in foreign
currencies held by the Fund, to the extent attributable to fluctuations in
currency exchange rates, as well as certain other gains or losses
attributable to exchange rate fluctuations, are treated as ordinary income
or loss and will also normally be made in December. All distributions will
be made in shares of the Fund and confirmations will be mailed to each
shareholder unless a shareholder has elected to receive cash, in which case
a check will be sent. Distributions are taxable, whether made in shares or
cash. (See "TAXES.")
PERFORMANCE INFORMATION
(See "Distribution and performance information--
Performance information" in the Funds' prospectuses.)
From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or reports to shareholders or
prospective investors. These performance figures are calculated in the
following manner:
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of
return for, where applicable, the periods of one year, five years, ten
years (or such shorter periods as may be applicable dating from the
commencement of a Fund's operations), all ended on the last day of a recent
calendar quarter. Average annual total return quotations reflect changes
in the price of a Fund's shares and assume that all dividends and capital
gains distributions during the respective periods were reinvested in Fund
shares. Average annual total return is calculated by finding the average
annual compound rates of return of a hypothetical investment, over such
periods, according to the following formula (average annual total return is
then expressed as a percentage):
T = (ERV/P)^(1/n) - 1
Where:
P = a hypothetical initial investment of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the
value, at the end of the applicable
period, of a hypothetical $1,000
investment made at the beginning of the
applicable period.
<TABLE>
<CAPTION>
Average Annual Total Return for periods ended October 31, 199 4
One Year Life of the Fund
---------- -----------------
<S> <C> <C>
Global Small Company Fund 2.80 % 11.49 %(1)
Global Income Fund (0.25) % 5.79 %(2)
(1) For the period beginning September 10, 1991.
(2) For the period beginning March 1, 1991.
</TABLE>
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period.
Cumulative total return quotations reflect changes in the price of a Fund's
shares and assume that all dividends and capital gains distributions during
the period were reinvested in Fund shares. Cumulative total return is
calculated by finding the cumulative rates of a return of a hypothetical
investment over such periods, according to the following formula
(cumulative total return is then expressed as a percentage):
C = (ERV/P)-1
Where:
C = cumulative total return
P = a hypothetical initial investment of
$1,000
ERV = ending redeemable value: ERV is the
value, at the end of the applicable
period, of a hypothetical $1,000
investment made at the beginning of the
applicable period.
<TABLE>
<CAPTION>
Cumulative Total Return for periods ended October 31, 199 4
One Year Life of the Fund
<S> <C> <C>
Global Small Company Fund 2.80 % 40.67 %(1)
Global Income Fund (0.25) % 22.90 %(2)
(1) For the period beginning September 10, 1991.
(2) For the period beginning March 1, 1991.
</TABLE>
Total Return
Total return is the rate of return on an investment for a specified
period of time calculated in the manner of cumulative total return.
Capital Change
Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include
the reinvestment of income dividends.
Yield of Global Income Fund
Yield of Global Income Fund is the net annualized yield based on a
specified 30-day (or one month) period assuming semiannual compounding of
income. Yield is calculated by dividing the net investment income per
share earned during the period by the maximum offering price per share on
the last day of the period, according to the following formula:
YIELD = 2[((a-b)/cd + 1)^6 - 1]
Where:
a = dividends and interest earned during the
period, including amortization of market
premium or accretion of market discount
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on
the last day of the period
Calculation of the Fund's yield does not take into account
"Section 988 Transactions." (See "TAXES.")
The yield for the 30-day period ended October 31, 199 4 was
8.13 % for Global Income Fund.
Quotations of each Fund's performance are based on historical earnings
and are not intended to indicate future performance. An investor's shares
when redeemed may be worth more or less than their original cost.
Performance of a Fund will vary based on changes in market conditions and
the level of the Fund's expenses.
Comparison of Portfolio Performance
A comparison of the quoted non-standard performance offered for
various investments is valid only if performance is calculated in the same
manner. Since there are different methods of calculating performance,
investors should consider the effects of the methods used to calculate
performance when comparing performance of a Fund with performance quoted
with respect to other investment companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends
or interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500
Composite Stock Price Index (S&P 500), the NASDAQ OTC Composite Index, the
NASDAQ Industrials Index, the Russell 2000 Index, and statistics published
by the Small Business Administration.
Because some or all each Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar as against these
currencies may account for part that Fund's investment performance.
Historical information on the value of the dollar versus foreign currencies
may be used from time to time in advertisements concerning the Funds. Such
historical information is not indicative of future fluctuations in the
value of the U.S. dollar against these currencies. In addition, marketing
materials may cite country and economic statistics and historical stock
market performance for any of the countries in which either Fund invests,
including, but not limited to, the following: population growth, gross
domestic product, inflation rate, average stock market price-earnings
ratios and the total value of stock markets. Sources for such statistics
may include official publications of various foreign governments and
exchanges.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual
funds with similar investment goals, as tracked by independent
organizations such as, Investment Company Data, Inc. ("ICD"), Lipper
Analytical Services, Inc. ("Lipper"), CDA Investment Technologies, Inc.
("CDA"), Morningstar, Inc., Value Line Mutual Fund Survey and other
independent organizations. When these organizations' tracking results are
used, a Fund will be compared to the appropriate fund category, that is, by
fund objective and portfolio holdings, or to the appropriate volatility
grouping, where volatility is a measure of a fund's risk. For instance, a
Scudder growth fund will be compared to funds in the growth fund category;
a Scudder income fund will be compared to funds in the income fund
category; and so on. Scudder funds (except for money market funds) may
also be compared to funds with similar volatility, as measured
statistically by independent organizations. In addition, a Fund's
performance may also be compared to the performance of broad groups of
comparable mutual funds. Indices with which a Fund's performance may be
compared include, but are not limited to, the following:
The Europe/Australia/Far East (EAFE) Index
Morgan Stanley Capital International World Index
J.P. Morgan Global Traded Bond Index
Salomon Brothers World Government Bond Index
NASDAQ Composite Index
Wilshire 5000 Stock Index
The following graph illustrates the historical risks and returns of
selected indices which track the performance of various combinations of
United States and international securities for the ten year period ended
December 31, 1994; results for other periods may vary. The graph uses ten
year annualized international returns represented by the Morgan Stanley
Capital International Europe, Australia and Far East (EAFE) Index and ten
year annualized United States returns represented by the S&P 500 Index.
Risk is measured by the standard deviation in overall portfolio performance
within each index. Performance of an index is historical, and does not
represent the performance of a Fund, and is not a guarantee of future
results.
(X-Y CHART TITLE) EFFICIENT FRONTIER
MSCI EAFE vs. S&P 500 (12/31/84-12/31/94)
(CHART DATA)
<TABLE>
<CAPTION>
Data Point Labels X-Axis Y-Axis
Standard Deviation Total Return
<S> <C> <C>
100% Int'l MSCI EAFE 19.35 17.55
10 US/90 Int'l 18.13 17.23
20/80 17.03 16.91
30 U.S./70 Int'l 16.07 16.59
40/60 15.29 16.27
50 U.S./50Int'l 14.70 15.96
60/40 14.34 15.64
70 U.S./30 Int'l 14.21 15.32
80/20 14.33 15.00
90 U.S./10 Int'l 14.69 14.68
100% U.S. S&P 500 15.27 14.36
</TABLE>
Source: Lipper Analytical Services, Inc. (Data as of 12/31/94)
From time to time, in marketing and other Fund literature, Directors
and officers of the Funds, the Funds' portfolio manager, or members of the
portfolio management team may be depicted and quoted to give prospective
and current shareholders a better sense of the outlook and approach of
those who manage the Funds. In addition, the amount of assets that
the Adviser has under management in various geographical areas may be
quoted in advertising and marketing materials.
The Funds may be advertised as an investment choice in Scudder's
college planning program. The description may contain illustrations of
projected future college costs based on assumed rates of inflation and
examples of hypothetical fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Funds.
The description may include a "risk/return spectrum" which compares the
Funds to other Scudder funds or broad categories of funds, such as money
market, bond or equity funds, in terms of potential risks and returns.
Money market funds are designed to maintain a constant $1.00 share price
and have a fluctuating yield. Share price, yield and total return of a
bond fund will fluctuate. The share price and return of an equity fund
also will fluctuate. The description may also compare the Funds to bank
products, such as certificates of deposit. Unlike mutual funds,
certificates of deposit are insured up to $100,000 by the U.S. government
and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity
funds, which may involve the loss of principal. However, all long-term
investments, including investments in bank products, may be subject to
inflation risk, which is the risk of erosion of the value of an investment
as prices increase over a long time period. The risks/returns associated
with an investment in bond or equity funds depend upon many factors. For
bond funds these factors include, but are not limited to, a fund's overall
investment objective, the average portfolio maturity, credit quality of the
securities held, and interest rate movements. For equity funds, factors
include a fund's overall investment objective, the types of equity
securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in
international bond or equity funds also will depend upon currency exchange
rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond
funds and equity funds. Shorter-term bond funds generally are considered
less risky and offer the potential for less return than longer-term bond
funds. The same is true of domestic bond funds relative to international
bond funds, and bond funds that purchase higher quality securities relative
to bond funds that purchase lower quality securities. Growth and income
equity funds are generally considered to be less risky and offer the
potential for less return than growth funds. In addition, international
equity funds usually are considered more risky than domestic equity funds
but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity
securities.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in
advertisements concerning the Funds, including reprints of, or selections
from, editorials or articles about these Funds. Sources for Fund
performance information and articles about the Funds may include the
following:
American Association of Individual Investors' Journal, a monthly
publication of the AAII that includes articles on investment analysis
techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market
and bank CD interest rates, published on a weekly basis by Masterfund, Inc.
of Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
CDA Investment Technologies, Inc., an organization which provides
performance and ranking information through examining the dollar results of
hypothetical mutual fund investments and comparing these results against
appropriate market indices.
Consumer Digest, a monthly business/financial magazine that includes a
"Money Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to
time articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a
"Market Watch" department reporting on activities in the mutual fund
industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign
equity market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market
fund activity and including certain averages as performance benchmarks,
specifically "Donoghue's Money Fund Average," and "Donoghue's Government
Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research
and data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly
covers financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon
Jacobs, that includes mutual fund performance data and recommendations for
the mutual fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company,
Inc., that reports on mutual fund performance, rates funds and discusses
investment strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes
a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow
Jones and Company, Inc. and The Hearst Corporation. Focus is placed on
ideas for investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter,
published by Babson United Investment Advisors, that includes mutual fund
performance data and reviews of mutual fund portfolios and investment
strategies.
USA Today, a leading national daily newspaper .
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient
features, management results, income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital
Publishing Company, a subsidiary of Fidelity Investments. Focus is placed
on personal financial journalism.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in the Funds' prospectuses.)
Each Fund is a series of Scudder Global Fund, Inc., a Maryland
corporation organized on May 15, 1986. Scudder Global Fund and Scudder
International Bond Fund are the other series of the Corporation.
The authorized capital stock of the Corporation consists of 700
million shares with $.01 par value, 100 million shares of which are
allocated to Global Small Company Fund and 300 million shares of which are
allocated to Global Income Fund. Each share of each series of the
Corporation has equal voting rights as to each other share of that series
as to voting for Directors, redemption, dividends and liquidation.
Shareholders have one vote for each share held. All shares issued and
outstanding are fully paid and non-assessable, transferable, and redeemable
at net asset value at the option of the shareholder. Shares have no
pre-emptive or conversion rights.
The shares of the Corporation have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do
so, and, in such event, the holders of the remaining less than 50% of the
shares voting for the election of Directors will not be able to elect any
person or persons to the Board of Directors.
The Directors, in their discretion, may authorize the division of
shares of a series into different classes permitting shares of different
classes to be distributed by different methods. Although shareholders of
different classes of a series would have an interest in the same portfolio
of assets, shareholders of any subsequently created classes may bear
different expenses in connection with different methods of distribution of
their classes. The Directors have no present intention of taking the
action necessary to effect the division of shares into separate classes
(which under present regulations would require the Corporation to obtain an
exemptive order of the SEC), nor of changing the method of distribution of
shares of a series.
Maryland corporate law provides that a Director of the Corporation
shall not be liable for actions taken in good faith, in a manner he or she
reasonably believes to be in the best interests of the Corporation and with
the care that an ordinarily prudent person in a like position would use
under similar circumstances. In so acting, a Director shall be fully
protected in relying in good faith upon the records of the Corporation and
upon reports made to the Corporation by persons selected in good faith by
the Directors as qualified to make such reports.
The Articles of Amendment and Restatement provide that the Directors
of the Corporation, to the fullest extent permitted by Maryland General
Corporation Law and the 1940 Act shall not be liable to the Corporation or
its shareholders for damages. As a result, Directors of the Corporation
may be immune from liability in certain instances in which they could
otherwise be held liable. The Articles and the By-Laws provide that the
Corporation will indemnify its Directors, officers, employees or agents
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their offices with the Corporation to
the fullest extent permitted by applicable law. Nothing in the Articles or
the By-Laws protects or indemnifies a Director, officer, employee or agent
against any liability to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
No series of the Corporation shall be liable for the obligations of
any other series.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Funds' prospectuses.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to the Funds. This organization is one of the most
experienced investment management firms in the U.S. It was established as
a partnership in 1919 and pioneered the practice of providing investment
counsel to individual clients on a fee basis. In 1928 it introduced the
first no-load mutual fund to the public. In 1953, Scudder, Stevens & Clark
introduced Scudder International Fund, the first mutual fund available in
the U.S. investing internationally in securities of issuers in several
foreign countries.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives
no income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including
insurance companies, colleges, industrial corporations, and financial and
banking organizations. In addition, it manages Montgomery Street Income
Securities, Inc., Scudder California Tax Free Trust, Scudder Cash
Investment Trust, Scudder Development Fund, Scudder Equity Trust, Scudder
Fund, Inc., Scudder Funds Trust, Scudder Global Fund, Inc., Scudder GNMA
Fund, Scudder Portfolio Trust, Scudder Institutional Fund, Inc., Scudder
International Fund, Inc., Scudder Investment Trust, Scudder Municipal
Trust, Scudder Mutual Funds, Inc., Scudder New Asia Fund, Inc., Scudder New
Europe Fund, Inc., Scudder State Tax Free Trust, Scudder Tax Free Money
Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund, Scudder
Variable Life Investment Fund, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian
Fund, Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The Latin
America Dollar Income Fund, Inc. Some of the foregoing companies or trusts
have two or more series.
The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets over $11 billion and
includes the AARP Growth Trust, AARP Income Trust, AARP Tax Free Income
Trust and AARP Cash Investment Funds.
The Adviser maintains a large research department, which conducts
continual studies of the factors that affect the position of various
industries, companies and individual securities. In this work, the Adviser
utilizes certain reports and statistics from a wide variety of sources,
including brokers and dealers who may execute portfolio transactions for
each Fund and for clients of the Adviser, but conclusions are based
primarily on investigations and critical analyses by its own research
specialists. The Adviser's international investment management team
travels the world, researching hundreds of companies.
Certain investments may be appropriate for a Fund and also for other
clients advised by the Adviser. Investment decisions for the Funds and
other clients are made with a view to achieving their respective investment
objectives and after consideration of such factors as their current
holdings, availability of cash for investment and the size of their
investments generally. Frequently, a particular security may be bought or
sold for only one client or in different amounts and at different times for
more than one but less than all clients. Likewise, a particular security
may be bought for one or more clients when one or more other clients are
selling the security. In addition, purchases or sales of the same security
may be made for two or more clients on the same date. In such event, such
transactions will be allocated among the clients in a manner believed by
the Adviser to be equitable to each. In some cases, this procedure could
have an adverse effect on the price or amount of the securities purchased
or sold by a Fund.
Purchase and sale orders for a Fund may be combined with those of
other clients of the Adviser in the interest of achieving the most
favorable net results for that Fund.
The Investment Management Agreements with the Adviser (the
"Agreements") for Global Small Company Fund and Global Income Fund dated
September 3, 1991 and September 7, 1993, respectively, were approved by
the Directors on September 7, 199 4 . Each Agreement will continue in
effect until September 30, 199 5 and from year to year thereafter
only if its continuance is approved annually by the vote of a majority of
those Directors who are not parties to the Agreement or interested persons
of the Adviser or the Corporation, cast in person at a meeting called for
the purpose of voting on such approval, and by vote either of the Directors
or of the outstanding voting securities of the respective Fund. Each
Agreement may be terminated at any time without payment of penalty by
either party on sixty days written notice, and automatically terminates in
the event of its assignment.
Under each Agreement, the Adviser regularly provides a Fund with
continuing investment management for the Fund's portfolio consistent with
the Fund's investment objective, policies and restrictions and determines
what securities shall be purchased for the portfolio of the Fund, what
portfolio securities shall be held or sold by the Fund, and what portion of
the Fund's assets shall be held uninvested, subject always to the
provisions of the Corporation's Articles of Incorporation and By-Laws, of
the 1940 Act and the Internal Revenue Code of 1986 and to the Fund's
investment objectives, policies and restrictions, as each may be amended,
and subject, further, to such policies and instructions as the Directors
may from time to time establish.
Under each Agreement, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for the Fund's
operations as an open-end investment company including, but not limited to,
preparing reports and notices to the Directors and shareholders;
supervising, negotiating contractual arrangements with, and monitoring
various third-party service providers to the Fund (such as the Fund's
transfer agent, pricing agents, custodian, accountants and others);
preparing and making filings with the SEC and other regulatory agencies;
assisting in the preparation and filing of the Fund's federal, state and
local tax returns; preparing and filing the Fund's federal excise tax
returns; assisting with investor and public relations matters; monitoring
the valuation of securities and the calculation of net asset value;
monitoring the registration of shares of the Fund under applicable federal
and state securities laws; maintaining the Fund's books and records to the
extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting
and legal issues; establishing and monitoring the Fund's operating budget;
processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Directors.
For these services, Global Small Company Fund pays the Adviser an
annual fee equal to 1.10% of the average daily net assets of such Fund.
Global Income Fund pays the Adviser an annual fee equal to 0.75 of 1.00% of
the first $1 billion of average daily net assets of such Fund and 0.70 of
1.00% of such net assets in excess of $1 billion. Prior to September 7,
1993, Global Income Fund paid a fee equal to 0.75 of 1.00% of average daily
net assets under an Agreement dated March 17, 1992. The fee is payable
monthly, provided each Fund will make such interim payments as may be
requested by the Adviser not to exceed 75% of the amount of the fee then
accrued on the books of the Fund and unpaid. The Adviser has agreed, with
respect to Global Income Fund, not to impose all or a portion of its
management fee and to maintain the annualized expenses of the Fund at not
more than ____% of average daily net assets of the Fund until __________.
For the fiscal year ended October 31, 1992, with respect to
Global Small Company Fund , the Adviser did not impose a portion of its
management fee amounting to $419,993 and the portion imposed amounted to
$24,173. For the fiscal year ended October 31, 1993, the Adviser did not
impose a portion of its management fee amounting to $494,930 and the
portion imposed amounted to $573,589. For the fiscal year ended October
31, 1994, the Adviser did not impose a portion of its management fee
amounting to $160,728 and the amount imposed amounted to
$2,497,457. For the fiscal year ended October 31, 1992, with
respect to Global Income Fund , the Adviser did not impose a portion of
its management fee amounting to $1,693,384 and the portion imposed amounted
to $3,787,344. For the fiscal year ended October 31, 1993, the Adviser did
not impose a portion of its management fee amounting to $1,221,474 and the
portion imposed amounted to $6,856,777. For the fiscal year ended
October 31, 1994, the Adviser did not impose a portion of its management
fee amounting to $1,176,118 and the portion imposed amounted to
$4,625,076.
The Adviser pays the compensation and expenses except those of
attending Board and committee meetings outside New York, New York and
Boston, Massachusetts of all Directors, officers and executive employees of
the Corporation affiliated with the Adviser and makes available, without
expense to either Fund, the services of such directors, officers and
employees as may duly be elected officers, subject to their individual
consent to serve and to any limitations imposed by law, and provides the
Funds' office space and facilities.
Under each Agreement, a Fund is responsible for all of its other
expenses including: organization expenses; fees and expenses incurred in
connection with membership in investment company organizations; broker's
commissions; legal, auditing and accounting expenses; taxes and
governmental fees; the fees and expenses of the transfer agent; the cost of
preparing share certificates and any other expenses, including clerical
expenses of issue, redemption or repurchase of shares; the expenses of and
the fees for registering or qualifying securities for sale; the fees and
expenses of the Directors, officers and employees who are not affiliated
with the Adviser; the cost of printing and distributing reports and notices
to shareholders; and the fees and disbursements of custodians. A Fund may
arrange to have third parties assume all or part of the expenses of sale,
underwriting and distribution of shares of the Fund. Each Fund is also
responsible for its expenses incurred in connection with litigation,
proceedings and claims and the legal obligation it may have to indemnify
its officers and Directors with respect thereto. The custodian agreement
provides that the Custodian shall compute each Fund's net asset value.
Each Agreement expressly provides that the Adviser shall not be required to
pay a pricing agent of a Fund for portfolio pricing services, if any.
The Adviser has agreed in each Agreement to reimburse a Fund for
annual expenses to the extent required by the lowest expense limitations
imposed by any states in which the Corporation is at the time offering a
Fund's shares for sale, although no payments are required to be made by the
Adviser pursuant to this reimbursement provision in excess of the annual
fee paid by the Fund to the Adviser. Management has been advised that the
lowest of such limitations is presently 2 1/2% of such net assets up to $30
million 2% of the next $70 million of such net assets and 1 1/2% of such
net assets in excess of that amount. Certain expenses such as brokerage
commissions, taxes, extraordinary expenses and interest are excluded from
such limitations, and other expenses may be excluded from time to time. If
reimbursement is required, it will be made as promptly as practicable after
the end of the Fund's fiscal year. However, no fee will be imposed by the
Adviser during any fiscal year which will cause year-to-date expenses to
exceed the cumulative pro-rata expense limitation at the time of such
payment.
Each Agreement also provides that the Corporation and a Fund may use
any name derived from the name "Scudder, Stevens & Clark" only as long as
the Agreement or any extension, renewal or amendment thereof remains in
effect.
In reviewing the terms of each Agreement and in discussions with the
Adviser concerning such Agreement, the Directors who are not "interested
persons" of the Corporation have been represented by independent counsel at
the relevant Fund's expense.
Each Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which the Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless
disregard by the Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian bank. It
is the Adviser's opinion that the terms and conditions of those
transactions which have occurred were not influenced by existing or
potential custodial or other Fund relationships.
None of the officers or Directors may have dealings with the Funds as
principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Funds.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
Position with
Underwriter,
Position Principal Scudder Investor
Name and Address with Fund Occupation** Services, Inc.
- ---------------- ---------- ------------ ------------------
<C> <C> <C> <C>
Edmond D. Villani++*# Chairman of the President and --
Board and Managing Director
Director of Scudder,
Stevens & Clark,
Inc.
Nicholas Bratt++*#@ President- Managing Director --
Scudder Short of Scudder,
Term Global Stevens & Clark,
Income Fund, Inc.
Scudder
International
Bond Fund and
Scudder Global
Small Company
Fund and
Director
Daniel Pierce*+ Vice President Chairman of the Vice President,
and Director Board & Managing Director and
Director of Assistant
Scudder, Stevens & Treasurer
Clark, Inc.
Paul Bancroft III Director Venture Capitalist --
1120 Cheston and Consultant
Lane
Queenstown, MD
Thomas J. Devine Director Consultant --
641 Lexington Avenue
New York, NY
William H. Gleysteen, Director President, The --
Jr. Japan
333 East 47th Street Society, Inc.;
New York, NY 10017 Vice
President of
Studies,
Council on Foreign
Relations (until
1989)
William H. Luers Director President, --
993 Fifth Avenue Metropolitan
New York, NY 10028 Museum of Art
(1986 until
present)
Robert G. Stone, Jr. Director Chairman of the --
69 Clapboard Ridge Board &
Rd. Director, Kirby
Greenwich, CT 06830 Corporation
Robert W. Lear Honorary Executive-in-Resid --
429 Silvermine Road Director ence
New Canaan, Ct Columbia
University
Graduate School of
Business
Carol L. Franklin++ Vice Principal of --
President- Scudder,
Scudder Stevens & Clark,
Global Small Inc.
Company Fund
Jerard K. Hartman++ Vice Managing Director --
President of
Scudder, Stevens &
Clark, Inc.
William E. Holzer++@ President- Managing Director --
Scudder of
Global Fund Scudder, Stevens &
Clark, Inc.
Thomas W. Joseph+ Vice Principal Vice
President of Scudder, President.
Stevens Director,
& Clark, Inc. Treasurer &
Assistant
Clerk
David S. Lee+ Vice Managing Director President,
President of Scudder, Assistant
and Assistant Stevens & Treasurer
Treasurer Clark, Inc. and Director
Douglas M. Loudon++ Vice Managing Director Senior Vice
President of President
Scudder, Stevens &
Clark, Inc.
Thomas F. McDonough+ Vice Principal of Clerk
President Scudder, Stevens &
and Secretary Clark, Inc.
Pamela A. McGrath+ Vice Principal of --
President Scudder,
and Treasurer Stevens & Clark,
Inc.
Gerald J. Moran++ Vice Principal --
President of Scudder,
Stevens &
Clark, Inc.
Edward J. O'Connell++ Vice Principal of Assistant
President and Scudder, Treasurer
Assistant Stevens & Clark,
Treasurer Inc.
Juris Padegs++ Vice Managing Director Vice President
President of and Director
and Assistant Scudder, Stevens &
Secretary Clark, Inc.
Kathryn L. Quirk++ Vice Managing Director Vice President
President of Scudder,
and Assistant Stevens &
Secretary Clark, Inc.
Cornelia M. Small++ Vice Managing Director --
President of
Scudder, Stevens &
Clark, Inc.
Lawrence Teitelbaum+ Vice Principal of --
President Scudder,
Stevens & Clark,
Inc.;
Senior Portfolio
Manager,
Merrill Lynch
Asset
Management, from
1986
to 1993
Coleen Downs Dinneen+ Assistant Vice President of Assistant Clerk
Secretary Scudder, Stevens &
Clark, Inc.
* Messrs. Villani, Bratt and Pierce are considered by the Corporation and
its counsel to be persons who are "interested persons" of the Adviser or
of the Corporation (within the meaning of the 1940 Act).
** Unless otherwise stated, all the Directors and officers have been
associated with their respective companies for more than five years, but
not necessarily in the same capacity.
# Messrs. Villani and Bratt are members of the Executive Committee, which
may exercise powers of the Directors when they are not in session.
@ The President of a series shall have the status of Vice President of the
Corporation.
+ Address: Two International Place , Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
</TABLE>
Certain accounts for which the Adviser acts as investment adviser
owned _______ shares in the aggregate of Global Small Company Fund, or
____% of the outstanding shares on January 31, 199 5 . The Adviser
may be deemed to be the beneficial owner of such shares of Global Small
Company Fund, but disclaims any beneficial ownership therein.
As of January 31, 1995 , _______ in the aggregate, ____% of the
outstanding shares of Global Income Fund, were held in the name of Charles
Schwab & Co., Inc., who may be deemed to be the beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
As of January 31, 1995 all Directors and officers as a group
owned beneficially (as the term is defined in Section 13(d) under the
Securities Exchange Act of 1934) ______ shares, or ____% of the shares of
Global Small Company Fund outstanding on such date.
As of January 31, 1995 all Directors and Officers as a group
owned beneficially (as the term is defined in Section 13(d) under the
Securities Exchange Act of 1934) less than 1% of the shares of Global
Income Fund outstanding on such date.
Except as stated above, to the best of the Corporation's knowledge, as
of January 31, 1995 , no person owned beneficially more than 5% of
either Fund's outstanding shares.
The Directors and officers of the Corporation also serve in similar
capacities with other Scudder Funds.
REMUNERATION
Several of the officers and Directors of the Corporation may be
officers or employees of the Adviser, Scudder Investor Services, Inc.,
Scudder Service Corporation or Scudder Trust Company, from whom they
receive compensation, as a result of which they may be deemed to
participate in the fees paid by each Fund. The Funds pay no direct
remuneration to any officer of the Corporation. However, each of the
Directors who is not affiliated with the Adviser receives from the
Corporation an annual Director's fee of $4,000 plus $400 for attending each
Directors' meeting, audit committee meeting or meeting held for the purpose
of considering arrangements between the Corporation on behalf of a Fund and
the Adviser or any of its affiliates. Each unaffiliated Director also
receives $150 per committee meeting attended other than those set forth
above. For the fiscal year ended October 31, 1994 , Directors' fees
amounted to $42,934 for Global Small Company Fund, $42,932
for Global Income Fund. The following Compensation Table provides in
tabular form the following data.
Column (1) All Directors who receive compensation from the Corporation.
Column (2) Aggregate compensation received by a Director from all series of
the Corporation - Scudder Global Fund, Inc., which is comprised of Scudder
Global Fund, Scudder International Bond Fund, Scudder Short Term Global
Income Fund, Scudder Global Small Company Fund and Scudder Emerging Markets
Income Fund.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to
be paid by the Corporation. Scudder Global Fund, Inc. does not pay its
Directors such benefits.
Column (5) Total compensation received by a Director from Scudder Global
Fund, Scudder International Bond Fund, Scudder Short Term Global Income
Fund, Scudder Global Small Company Fund and Scudder Emerging Markets Income
Fund, plus compensation received from all funds managed by Scudder for
which a Director serves. The total number of funds from which a Director
receives such compensation is also provided in column (5).
<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1994
(1) (2) (3) (4) (5)
Aggregate Compensation
from Scudder Global
Fund, Inc. (consisting
of five funds: Scudder
Global Fund, Scudder Total
International Bond Pension or Compensation
Fund, Scudder Short Retirement From Scudder
Term Global Income Benefits Estimated Global Fund,
Fund, Scudder Global Accrued As Annual Inc. and
Name of Small Company Fund and Part of Benefits Fund Complex
Person, Scudder Emerging Fund Upon Paid to
Position Markets Income Fund) Expenses Retirement Director
- ------------ ---------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Paul Bancroft $45,663 N/A N/A $ 120,238
III, (14 funds)
Director
Thomas J. $45,663 N/A N/A $ 115,656
Devine, (16 funds)
Director
William H. $45,313 N/A N/A
Gleysteen,
Jr.,
Director
William H. $45,313 N/A N/A
Luers,
Director
Robert G. $45,663 N/A N/A (15 funds)
Stone, Jr.,
Director
</TABLE>
DISTRIBUTOR
The Corporation has an underwriting agreement with Scudder Investor
Services, Inc. (the "Distributor"), a Massachusetts corporation, which is a
wholly-owned subsidiary of Scudder, Stevens & Clark, Inc., a Delaware
corporation. The Corporation's underwriting agreement dated July 24, 1986
will remain in effect until September 30, 1994 and from year to year
thereafter only if its continuance is approved annually by a majority of
the members of the Directors who are not parties to such agreement or
interested persons of any such party and by vote either of a majority of
the Directors or a majority of the outstanding voting securities of the
Corporation. The underwriting agreement was most recently approved by the
Directors on September 7, 1994 .
Under the principal underwriting agreement, the Corporation is
responsible for: the payment of all fees and expenses in connection with
the preparation and filing with the SEC of the Corporation's registration
statement and prospectus and any amendments and supplements thereto, the
registration and qualification of shares for sale in the various states,
including registering the Corporation as a broker/dealer in various states
as required; the fees and expenses of preparing, printing and mailing
prospectuses (see below for expenses relating to prospectuses paid by the
Distributor), notices, proxy statements, reports or other communications
(including newsletters) to shareholders of each Fund; the cost of printing
and mailing confirmations of purchases of shares and the prospectuses
accompanying such confirmations; any issue taxes or any initial transfer
taxes; any of shareholder toll-free telephone charges and expenses of
shareholder service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes;
and any of the cost of computer terminals used by both the Corporation and
the Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of Fund shares
to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of each Fund to the
public. The Distributor will pay all fees and expenses in connection with
its qualification and registration as a broker or dealer under federal and
state laws, any of the cost of toll-free telephone service and expenses of
service representatives, any of the cost of computer terminals, and of any
activity which is primarily intended to result in the sale of shares issued
by the Corporation.
NOTE: Although neither Fund currently has a 12b-1 Plan and shareholder
approval would be required in order to adopt one, the underwriting
agreement provides that each Fund will also pay those fees and
expenses permitted to be paid or assumed by a Fund pursuant to a
12b-1 Plan, if any, adopted by the Fund, notwithstanding any other
provision to the contrary in the underwriting agreement, and the
Fund or a third party will pay those fees and expenses not
specifically allocated to the Distributor in the underwriting
agreement.
As agent, the Distributor currently offers each Fund's shares on a
continuous basis to investors in all states. The underwriting agreement
provides that the Distributor accepts orders for shares at net asset value
as no sales commission or load is charged to the investor. The Distributor
has made no firm commitment to acquire shares of the Corporation.
TAXES
(See "Distribution and performance information--Dividends and capital gains
distributions" and "Transaction information--Tax information,
Tax identification number" in the Funds' prospectuses.)
Each of the Funds has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and has qualified as such since its inception. Each Fund
intends to continue to qualify for such treatment. Such qualification does
not involve governmental supervision or management of investment practices
or policy.
As a regulated investment company qualifying under Subchapter M of the
Code, each Fund is required to distribute to its shareholders at least 90
percent of its investment company taxable income (including net short-term
capital gain) and generally is not subject to federal income tax to the
extent that it distributes annually its investment company taxable income
and net realized capital gains in the manner required under the Code.
Global Small Company Fund and Global Income Fund normally intend to
distribute at least annually all of their respective investment company
taxable income and net realized capital gains and therefore do not expect
to pay federal income tax, although in certain circumstances the Funds may
determine that it is in the interest of shareholders to distribute less
than that amount.
Each Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of the Fund's ordinary income for the calendar
year, at least 98% of the excess of its capital gains over capital losses
(adjusted for certain ordinary losses) realized during the one-year period
ending October 31 during such year, and all ordinary income and capital
gains for prior years that were not previously distributed.
Investment company taxable income generally includes dividends,
interest, net short-term capital gains in excess of net long-term capital
losses, and certain foreign currency gains, if any, less expenses and
certain foreign currency losses, if any. Net realized capital gains for a
fiscal year are computed by taking into account any capital loss
carryforward of the Fund.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by a Fund for reinvestment,
requiring federal income taxes to be paid thereon by the Fund, the Fund
intends to elect to treat such capital gains as having been distributed to
shareholders. As a result, each shareholder will report such capital gains
as long-term capital gains, will be able to claim his/her share of federal
income taxes paid by the Fund on such gains as a credit against his/her own
federal income tax liability, and will be entitled to increase the adjusted
tax basis of his/her Fund shares by the difference between his/her pro rata
share of such gains and his/her tax credit. If a Fund makes this election,
it may not be treated as having met the excise tax distribution
requirement.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are expected to comprise some
portion of Global Small Company Fund's gross income. To the extent that
such dividends constitute any of the Fund's gross income, any of the income
distributions of the Fund may be eligible for the deduction for dividends
received by corporations. Shareholders will be informed of the portion of
dividends which so qualify. The dividends-received deduction is reduced to
the extent that either the Fund shares, or the underlying shares of stock
held by the Fund, with respect to which dividends are received, are treated
as debt-financed under federal income tax law and is eliminated if the
shares are deemed to have been held by the shareholders or the Fund, as the
case may be, for less than 46 days.
Since no portion of Global Income Fund's income is expected to be
comprised of dividends from domestic corporations, none of the Fund's
income distributions is expected to be eligible for the deduction for
dividends received by corporations.
Distributions of the excess of net long-term capital gain over net
short-term capital loss which a Fund designates as "capital gains
dividends" are taxable to shareholders as long-term capital gain,
regardless of the length of time the shares of a Fund have been held by
such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of
shares held at the time of redemption for six months or less from the date
of their purchase will be treated as a long-term capital loss to the extent
of any amounts treated as distributions of long-term capital gain during
such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in
shares or in cash. Shareholders electing to receive distributions in the
form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share
on the reinvestment date.
All distributions of investment company taxable income and net
realized capital gain, whether received in shares or in cash, must be
reported by each shareholder on his or her federal income tax return.
Dividends and capital gains distributions declared in October, November or
December and payable to shareholders of record in such a month will be
deemed to have been received by shareholders on December 31 if paid during
January of the following year. Redemptions of shares, including exchanges
for shares of another Scudder fund, may result in tax consequences (gain or
loss) to the shareholder and are also subject to these reporting
requirements.
An individual may make a deductible IRA contribution of up to $2,000
or, if less, the amount of the individual's earned income for any taxable
year only if (i) neither the individual nor his or her spouse (unless
filing separate returns) is an active participant in an employer's
retirement plan, or (ii) the individual (and his or her spouse, if
applicable) has an adjusted gross income below a certain level ($40,000 for
married individuals filing a joint return, with a phase-out of the
deduction for adjusted gross income between $40,000 and $50,000; $25,000
for a single individual, with a phase-out for adjusted gross income between
$25,000 and $35,000). However, an individual not permitted to make a
deductible contribution to an IRA for any such taxable year may nonetheless
make nondeductible contributions up to $2,000 to an IRA (up to $2,250 to
IRAs for an individual and his or her nonearning spouse) for that year.
There are special rules for determining how withdrawals are to be taxed if
an IRA contains both deductible and nondeductible amounts. In general, a
proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made
to a spousal IRA even if the spouse has earnings in a given year if the
spouse elects to be treated as having no earnings (for IRA contribution
purposes) for the year.
Distributions by a Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value
below a shareholder's cost basis, such distribution would nevertheless be
taxable to the shareholder as ordinary income or capital gain as described
above, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, investors should consider the
tax implications of buying shares just prior to a distribution. The price
of shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then
receive a partial return of capital upon the distribution, which will
nevertheless be taxable to them.
Dividend and interest income received by a Fund from sources outside
the U.S. may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
U.S. may reduce or eliminate these foreign taxes, however, and foreign
countries generally do not impose taxes on capital gains in respect of
investments by foreign investors.
Each Fund intends to qualify for and may make the election permitted
under Section 853 of the Code so that shareholders may (subject to
limitations) be able to claim a credit or deduction on their federal income
tax returns for, and will be required to treat as part of the amounts
distributed to them, their pro rata portion of qualified taxes paid by the
Fund to foreign countries (which taxes relate primarily to investment
income). Each Fund may make an election under Section 853 of the Code,
provided that more than 50% of the value of the total assets of the Fund at
the close of the taxable year consists of securities in foreign
corporations. The foreign tax credit available to shareholders is subject
to certain limitations imposed by the Code.
If Global Small Company Fund invests in stock of certain foreign
investment companies, the Fund may be subject to U.S. federal income
taxation on any of any "excess distribution" with respect to, or gain from
the disposition of, such stock. The tax would be determined by allocating
such distribution or gain ratably to each day of the Fund's holding period
for the stock. The distribution or gain so allocated to any taxable year
of the Fund, other than the taxable year of the excess distribution or
disposition, would be taxed to the Fund at the highest ordinary income rate
in effect for such year, and the tax would be further increased by an
interest charge to reflect the value of the tax deferral deemed to have
resulted from the ownership of the foreign company's stock. Any amount of
distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable
income and, accordingly, would not be taxable to the Fund to the extent
distributed by the Fund as a dividend to its shareholders.
Proposed regulations have been issued which will allow Global Small
Company Fund to make an election to mark to market its shares of these
foreign investment companies in lieu of being taxed in the manner described
above. At the end of each taxable year to which the election applies, the
Fund will include in its income the amount by which the fair market value
of the foreign company's stock exceeds the Fund's adjusted basis in these
shares. No mark to market losses may be recognized. Distributions and
gain on dispositions of such stock will not be subject to a fund level tax
to the extent distributed by the Fund as a dividend to its shareholders.
The Fund intends to make this election if it is determined to be
appropriate and in the best interest of the shareholders.
Equity options (including options on stock and options on narrow-based
stock indices) written or purchased by Global Small Company Fund and
over-the-counter options on debt securities written or purchased by either
Fund will be subject to tax under Section 1234 of the Code. In general, no
loss is recognized by a Fund upon payment of a premium in connection with
the purchase of a put or call option. The character of any gain or loss
recognized (i.e., long-term or short-term) will generally depend in the
case of a lapse or sale of the option on a Fund's holding period for the
option and in the case of an exercise of the option on a Fund's holding
period for the underlying stock. The purchase of a put option may
constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying security or
substantially identical security in a Fund's portfolio. If a Fund writes a
put or call option, no gain is recognized upon its receipt of a premium.
If the option lapses or is closed out, any gain or loss is treated as a
short-term capital gain or loss. If a call option written by the Fund is
exercised any resulting gain or loss is a short-term or long-term capital
gain or loss depending on the holding period of the underlying security.
The exercise of a put option written by a Fund is not a taxable transaction
for the Fund.
Many futures contracts (including foreign currency futures contracts)
entered into by a Fund, certain forward foreign currency contracts, and all
listed nonequity options written or purchased by a Fund (including options
on debt securities, options on futures contracts, options on securities
indices and options on broad-based stock indices) will be governed by
Section 1256 of the Code. Absent a tax election to the contrary, gain or
loss attributable to the lapse, exercise or closing out of any such
position generally will be treated as 60% long-term and 40% short-term
capital gain or loss, and on the last trading day of a Fund's fiscal year,
all outstanding Section 1256 positions will be marked-to-market (i.e.
treated as if such positions were closed out at their closing price on such
day), with any resulting gain or loss recognized as 60% long-term and 40%
short-term capital gain or loss. Under certain circumstances, entry into a
futures contract to sell a security may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying security or a substantially identical security in a Fund's
portfolio. Under Section 988 of the Code, discussed below, foreign
currency gains or loss from foreign currency related forward contracts,
certain futures and similar financial instruments entered into or acquired
by a Fund will be treated as ordinary income or loss.
Subchapter M requires that a Fund realize less than 30% of its annual
gross income from the sale or other disposition of stock, securities and
certain options, futures and forward contracts held for less than three
months. A Fund's options, futures and forward transactions may increase
the amount of gains realized by the Fund that are subject to this 30%
limitation. Accordingly, the amount of such transactions that a Fund may
undertake may be limited.
Positions of Global Small Company Fund which consist of at least one
stock and at least one stock option or other position with respect to a
related security which substantially diminishes the Fund's risk of loss
with respect to such stock could be treated as a "straddle" which is
governed by Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in the holding periods of stock or
securities and conversion of short-term capital losses into long-term
capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by the Fund.
Positions of a Fund which consist of at least one position not
governed by Section 1256 and at least one futures contract or forward
contract or nonequity option governed by Section 1256 which substantially
diminishes the Fund's risk of loss with respect to such other position will
be treated as a "mixed straddle." Although mixed straddles are subject to
the straddle rules of Section 1092 of the Code, certain tax elections exist
for them which reduce or eliminate the operation of these rules. Each Fund
will monitor its transactions in options and futures and may make certain
tax elections in connection with these investments.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time a Fund actually
collects such receivables, or pays such liabilities, generally are treated
as ordinary income or ordinary loss. Similarly, on disposition of debt
securities denominated in a foreign currency and on disposition of certain
futures and forward contracts, gains or losses attributable to fluctuations
in the value of foreign currency between the date of acquisition of the
security or contract and the date of disposition are also treated as
ordinary gain or loss. These gains or losses, referred to under the Code
as "Section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
If Global Small Company Fund invests in certain high yield original
issue discount obligations issued by corporations, any of the original
issue discount accruing on the obligation may be eligible for the deduction
for dividends received by corporations. In such event, dividends of
investment company taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of accrued
original issue discount, may be eligible for this deduction for dividends
received by corporations if so designated by the Fund in a written notice
to shareholders.
Each Fund will be required to report to the IRS all distributions of
investment company taxable income and capital gains as well as gross
proceeds from the redemption or exchange of Fund shares, except in the case
of certain exempt shareholders. Under the backup withholding provisions of
Section 3406 of the Code, distributions of investment company taxable
income and capital gains and proceeds from the redemption or exchange of
the shares of a regulated investment company may be subject to withholding
of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required
if a Fund is notified by the IRS or a broker that the taxpayer
identification number furnished by the shareholder is incorrect or that the
shareholder has previously failed to report interest or dividend income.
If the withholding provisions are applicable, any such distributions and
proceeds, whether taken in cash or reinvested in additional shares, will be
reduced by the amounts required to be withheld.
Shareholders of each Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's
shares.
Each distribution is accompanied by a brief explanation of the form
and character of the distribution. In January of each year the Corporation
issues to each shareholder a statement of the federal income tax status of
all distributions.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign
tax consequences of ownership of shares of a Fund, including the
possibility that such a shareholder may be subject to a U.S. withholding
tax at a rate of 30% (or at a lower rate under an applicable income tax
treaty) on amounts constituting ordinary income received by him or her,
where such amounts are treated as income from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application
of the provisions of tax law described in this statement of additional
information in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
(See "Fund organization--Investment adviser" in the Funds' prospectuses)
Brokerage
To the maximum extent feasible the Adviser places orders for portfolio
transactions through the Distributor which in turn places orders on behalf
of a Fund with other brokers and dealers. The Distributor receives no
commission, fees or other remuneration from either of the Funds for this
service. Allocation of brokerage is supervised by the Adviser.
Purchases and sales of fixed-income securities are generally placed by
the Adviser with primary market makers for these securities on a net basis,
without any brokerage commission being paid by the Fund. These
transactions do, however, involve transaction costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid
and asked prices. Purchases of underwritten issues may be made which will
include an underwriting fee paid to the underwriter.
The primary objective of the Adviser in placing orders for the
purchase and sale of securities for each Fund's portfolio is to obtain the
most favorable net results, taking into account such factors as price,
commission (which is negotiable in the case of U.S. national securities
exchange transactions but which is generally fixed in the case of foreign
exchange transactions), size of order, difficulty of execution and skill
required of the executing broker/dealer. The Adviser seeks to evaluate the
overall reasonableness of brokerage commissions paid through the
familiarity of the Distributor with commissions charged on comparable
transactions, as well as by comparing commissions paid by a Fund to
reported commissions paid by others, if available. The Adviser reviews on
a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders
with brokers and dealers who supply market quotations to the Funds'
custodian for appraisal purposes, or who supply research market and
statistical information to the Funds or the Adviser. The term "research,
market and statistical information" includes advice as to the value of
securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, and furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts. The Adviser is not authorized when placing
portfolio transactions for a Fund to pay a brokerage commission in excess
of that which another broker might have charged for executing the same
transaction solely on account of the receipt of research, market or
statistical information. The Adviser does not place orders with brokers or
dealers on the basis that the broker or dealer has or has not sold a Fund's
shares. Subject also to obtaining the most favorable net results, the
Adviser may place brokerage transactions through the Custodian and a credit
against the custodian fee due, equal to one-half of the commission on any
such transaction will be given on any such transaction. Except for
implementing the policy stated above, there is no intention to place
portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Funds and to the Adviser, it is
the opinion of the Adviser that such information will only supplement its
own research effort since the information must still be analyzed, weighed,
and reviewed by the Adviser's staff. Such information may be useful to the
Adviser in providing services to clients other than the Funds, and not all
such information is used by the Adviser in connection with the Funds.
Conversely, such information provided to the Adviser by brokers and dealers
through whom other clients of the Adviser effect securities transactions
may be useful to the Adviser in providing services to the Funds.
In the fiscal years ended October 31, 1994, 1993 and 1992, Global
Small Company Fund paid brokerage commissions of $730,119, $507,871 and
$214,903, respectively. In the fiscal year ended October 31, 1994, the
Fund paid brokerage commissions of $489,523 (67.04% of the total brokerage
commissions), resulting from orders placed, consistent with the policy of
seeking to obtain the most favorable net results, for transactions placed
with brokers and dealers who provided supplementary research, market and
statistical information to the Corporation or Adviser. The amount of such
transactions aggregated $149,363,282 (59.81% of all brokerage
transactions). The balance of such brokerage was not allocated to any
particular broker or dealer or with regard to the above-mentioned or any
other special factors.
In the fiscal year ended October 31, 1994, Global Income Fund paid
brokerage commissions of $357,605, which was not allocated to any
particular broker or dealer or with regard to the above mentioned or any
other special factors. In the fiscal years ended October 31, 1993 and
1992, Global Income Fund paid no brokerage commissions.
The Directors intend to review from time to time whether the recapture
for the benefit of a Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally
permissible and advisable.
Portfolio Turnover
Each Fund's average annual portfolio turnover rate is the ratio of the
lesser of sales or purchases to the monthly average value of such
securities owned during the year, excluding from both the numerator and the
denominator all securities with maturities at the time of acquisition of
one year or less. Purchases and sales are made for a Fund's portfolio
whenever necessary, in management's opinion, to meet the Fund's objective.
Global Income Fund's portfolio turnover rates for the fiscal years ended
October 31, 199 4 and 199 3 were 272.4 % and
259.8 %, respectively. Global Small Company Fund's portfolio
turnover rates for the fiscal years ended October 31, 199 4 and
199 3 were 45.8 % and 54.6 %, respectively.
Economic and market conditions have necessitated more active trading,
resulting in a higher portfolio turnover rate for Scudder Short Term Global
Income Fund. A higher rate involves greater transaction costs to the Fund
and may result in the realization of net capital gains, which would be
taxable to shareholders when distributed.
NET ASSET VALUE
The net asset value of shares of each Fund is computed as of the close
of regular trading on the Exchange on each day the Exchange is open for
trading. The Exchange is scheduled to be closed on the following holidays:
New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. Net asset value per share is
determined by dividing the value of the total assets of a Fund, less all
liabilities, by the total number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean
between the most recent bid quotation and the most recent asked quotation
(the "Calculated Mean"). Lacking a Calculated Mean, the security is valued
at the most recent bid quotation. An equity security which is traded on
the National Association of Securities Dealers Automated Quotation
("NASDAQ") system is valued at its most recent sale price. Lacking any
sales, the security is valued at the high or "inside" bid quotation. The
value of an equity security not quoted on the NASDAQ System, but traded in
another over-the-counter market, is its most recent sale price. Lacking
any sales, the security is valued at the Calculated Mean. Lacking a
Calculated Mean, the security is valued at the most recent bid quotation.
Debt securities, other than short-term securities, are valued at
prices supplied by each Fund's pricing agent(s) which reflect broker/dealer
supplied valuations and electronic data processing techniques. Short-term
securities with remaining maturities of sixty days or less are valued by
the amortized cost method, which the Board believes approximates market
value. If it is not possible to value a particular debt security pursuant
to these valuation methods, the value of such security is the most recent
bid quotation supplied by a bona fide marketmaker. If it is not possible
to value a particular debt security pursuant to the above methods, the
Adviser may calculate the price of that debt security, subject to
limitations established by the Board.
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on
such exchange. Lacking any sales, the options contract is valued at the
Calculated Mean. Lacking any Calculated Mean, the options contract is
valued at the most recent bid quotation in the case of a purchased options
contract, or the most recent asked quotation in the case of a written
options contract. An options contract on securities, currencies and other
financial instruments traded over-the-counter is valued at the most recent
bid quotation in the case of a purchased options contract and at the most
recent asked quotation in the case of a written options contract. Futures
contracts are valued at the most recent settlement price. Foreign currency
exchange forward contracts are valued at the value of the underlying
currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of each Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all
available information. The value of other portfolio holdings owned by the
Fund is determined in a manner which, in the discretion of the Valuation
Committee most fairly reflects fair market value of the property on the
valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed
("Local Currency"), the value of these portfolio assets in terms of U.S.
dollars is calculated by converting the Local Currency into U.S. dollars at
the prevailing currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Financial Highlights of each Fund included in each Fund's
Prospectus and the Financial Statements incorporated by reference in this
Statement of Additional Information have been so included or incorporated
by reference in reliance on the report of Coopers & Lybrand L.L.P. ,
One Post Office Square, Boston, MA 02109, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
Other Information
Many of the investment changes in a Fund will be made at prices
different from those prevailing at the time such changes may be reflected
in a regular report to shareholders of the Fund. These transactions will
reflect investment decisions made by the Adviser in light of the investment
objectives and policies of each Fund, and such factors as its other
portfolio holdings and tax considerations should not be construed as
recommendations for similar action by other investors.
The CUSIP number of Global Small Company Fund is 811150-40-8.
The CUSIP number for Global Income Fund is 811150-30-9.
Each Fund's fiscal year end is October 31.
The law firm of Dechert Price & Rhoads is counsel for the Funds.
Costs of $ 51,807 incurred by Global Small Company Fund in
conjunction with its organization are amortized over the five year period
beginning September 10, 1991.
Costs of $ 58,530 incurred by Global Income Fund in conjunction
with its organization are amortized over the five year period beginning
March 1, 1991.
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, is employed as custodian for the Funds. Brown Brothers Harriman &
Co. has entered into agreements with foreign subcustodians approved by the
Directors of the Corporation pursuant to Rule 17f-5 of the Investment
Company Act.
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts
02107-2291, a wholly-owned subsidiary of the Adviser, is the transfer and
dividend paying agent for the Funds. Scudder Service Corporation also
serves as shareholder service agent and provides subaccounting and
recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. Global Small Company Fund pays Scudder Service
Corporation an annual fee of $17.55 for each account maintained for a
participant. Global Income Fund pays Scudder Service Corporation an annual
fee of $25 for each account maintained for a participant. Scudder Service
Corporation charged Global Small Company Fund aggregate fees of
$ 596,637 during the Fund's last fiscal year. Scudder Service
Corporation charged Global Income Fund aggregate fees of $ 1,083,858
during the Fund's last fiscal year.
The Directors of the Corporation have considered the appropriateness
of using this combined Statement of Additional Information for the Funds.
There is a possibility that a Fund might become liable for any
misstatement, inaccuracy, or incomplete disclosure in this Statement of
Additional Information concerning the other Fund.
The Funds' prospectuses and this combined Statement of Additional
Information omit certain information contained in the Registration
Statement which the Corporation has filed with the SEC under the Securities
Act of 1933 and reference is hereby made to the Registration Statement for
further information with respect to each Fund and the securities offered
hereby. This Registration Statement is available for inspection by the
public at the SEC in Washington, D.C.
FINANCIAL STATEMENTS
Global Small Company Fund
The financial statements, including the Investment Portfolio of Global
Small Company Fund, together with the Report of Independent Accountants,
and Financial Highlights, are incorporated by reference and attached hereto
on pages 11 through 29 , inclusive, in the Annual Report to
Shareholders of the Fund dated October 31, 199 4 , and are deemed to
be a part if this Statement of Additional Information.
Global Income Fund
The financial statements, including the Investment Portfolio of Global
Income Fund, together with the Report of Independent Accountants, and
Financial Highlights, are incorporated by reference and attached hereto on
pages 9 through 26 , inclusive, in the Annual Report to
Shareholders of the Fund dated October 31, 199 4 , and are deemed to
be a part of this Statement of Additional Information.
APPENDIX
The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds.
Ratings of Municipal and Corporate Bonds
S&P:
Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. Debt
rated AA has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in small degree. Debt rated A
has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating. Debt rated B has a
greater vulnerability to default but currently has the capacity to meet
interest payments and principal repayments. Adverse business, financial,
or economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating. The rating CC typically
is applied to debt subordinated to senior debt that is assigned an actual
or implied CCC rating. The rating C typically is applied to debt
subordinated to senior debt which is assigned an actual or implied CCC-
debt rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are
continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category
is used when interest payments or principal payments are not made on the
date due even if the applicable grace period had not expired, unless S&P
believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty
of position characterizes bonds in this class. Bonds which are rated B
generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest. Bonds which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in default
or have other marked shortcomings. Bonds which are rated C are the lowest
rated class of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Global Small
Company Fund
Annual Report
October 31, 1994
* For investors seeking above-average capital appreciation over the long
term by investing primarily in the equity securities of small
companies located throughout the world.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
11 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
29 Report of Independent Accountants
30 Tax Information
33 Officers and Directors
34 Investment Products and Services
35 How to Contact Scudder
HIGHLIGHTS
* Scudder Global Small Company Fund produced a positive total return of
2.80% for the fiscal year ended October 31, 1994, in spite of
challenging investment conditions.
* The Fund's 12-month total return was enhanced by a weak U.S. dollar
relative to a number of foreign currencies, namely the Japanese yen
and the German mark.
* SAP AG, the Fund's top holding, appreciated a remarkable 232% during
the year.
* Morningstar, an independent analyst of mutual funds, recently awarded
your Fund a **** rating (out of a possible five stars) for the
three-year period ended September 30, 1994. Morningstar proprietary
ratings reflect historical risk-adjusted performance. The ratings are
subject to change every month. Morningstar ratings are calculated from
the Fund's three-year average annual return with appropriate fee
adjustments and a risk factor that reflects fund performance relative
to three-month Treasury bill monthly returns. No more than 22.5% of
the funds in an investment category receive four stars (only ten
percent receive five stars). Past performance is no guarantee of
future results.
LETTER FROM THE FUND'S CHAIRMAN
Dear Shareholders,
The combination of modest global economic growth and low inflation
caused stock prices to move higher in the summer months, and many of the
smaller European markets were up sharply after performing poorly in the
first half of the year. Yet the financial community continues to cast a
wary eye on the prospects for inflation and is taking its cues to a large
extent from central bank activity and the direction of interest rates.
We expect higher interest rates to limit economic growth in the United
States to a more sustainable pace. The U.S. economy may receive some help
from increased exports in 1995, aided by recoveries in Europe and Japan,
and corporate earnings in related industries should improve as a result.
Global economic expansion is also expected to continue at a moderate
overall pace. But the upward pressure on interest rates should continue due
in part to the relative scarcity of capital available to invest in
economies and financial markets. As a result, the world's stock markets are
likely to remain volatile in the near term.
If you have questions about your Fund or your investments, contact a
Scudder Investor Information representative at 1-800-225-2470. Page 35
provides more information on how to contact Scudder. Thank you for choosing
Scudder Global Small Company Fund to help meet your investment needs.
We would also like to take this opportunity to announce that on
October 10, 1994, in keeping with our pioneering tradition in international
investing, we introduced Scudder Greater Europe Growth Fund, a pure no-load
mutual fund, designed to invest both in Western and Eastern Europe. For
more information about Scudder Greater Europe Growth Fund and other
investment products and services, see page 34.
Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Global Small Company Fund
<PAGE>
Scudder Global Small Company Fund
Performance Update as of October 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- ------------------------------------------------------------------
Scudder Global Small Company Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,280 2.80% 2.80%
Life of
Fund* $14,067 40.67% 11.49%
MSCI World Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,765 7.65% 7.65%
Life of
Fund* $13,163 31.63% 9.33%
* The Fund commenced operations on
September 10, 1991. Index comparisons
begin September 30, 1991.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Global Small Company Fund
Year Amount
- --------------------
9/91* 10000
10/91 9770
4/92 10107
10/92 9894
4/93 11558
10/93 13459
4/94 13496
10/94 13837
MSCI World Index
Year Amount
- --------------------
9/91* 10000
10/91 10159
4/92 9696
10/92 9628
4/93 11213
10/93 12228
4/94 12542
10/94 13163
The Morgan Stanley Capital International (MSCI) World
Index is an unmanaged capitalization-weighted measure
of global stock markets including the U.S., Canada,
Europe, Australia, and the Far East. Index returns assume
dividends reinvested net of withholding tax and, unlike
Fund returns, do not reflect any fees or expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly Periods ended October 31
- ----------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1991* 1992 1993 1994
-------------------------------------------------------------------------------
Net Asset Value.... $11.92 $12.05 $16.14 $16.27
Income Dividends... $ -- $ .02 $ .07 $ .18
Capital Gains
Distributions...... $ -- $ -- $ .12 $ .15
Fund Total
Return (%)......... -.67 1.26 36.04 2.80
Index Total
Return (%)......... 1.59 -5.23 27.01 7.65
</TABLE>
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 average annual total return for the one
year and life of Fund would have been approximately 2.74% and 10.86%,
respectively.
Scudder Global Small Company Fund
Portfolio Summary as of October 31, 1994
- ---------------------------------------------------------------------------
Geographical (Excludes 10% Cash Equivalents)
- ---------------------------------------------------------------------------
U.S. & Canada 28% The Fund continues to blend small
Europe 26% company stock investments from the
Japan 21% world's established markets with
Pacific Basin 17% those from developing markets.
Latin America 8%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Sectors (Excludes 10% Cash Equivalents)
- --------------------------------------------------------------------------
Technology 14% During the year, price appreciation
Consumer Discretionary 11% of technology stocks boosted the
Consumer Staples 11% Fund's exposure to the technology
Financial 11% sector.
Manufacturing 11%
Durables 10%
Services Industries 7%
Transportation 5%
Health 5%
Other 15%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------
1. SAP AG
German computer software manufacturer
2. Atmel Corp.
U.S. developer and manufacturer of integrated circuits
3. Tibbett and Britten Group PLC
British transportation services for manufacturing and retail industries
4. Allegheny Ludlum Corp.
Major U.S. stainless steel manufacturer
5. Thomas Nelson, Inc.
U.S. publisher
6. Shohkoh Fund & Co., Ltd.
Japanese finance company for small and medium size firms
7. Nichiei Co., Ltd.
Japanese finance company for small and medium size firms
8. Companhia Cervejaria Brahma
Leading Brazilian beer producer and distributor
9. Bank of Ireland PLC
Bank
10. Takuma Co., Ltd.
Leading Japanese maker of boilers, garbage incinerators and
water treatment plants
SAP AG, which has established itself as a leader in software
applications, was the Fund's largest holding for much of the fiscal year.
For more complete details about the Fund's Investment Portfolio,
see page 11.
A monthly Investment Portfolio Summary is available upon request.
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
For the fiscal year ended October 31, 1994, Scudder Global Small
Company Fund posted a total return of 2.80%, reflecting an increase in
share price from $16.14 a year ago to $16.27 at the end of the period.
Included in your Fund's 12-month return are distributions totaling $0.33
per share ($0.18 in income dividends and $0.15 in capital gains). For the
same period, the unmanaged Morgan Stanley Capital International (MSCI)
World Index produced a total return of 7.65%. The MSCI World Index is
composed of stocks of the world's largest companies, whereas your Fund
concentrates on small-company stocks. Stocks of larger companies tend to
fare better than their small-company counterparts during times of economic
and financial uncertainty, as was the case in early 1994. But several Fund
holdings that were bruised earlier this year have since recovered
significantly. The Fund's total return for the period's final quarter
(4.23% versus 3.09% for the index) reflects not only better absolute
performance, but better relative performance as well.
Interest Rates Rise in the Face of Global Growth
Over the past fiscal year, rising interest rates, a weakening dollar,
and a shrinking supply of global capital for investment roiled financial
markets. Japan's economy remained in recession, but Europe pulled out of
its longest slump since World War II. Here in the United States, the pace
of economic growth increased. Meanwhile, emerging economies, particularly
those in Southeast Asia, continued to grow at a rapid pace. With global
economic activity on the rise, investors are wary of accelerating
inflation, which has dampened enthusiasm for financial investments. In
reality, however, inflation has remained relatively quiescent despite
global growth. While we expect to see prices of certain commodities rise,
corporate efforts to improve productivity, the development of new
technologies, and increased competition stemming from globalization may
limit the extent to which these increases filter through to the broader
economy.
Unlike the European recovery, Japan's recovery has been slow in
coming. We believe improvement is likely to arrive via domestic consumption
(in contrast to Europe's primarily export-driven recovery), as the
constrained Japanese consumer gets a boost from lower taxes and market
deregulation. Hampering growth, however, is the strength of the yen, which
has undermined the global competitiveness of Japan's manufacturing sector.
Japanese manufacturers continue to move their production overseas to more
affordable locations, especially neighboring Asian nations such as China,
Malaysia, and Indonesia. But the flip side of a strong yen is much cheaper
imports. Coupled with recent tax cuts and pent-up consumer demand for
value, imported goods continue to penetrate the Japanese market.
Throughout the fiscal year, Japan maintained a prominent presence in
the portfolio, its weighting rising to a high of 26% in July. By the fiscal
year's end, however, we had reduced the Fund's Japanese position to 21% of
the equity portfolio, due in part to Japan's continued reluctance to
recycle its vast pool of savings sooner to capital-hungry global markets.
In addition, consumer purchases have yet to escalate dramatically despite
lower-cost imports, consequently preventing economic recovery from taking a
firm hold. Against this backdrop, we varied the Fund's array of Japanese
small-stock holdings to include specialty industrial companies such as
Takuma Co. (1.5% of the equity portfolio). Takuma is a leading manufacturer
of boilers, garbage incinerators, and water treatment plants, and we
believe is in an excellent position to benefit from any improvement in
global economic growth. Such additions join several rewarding Japanese
investments in the finance sector, including Nichiei Co., a Japanese
finance company for small- and medium-size firms.
Individual Stock Selection Drives Performance
The performance of the Fund's U.S. holdings was mixed. Outstanding
returns generated by semiconductor stocks_Atmel (+168%), Microchip
Technology (+120%), and Maxim Integrated Products (+66%)_were partially
offset by the relatively poor performance of financial stocks, notably
First Colony (-24%) and W.R. Berkley (-6%). First Colony, the second
largest position in the portfolio at the beginning of the fiscal year, is
an insurance holding company specializing in annuity products. W.R. Berkley
is a well-run insurance company that has, like its peers, endured a long,
difficult period for the industry. As a group, small U.S. stocks with high
growth rates underperformed during the past 12 months, although they
bounced back in the final months of the fiscal year.
Technology was the most dynamic sector during the year, constituting
14% of the equity portfolio at the end of the period versus 6% a year
earlier. Price appreciation_not new investments_was the primary driver
behind the Fund's growing exposure to technology. Gains were driven by
dramatic earnings increases in the semiconductor stocks noted above
together with a whopping 232% increase in your Fund's largest holding, SAP,
the German software producer. This company has established itself as the
dominant supplier of software applications packages for major corporations
employing client-server technology. As companies allocate more of their
capital spending to technology, the integration and reliability of SAP's
programs should have increasing appeal, evidenced by SAP's revenue growth
rate of 66% in the first nine months of their fiscal year.
Investments in the smaller emerging markets, particularly those in
Latin America and the Pacific Basin, continue to play a major role in the
portfolio. Our approach here has been to consolidate holdings and realign
positions by replacing some consumer-oriented companies with companies
whose earnings stand to benefit as strong global economic expansion
continues, such as steel producers Usaminas in Brazil and Hylsamex in
Mexico. While we have pared back our exposure to some areas, particularly
Hong Kong and Mexico, we think numerous opportunities still exist in these
regions.
Despite the gyrations of equity and currency markets during the year,
the core of your portfolio has remained stable. However, several companies
were added to the top 10 list. Two of these stocks earned their way to the
top tier through strong performance, thanks to strong profit growth:
Brahma, the largest brewery in Brazil; and Shohkoh Fund, a small- and
medium-size business finance fund in Japan. These stocks rose 88% and 58%,
respectively, for the period under review. A third, Allegheny Ludlum, is a
special situation. A survivor in American stainless steel production, the
company has strong earnings prospects.
Currencies Work to the Fund's Advantage
While currency fluctuation should have little impact on the long-term
performance of stock investments, it can have a significant effect on
short-term performance. As with any global portfolio invested in securities
outside the United States this year, changes in currency rates have had a
direct impact on the dollar value of your Fund. As illustrated in the
following table, recent dollar weakness benefited U.S. investors in foreign
stocks during the 12 months ended October 31, 1994.
<TABLE>
<CAPTION>
Market Change in Market Change in
Markets Local Currency U.S. Dollars
-------- --------------- -------------
<S> <C> <C>
United Kingdom -1.9% 6.9%
Japan -2.4% 9.2%
Germany -1.6% 9.6%
Malaysia -5.1% -5.0%
</TABLE>
Because the currencies of several Far Eastern markets (excluding
Japan) are in essence linked to the U.S. dollar, global currency
fluctuations have a more limited impact on the dollar-adjusted returns in
those markets than in European markets, for example.
It is also worth noting that during the year we put defensive hedging
strategies to work, effectively converting much of the Fund's exposure to
Japanese yen into U.S. dollars. We are convinced the yen is overvalued
relative to the U.S. dollar and due for a decline, and these strategies are
intended to limit currency-related price fluctuations in the Fund's
Japanese holdings. If the yen strengthens further in the near term, we plan
to increase the hedge.
Outlook
Looking ahead to 1995, we believe the pace of global growth will
continue to rise modestly, and that further interest-rate increases are
likely. Higher interest rates, of course, will test stock valuations.
Income investments with increasingly higher yields may compete for
investors' affections. In this environment, we will maintain a strategic
focus on growth opportunities in the developing world and look for ways to
take advantage of the economic recovery underway in Europe. We are also
increasing investments in the energy arena, scouring the globe for small
energy companies with exciting prospects. As always, our selective
stock-by-stock approach is the mainstay of our investment process, and we
remain committed to putting more money behind individual stocks of those
companies in which our analysts have the greatest confidence, regardless of
location.
Sincerely,
Your Portfolio Management Team
/s/Gerald J. Moran /s/Elizabeth J. Allan
Gerald J. Moran Elizabeth J. Allan
/s/Carol L. Franklin /s/Joan R. Gregory
Carol L. Franklin Joan R. Gregory
Scudder Global Small Company Fund: A Team Approach to Investing
Scudder Global Small Company Fund is run by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund. They are supported by
Scudder's large staff of economists, research analysts, traders, and other
investment specialists who work in Scudder offices across the United States
and abroad. We believe our team approach benefits Fund investors by
bringing together many disciplines and leveraging Scudder's extensive
resources.
Lead Portfolio Manager Gerald J. Moran has set Scudder Global Small
Company Fund's investment strategy and overseen its daily operation since
the Fund was introduced in 1991. Gerry joined Scudder's equity research and
management area in 1968 as an analyst and has focused on small company
stocks since 1982. Gerry has been a portfolio manager since 1985. Elizabeth
Allan, Portfolio Manager, who joined the team in 1994, concentrates on the
Fund's Pacific Basin investments. Elizabeth, who has been a portfolio
manager at Scudder since 1991, joined the firm in 1987 as a member of the
portfolio management team of a Scudder closed-end mutual fund concentrating
its investments in Asia. Carol L. Franklin, Portfolio Manager, contributes
expertise on the Fund's European investments, a role she has filled since
the Fund commenced operations. Carol has worked on international equity
investing as a portfolio manager at Scudder since 1981. Joan Gregory,
Portfolio Manager, joined the team in 1994 and focuses on stock selection,
a role she has played since she joined Scudder in 1992. Ms. Gregory has
been involved with investment in global and international stocks as an
assistant portfolio manager since 1989.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of October 31, 1994
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4.3% REPURCHASE AGREEMENT
----------------------------------------------------------------------------------
11,211,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 10/31/94 at 4.77%,
to be repurchased at $11,212,485 on 11/1/94,
collateralized by a $10,914,000, U.S. Treasury
Note, 8.5%, 4/15/97 (Cost $11,211,000) . . . . . . 11,211,000
----------
5.7% COMMERCIAL PAPER
----------------------------------------------------------------------------------
5,001,000 American Express Credit Corp., 4.82%, 11/18/94 . . . 5,001,000
10,000,000 American Express Credit Corp., 4.9%, 11/28/94 . . . 10,000,000
----------
TOTAL COMMERCIAL PAPER (Cost $15,001,000) . . . . . 15,001,000
----------
0.6% CONVERTIBLE BONDS
----------------------------------------------------------------------------------
HONG KONG 1,500,000 Henderson Land Development Co., Ltd.,
4%, 10/27/96 (Property developer)
(Cost $1,511,250) . . . . . . . . . . . . . . . . 1,468,200
----------
6.7% PREFERRED STOCKS
----------------------------------------------------------------------------------
Shares
----------------------------------------------------------------------------------
GERMANY 3,360 Hornbach AG (Do-it-yourself home improvement
retailer) . . . . . . . . . . . . . . . . . . . . 3,574,349
3,080 Marschollek Lautenschlaeger und Partner AG
(Leading independent life insurance company) . . . 1,736,538
21,540 SAP AG (Computer software manufacturer) . . . . . . 12,445,238
----------
TOTAL PREFERRED STOCKS (Cost $6,577,900) . . . . . . 17,756,125
----------
82.7% COMMON STOCKS
----------------------------------------------------------------------------------
ARGENTINA 1.5% 35,000 Buenos Aires Embotelladora S.A. "B" (ADR)
(Soft drink bottler and distributor) . . . . . . . 1,343,125
104,000 Quilmes Industrial S.A. (Leading beer distributor) . 2,730,000
----------
4,073,125
----------
AUSTRALIA 2.1% 668,400 Ampol Exploration Ltd. (Oil and gas exploration
company) . . . . . . . . . . . . . . . . . . . . . 2,025,124
571,291 BRL Hardy Ltd. (Wine and spirits manufacturer) . . . 848,481
91,833 BRL Hardy Ltd.** . . . . . . . . . . . . . . . . . . 57,284
275,000 Cortecs International, Ltd. (Pharmaceutical
company) . . . . . . . . . . . . . . . . . . . . . 152,140
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,280,400 E.R.G. Australia Ltd. (Producer and installer of
electronic ticketing equipment, and manufacturer
of radio communication equipment) . . . . . . . 2,320,013
---------
5,403,042
---------
AUSTRIA 0.4% 20,100 Mayr-Meinhof Karton AG (Leading carton
producer) . . . . . . . . . . . . . . . . . . . 1,091,498
---------
BRAZIL 2.7% 11,030,290 Companhia Cervejaria Brahma (pfd.)
(Leading beer producer and distributor) . . . . 3,881,512
344,777 Companhia Cervejaria Brahma (pfd.)
Warrants (expire 9/30/96)* . . . . . . . . . . 32,680
190,300 Usinas Siderurgicas de Minas Gerais S/A
(pfd.) (ADR) (Non-coated flat products and
electrolytic galvanized products) . . . . . . . 3,163,738
---------
7,077,930
---------
CANADA 1.5% 25,000 Magna International, Inc. "A" (Manufacturer
of automotive parts) . . . . . . . . . . . . . . 884,903
15,000 Magna International, Inc. "A" (ADR) . . . . . . . 532,500
179,000 Petromet Resources Ltd. (Exploration,
development and production of natural
gas in Alberta) . . . . . . . . . . . . . . . . 1,207,626
132,100 Reko International Group Inc. (Designer and
manufacturer of injection molds and
other auto parts) . . . . . . . . . . . . . . . 659,255
30,000 Renaissance Energy Ltd. (Leading oil and
gas producer) . . . . . . . . . . . . . . . . . 695,908
---------
3,980,192
---------
CHILE 0.6% 76,400 Cristalerias de Chile (ADR) (Glassworks) . . . . . 1,642,600
---------
CHINA 0.7% 2,524,000 Tsingtao Brewery "H" (Leading brewery) . . . . . . 1,894,429
---------
GERMANY 1.0% 1,260 Hornbach Baumarkt AG (Do-it-yourself home
improvement retailer) . . . . . . . . . . . . . 682,757
3,255 Weru AG (High-quality window manufacturer) . . . . 1,839,533
---------
2,522,290
---------
GREECE 0.1% 90,000 Athens Medical Center (Health services) . . . . . 335,619
360 Hellenic Bottling Co. (Soft drink distributor) . . 11,172
---------
346,791
---------
HONG KONG 3.3% 6,436,000 Hong Kong Toy Centre International, Ltd.
(Major toy manufacturer) . . . . . . . . . . . . 566,351
4,794,000 Innovative International Holdings, Ltd.
(Manufacturer and marketer of automobile
parts and accessories) . . . . . . . . . . . . 1,488,916
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,068,600 Jinhui Holdings Ltd. (Operator of dry bulk
cargo ships in southern China) . . . . . . . . 1,939,509
1,110,000 Johnson Electric Holdings Ltd. (Designer
and manufacturer of micrometers for domestic
and commercial uses) . . . . . . . . . . . . . 3,088,321
700,000 Sime Darby Hong Kong (Vehicle distributor) . . . . 951,148
1,809,501 Yips Hang Cheung (Manufacturer of mixed
solvents and paints) . . . . . . . . . . . . . 649,805
----------
8,684,050
----------
INDIA 0.9% 86,300 Arvind Mills Ltd. (GDR) (Cotton textile
manufacturer) . . . . . . . . . . . . . . . . . 507,013
95,700 Indian Rayon & Industries Ltd. (GDR)
(Manufacturer and marketer of rayon yarn
and textiles) . . . . . . . . . . . . . . . . . 1,830,263
----------
2,337,276
----------
INDONESIA 4.4% 671,000 Gadjah Tunggal (Tire manufacturer) . . . . . . . . 1,143,508
80,400 Indonesia Satellite Corp. (ADR) (International
telecommunication services) . . . . . . . . . . 3,155,700
310,000 Kabelmetal Indonesia (Cable manufacturer) . . . . 446,197
702,640 Kalbe Farma (Foreign registered)
(Pharmaceutical producer and distributor) . . . 3,106,843
116,500 Medco Energy Corp. (Foreign registered)
(Oil drilling company) . . . . . . . . . . . . 289,758
100,000 Merck-Indonesia (Foreign registered)
(Pharmaceutical company) (b) . . . . . . . . . 575,738
195,000 Modern Photo Film Co. (Photographic film
distributor) . . . . . . . . . . . . . . . . . 983,476
169,000 Supreme Cable Co. (Foreign registered)
(Manufacturer of power and telecommunication
cables) . . . . . . . . . . . . . . . . . . . . 564,339
157,440 Surya Toto Indonesia (Foreign registered)
(Manufacturer of bathroom fixtures) (b) . . . . 377,080
51,743 Unilever-Indonesia (Foreign registered)
(Consumer products manufacturer) . . . . . . . 929,461
----------
11,572,100
----------
IRELAND 2.7% 5,511,000 Aran Energy PLC (Oil and natural gas
exploration) . . . . . . . . . . . . . . . . . . 3,454,611
820,932 Bank of Ireland PLC (Bank) . . . . . . . . . . . . 3,773,787
----------
7,228,398
----------
ITALY 0.4% 130,000 Arnoldo Mondadori Editore SpA (Book
publisher) . . . . . . . . . . . . . . . . . . . 1,174,641
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JAPAN 18.6% 138,000 Amano Corp. (Time-management systems). . . . . . . . 2,322,321
64,000 Cox Co., Ltd. (Men's and ladies' wear chain
store operator) . . . . . . . . . . . . . . . . . 1,784,018
17,000 Eyeful Home Technology Inc. (Homebuilding
franchise operator) . . . . . . . . . . . . . . . 584,452
48,000 Genki Sushi Co., Ltd. (North Kanto-based
fast-food sushi chain) . . . . . . . . . . . . . 1,432,170
180,000 Hitachi Construction Machinery Co., Ltd.
(Leading maker of hydraulic shovels) . . . . . . . 2,397,274
25,000 Horipro Inc. (Growing entertainment production
company) . . . . . . . . . . . . . . . . . . . . 668,491
66,000 Hosoda Corp. (Tokyo-based construction firm) . . . . 984,617
146,000 JAMCO Corp. (Leading manufacturer of galleys
and lavatories for commercial aircraft) . . . . . 2,110,262
124,000 Japan Radio Co., Ltd. (Manufacturer of wireless
telecommunication equipment) . . . . . . . . . . 2,329,961
43,000 Kyokuto Kaihatsu Kogyo Co., Ltd. (Leading
maker of dump trucks and other specialty
vehicles) . . . . . . . . . . . . . . . . . . . . 1,340,698
79,000 Ministop Co., Ltd. (Growing convenience
store chain) . . . . . . . . . . . . . . . . . . 2,503,923
63,800 Nichiei Co., Ltd. (Finance company for small
and medium size firms) . . . . . . . . . . . . . 4,116,766
61,200 Nissen Co., Ltd. (Mail-order women's apparel
distributor) . . . . . . . . . . . . . . . . . . 2,502,085
72,000 Rock Field Co., Ltd. (Major delicatessen food
processor) . . . . . . . . . . . . . . . . . . . 1,672,517
79,000 Royal Ltd. (Wholesaler and retailer of automobile
equipment and parts) . . . . . . . . . . . . . . 3,425,563
18,000 Sankyo Co., Ltd. (Leading manufacturer
of pachinko game equipment) . . . . . . . . . . . 1,393,764
54,000 Shimamura Co., Ltd. (Discount retailer) . . . . . . 2,547,801
114,000 ShinMaywa Industries, Ltd. (Leading maker of
dump trucks and other specialty vehicles) . . . . 1,341,730
21,100 Shohkoh Fund & Co., Ltd. (Finance company
for small and medium size firms) . . . . . . . . 5,032,108
35,000 Simree Co., Ltd. (Clothing mail-order sales firm). . 437,229
184,000 Takuma Co., Ltd. (Leading maker of boilers,
garbage incinerators and water
treatment plants) . . . . . . . . . . . . . . . . 3,647,326
75,000 Ten Allied Co., Ltd. (Tavern chain operator) . . . 2,013,215
26,000 Toyo Exterior Co., Ltd. (Exterior garden products
manufacturer) . . . . . . . . . . . . . . . . . . 751,600
17,000 Tsutsumi Jewelry Co., Ltd. (Manufacturer,
wholesaler and retailer of jewelry) . . . . . . . 1,607,681
----------
48,947,572
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KOREA 0.4% 180 units Korea 1990 Trust IDR (Investment company) (c) . . . . 966,600
---------
MALAYSIA 2.4% 125,000 Aokam Perdana Bhd. (Forest products
company) . . . . . . . . . . . . . . . . . . . . . 1,032,290
50,000 Aokam Perdana Bhd. (New(d)) . . . . . . . . . . . . 391,389
243,600 Malaysian Helicopter Bhd. (Aviation
transportation services) . . . . . . . . . . . . 600,658
500 Matsushita Electric Malaysia (Consumer
electronics manufacturer) . . . . . . . . . . . . 5,186
609,000 Technology Resources Industries (Mobile
telephone operator)* . . . . . . . . . . . . . . 2,371,644
279,000 Westmont Bhd. (Manufacturer and trader
of garments in Hong Kong) . . . . . . . . . . . . 1,976,478
---------
6,377,645
---------
MEXICO 2.3% 580,000 Grupo Financiero Inversiones Bursatiles S.A.
(Stock brokerage) . . . . . . . . . . . . . . . . 2,497,527
1,333,400 Grupo Industrial Maseca S.A. de C.V. "B"
(Food producer) . . . . . . . . . . . . . . . . . 2,172,546
62,700 Hylsamex (ADS) (Leading steel company,
making finished steel products for use in
construction, auto parts and household
appliances) . . . . . . . . . . . . . . . . . . . 1,387,238
---------
6,057,311
---------
NETHERLANDS 1.9% 40,000 IHC Caland N.V. (Dredging and offshore
services) . . . . . . . . . . . . . . . . . . . . 1,015,408
9,000 Telegraaf Holdings CVA (Newspaper publisher) . . . . 1,014,222
40,708 Wolters Kluwer CVA (Publisher) . . . . . . . . . . . 2,943,205
---------
4,972,835
---------
NORWAY 0.9% 127,800 Unitor A/S (Provider of broad range of ship
services, leading supplier of marine chemicals). . 2,306,540
---------
PHILIPPINES 0.2% 518,780 Keppel Philippines Shipyard "B" (Shipbuilding
and repair) (b) . . . . . . . . . . . . . . . . . 396,174
126,000 Kepphil Shipyard Inc. (Shipbuilding and
repair) . . . . . . . . . . . . . . . . . . . . . 17,219
---------
413,393
---------
PORTUGAL 1.8% 7,025 Corporacion Industrial do Norte (Paint
producer and distributor) . . . . . . . . . . . . 182,762
59,460 Jeronimo Martins (Food producer and retailer) . . . 2,668,422
63,000 Uniao Cervejaria (Brewery) . . . . . . . . . . . . . 950,625
63,000 Uniao Cervejaria (New(d)) (b) . . . . . . . . . . . 950,625
---------
4,752,434
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SINGAPORE 0.4% 400,000 GP Batteries International (Developer,
manufacturer and distributor of batteries
and battery related products) . . . . . . . . . . 1,176,000
----------
SWEDEN 1.2% 91,600 Autoliv AB (Free) (Manufacturer of safety air
bags for automobiles)* . . . . . . . . . . . . . . 3,236,904
----------
SWITZERLAND 0.4% 3,000 Phoenix Mecano AG (Bearer) (Manufacturer
of housings and components for computers) . . . . 979,533
----------
THAILAND 0.4% 28,200 American Standard Sanitaryware (Foreign
registered) (Manufacturer of bathroom fixtures). . 534,061
132,599 Bangkok Dusit Medical Services Co., Ltd.
(Health services) (b) . . . . . . . . . . . . . . 563,957
----------
1,098,018
----------
UNITED KINGDOM 5.7% 125,300 Brake Brothers (Specialist supplier of frozen
foods to the catering industry) . . . . . . . . . 873,751
1,985,830 City Centre Restaurants PLC (Restaurant chain) . . . 2,500,060
110,000 Control Techniques (Leading manufacturer
of electronics control systems) . . . . . . . . . 653,754
408,400 Grampian Holdings Inc. (Pharmaceutical retailer) . . 641,024
903,300 Hambros Insurance Services Group PLC
(Insurance company) . . . . . . . . . . . . . . . 1,654,122
542,200 Serco Group PLC (Facilities management
company) . . . . . . . . . . . . . . . . . . . . 2,561,975
513,100 Tibbett and Britten Group PLC (Transportation
services for manufacturing and retail
industries) . . . . . . . . . . . . . . . . . . . 6,040,211
----------
14,924,897
----------
UNITED STATES 23.8% 39,900 A.O. Smith Corp. (Manufacturer of equipment
for automobiles, trucks and farms) . . . . . . . . 972,563
282,000 Allegheny Ludlum Corp. (Major stainless steel
manufacturer) . . . . . . . . . . . . . . . . . . 5,604,750
105,100 American Classic Voyager Co. (North
American operator of steamboat cruises) . . . . . 1,839,250
222,600 Atmel Corp. (Developer and manufacturer of
integrated circuits)* . . . . . . . . . . . . . . 8,208,375
45,500 Automotive Industries Holdings Inc. "A"
(Manufacturer of auto and van interior
trim systems) . . . . . . . . . . . . . . . . . . 1,103,375
266,500 BE Aerospace (Airline audio/video control
systems) . . . . . . . . . . . . . . . . . . . . 2,315,219
200,000 Benton Oil & Gas Co. (Oil and gas exploration,
development and production)* . . . . . . . . . . 1,562,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
57,900 Central European Media Enterprises Ltd. "A"
(Owner and operator of national and regional
private commercial television stations in
central Europe) . . . . . . . . . . . . . . . . 940,875
71,200 Coastal Healthcare Group, Inc. (Physician
recruiting and management services) . . . . . . 2,242,800
118,200 First Colony Corp. (Holding company which
sells individual life insurance and annuity
products throughout the U.S.) . . . . . . . . . 2,364,000
120,775 Fiserv Inc. (Data processing services)* . . . . . 2,838,213
53,000 Franklin Quest Co. (Provider of training
seminars and products) . . . . . . . . . . . . 1,874,875
235,000 IGEN Inc. (Producer of medical supplies) . . . . . 1,527,500
85,000 M.S. Carriers Inc. (Truckload carrier of
general freight) . . . . . . . . . . . . . . . 1,997,500
20,300 Maxim Integrated Products Inc. (Manufacturer
and marketer of integrated circuits) . . . . . . 1,370,250
63,300 Microchip Technology Inc. (Manufacturer of
high performance, field programmable
microcontrollers and specialty memory
products)* . . . . . . . . . . . . . . . . . . 2,967,188
116,500 Millicom International Cellular SA (Developer
and operator of cellular telephone networks) . . 3,276,563
91,500 Nu-Kote Holdings Inc. "A" (Manufacturer of
office and home printing products) . . . . . . 1,704,188
46,300 PhyCor Inc. (Operator of specialty medical
clinics) . . . . . . . . . . . . . . . . . . . 1,585,775
1,100 R.P. Scherer Corp. (Manufacturer of drug
delivery system)* . . . . . . . . . . . . . . . 49,088
50,600 Sigma-Aldrich Corp. (Producer of biochemicals,
organic and inorganic chemicals) . . . . . . . 1,758,350
96,900 Sterling Software Inc. (Computer software
products)* . . . . . . . . . . . . . . . . . . 3,028,125
17,000 Superior Industries International Inc.
(Manufacturer of aluminum wheels for
automobiles) . . . . . . . . . . . . . . . . . 501,500
280,850 Thomas Nelson, Inc. (Publisher) . . . . . . . . . 5,476,575
8,500 Trimedyne Inc. Warrants (expire 12/9/96)* . . . . 7,480
72,000 W.R. Berkley Corp. (Insurance company) . . . . . . 2,610,000
96,400 Zilog Inc. (Manufacturer and marketer of
integrated circuits)* . . . . . . . . . . . . . 2,771,500
-----------
62,498,377
-----------
TOTAL COMMON STOCKS (Cost $196,829,677). . . . . . 217,736,421
-----------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $231,130,827) (a) . . . . . . . . . . . . 263,172,746
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------
--------------------------------------------------------------------------
* Non-income producing security.
** Market value and cost reflect partial payment. An additional
payment equal to the U.S. dollar equivalent of Aus. $91,833 is
payable, at the applicable exchange rate, on June 28, 1995.
(a) The cost for federal income tax purposes was $235,369,751. At
October 31, 1994, net unrealized apprecia- tion for all
securities based on tax cost was $27,802,995. This consisted of
aggregate gross unrealized appreciation for all securities in
which there was an excess of market value over tax cost of
$42,253,099 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market
value of $14,450,104.
(b) Securities valued in good faith by the Valuation Committee of the
Board of Directors. The cost of these securities at October 31,
1994 aggregated $2,535,337. See Note A of the Notes to Financial
Statements.
(c) 1,000 shares = 1 IDR unit for Korea 1990 Trust.
(d) New shares issued during 1994, eligible for a pro rata share of
1994 dividends.
Sector breakdown of the Fund's equity securities is noted on
page 5.
<TABLE>
At October 31, 1994, outstanding written call options on currencies were as follows (Note A):
<CAPTION>
PRINCIPAL EXPIRATION STRIKE MARKET
AMOUNT DATE PRICE VALUE ($)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen (euro) ... Y 923,000,000 6/29/95 Y 95.55 359,970
-------
Total outstanding written options on currencies
(Premiums received $448,218) . . . . . . . . . . . . . . . . . . . . . . . 359,970
=======
</TABLE>
<TABLE>
Transactions in written call options on currencies during the year ended October 31, 1994 were:
<CAPTION>
PREMIUMS
PRINCIPAL AMOUNT RECEIVED ($)
------------------------------------
<S> <C> <C>
Outstanding at
October 31, 1993 ...... -- --
Contracts written ...... Y 923,000,000 448,218
------------------------------------
Outstanding at
October 31, 1994 ...... Y 923,000,000 448,218
============= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $231,130,827)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . $263,172,746
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,795
Foreign currency holdings, at market
(identified cost $16,706) (Note A) . . . . . . . . . . . 16,747
Forward foreign currency exchange contracts to buy,
at market (contract cost $1,464,383) (Notes A and D) . . 1,462,755
Receivable on forward foreign currency exchange
contracts to sell (Notes A and D) . . . . . . . . . . . 24,127,122
Other receivables:
Investments sold . . . . . . . . . . . . . . . . . . . . 735,303
Fund shares sold . . . . . . . . . . . . . . . . . . . . 351,968
Dividends and interest . . . . . . . . . . . . . . . . . 338,524
Foreign taxes recoverable . . . . . . . . . . . . . . . 34,254
Deferred organization expenses (Note A) . . . . . . . . . . 19,215
------------
Total assets . . . . . . . . . . . . . . . . . . . . 290,401,429
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . $ 5,267,567
Fund shares redeemed . . . . . . . . . . . . . . . . . . 403,399
Accrued management fee (Note C) . . . . . . . . . . . . 232,595
Other accrued expenses (Note C) . . . . . . . . . . . . 272,585
Written options, at market
(premiums received $448,218) (Note A) . . . . . . . . 359,970
Forward foreign currency exchange contracts to buy
(Notes A and D) . . . . . . . . . . . . . . . . . . . 1,464,383
Forward foreign currency exchange contracts to sell,
at market (contract cost $24,127,122)
(Notes A and D) . . . . . . . . . . . . . . . . . . . 26,406,820
-----------
Total liabilities . . . . . . . . . . . . . . . . . . 34,407,319
------------
Net assets, at market value . . . . . . . . . . . . . . . . $255,994,110
============
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net
investment income (Note E) . . . . . . . . . . . . . (1,776,624)
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . 32,041,919
Written options . . . . . . . . . . . . . . . . . . . 88,248
Foreign currency related transactions . . . . . . . . (2,275,587)
Accumulated net realized gain (Note E) . . . . . . . . . 1,016,007
Capital stock . . . . . . . . . . . . . . . . . . . . . 157,346
Additional paid-in capital . . . . . . . . . . . . . . . 226,742,801
------------
Net assets, at market value . . . . . . . . . . . . . . . . $255,994,110
============
NET ASSET VALUE, offering and redemption price per
share ($255,994,110 -:-15,734,564 shares
of capital stock outstanding, $.01 par value,
100,000,000 shares authorized) . . . . . . . . . . . . . $16.27
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER GLOBAL SMALL COMPANY FUND
- ----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $222,510) . . $2,373,706
Interest . . . . . . . . . . . . . . . . . . . . . . . . 1,055,244
----------
3,428,950
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . $2,497,457
Services to shareholders (Note C) . . . . . . . . . . . . 755,513
Directors' fees and expenses (Note C) . . . . . . . . . . 42,934
Custodian fees . . . . . . . . . . . . . . . . . . . . . 462,360
Reports to shareholders . . . . . . . . . . . . . . . . . 146,843
Auditing . . . . . . . . . . . . . . . . . . . . . . . . 51,710
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . 49,775
State registration . . . . . . . . . . . . . . . . . . . 38,957
Federal registration . . . . . . . . . . . . . . . . . . 18,837
Amortization of organization expenses (Note A) . . . . . 10,406
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 22,770 4,097,562
----------------------
Net investment loss . . . . . . . . . . . . . . . . . . . (668,612)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . 1,352,291
Foreign currency related transactions . . . . . . . . (25,563) 1,326,728
----------
Net unrealized appreciation (depreciation)
during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . 6,163,113
Written options . . . . . . . . . . . . . . . . . . . 88,248
Foreign currency related transactions . . . . . . . . (2,288,704) 3,962,657
----------------------
Net gain on investment transactions . . . . . . . . . . . 5,289,385
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . $4,620,773
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) . . . . . . . . . . . $ (668,612) $ 512,974
Net realized gain from investment
transactions . . . . . . . . . . . . . . . . . . 1,326,728 3,144,786
Net unrealized appreciation on investment
transactions during the period . . . . . . . . . 3,962,657 26,529,468
------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . . . . . . . 4,620,773 30,187,228
------------ ------------
Distributions to shareholders:
From net investment income ($.07 per share) . . -- (327,384)
------------ ------------
In excess of net investment income ($.18
per share) . . . . . . . . . . . . . . . . . . . (2,271,808) --
------------ ------------
From net realized gains ($.15 and $.12
per share, respectively) . . . . . . . . . . . . (1,947,264) (561,229)
------------ ------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . 167,361,242 147,442,135
Net asset value of shares issued to
shareholders in reinvestment of
distributions . . . . . . . . . . . . . . . . . 3,818,846 829,178
Cost of shares redeemed . . . . . . . . . . . . . . (113,105,251) (34,780,240)
------------ ------------
Net increase in net assets from Fund share
transactions . . . . . . . . . . . . . . . . . . 58,074,837 113,491,073
------------ ------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . 58,476,538 142,789,688
Net assets at beginning of period . . . . . . . . . 197,517,572 54,727,884
------------ ------------
NET ASSETS AT END OF PERIOD (including
accumulated distributions in excess of
net investment income of $1,776,624
and undistributed net investment income
of $483,473, respectively) . . . . . . . . . . . $255,994,110 $197,517,572
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . 12,238,526 4,541,708
------------ ------------
Shares sold . . . . . . . . . . . . . . . . . . . . 10,300,657 10,092,030
Shares issued to shareholders in
reinvestment of distributions . . . . . . . . . 232,856 68,301
Shares redeemed . . . . . . . . . . . . . . . . . . (7,037,475) (2,463,513)
------------ ------------
Net increase in Fund shares . . . . . . . . . . . . 3,496,038 7,696,818
------------ ------------
Shares outstanding at end of period . . . . . . . . 15,734,564 12,238,526
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER GLOBAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
FOR THE PERIOD
SEPTEMBER 10, 1991
(COMMENCEMENT
YEARS ENDED OCTOBER 31, OF OPERATIONS)
---------------------------- TO OCTOBER 31,
1994 1993 1992 1991
---------------------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . $16.14 $12.05 $11.92 $12.00
------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (a) . . . . . . . . . . (.02) .04 .07 .01
Net realized and unrealized gain (loss) on investment
transactions . . . . . . . . . . . . . . . . . . . . .48 4.24 .08 (.09)
------ ------ ------ ------
Total from investment operations . . . . . . . . . . . .46 4.28 .15 (.08)
------ ------ ------ ------
Less distributions:
From net investment income . . . . . . . . . . . . . -- (.07) (.02) --
In excess of net investment income . . . . . . . . . (.18) -- -- --
From net realized gains on investment transactions . (.15) (.12) -- --
------ ------ ------ ------
Total distributions . . . . . . . . . . . . . . . . . . (.33) (.19) (.02) --
------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . $16.27 $16.14 $12.05 $11.92
====== ====== ====== ======
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . 2.80 36.04 1.26 (.67)*
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . 256 198 55 9
Ratio of operating expenses net, to average daily
net assets (%) (a) . . . . . . . . . . . . . . . . . 1.70 1.50 1.50 1.50**
Ratio of net investment income (loss) to average daily
net assets (%) . . . . . . . . . . . . . . . . . . . (.28) .53 .78 2.47**
Portfolio turnover rate (%) . . . . . . . . . . . . . . 45.8 54.6 23.4 --
<FN>
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of . . $ -- $ -- $ -- $ .06
Reflects a per share amount of management fee not
imposed by the Adviser of . . . . . . . . . . . . $ .01 $ .04 $ .09 $ .01
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%) . . . . . . . . . . . . . . . . . 1.76 2.01 2.53 15.34**
* Not annualized
** Annualized
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Global Small Company Fund (the "Fund") is a diversified series of
Scudder Global Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The policies described below are followed consistently by
the Fund in the preparation of its financial statements in conformity with
generally accepted accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system.
If there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such
market. If no sale occurred, the security is then valued at the calculated mean
between the most recent bid and asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a 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. Securities valued in good
faith by the Valuation Committee of the Board of Directors at fair value
amounted to $2,863,574 (1.12% of net assets) and have been noted in the
investment portfolio as of October 31, 1994.
<PAGE>
SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------
OPTIONS. The Fund may write (sell) exchange-listed and over-the-counter call
and put options on securities and other financial instruments. When the Fund
writes a call, it gives the purchaser of the call option the right to buy the
underlying security at the price specified in the option (the "exercise price")
at any time during the option period, generally ranging up to nine months. When
the Fund writes a put option, it gives the purchaser of the put option the
right to sell the underlying security to the Fund at the exercise price at any
time during the option period, generally ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the form of
a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder or
purchase the underlying security from the option holder at the exercise price.
Certain options, including options on indices will require cash settlement by
the Fund if the option is exercised. By writing a call option, the Fund
foregoes, in exchange for the premium less the commission ("net premium"), the
opportunity to profit during the option period from an increase in the market
value of the underlying security above the exercise price. By writing a put
option, the Fund, in exchange for the net premium received, accepts the risk of
a decline in the market value of the underlying security below the exercise
price.
The liability representing the Fund's obligation under an exchange traded
written call or put option is valued at the last sale price or, in the absence
of a sale, the mean between the closing bid and asked quotations or at the most
recent asked quotation if no bid and asked quotations are available.
Over-the-counter written options are valued at the most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, call and put
options on securities and other financial instruments. Exchange traded
purchased options are valued at the last sales price or, in the absence of a
sale, the mean between the closing bid and asked quotations or at the most
recent bid quotation if no bid and asked quotations are available.
Over-the-counter purchased options are valued at the most recent bid quotation.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the resale price.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. Certain
risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts. Realized and
unrealized gains and losses arising from such transactions are included in net
realized and unrealized gain (loss) from foreign currency related transactions.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
<PAGE>
SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code 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.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in forward contracts, passive
foreign investment companies, and certain securities sold at a loss. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the year ended October 31, 1994, purchases and sales of investment
securities (excluding short-term investments) aggregated $150,388,055 and
$99,710,849, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to
the Adviser a fee equal to an annual rate of 1.10% of the Fund's average daily
net assets, computed and accrued daily and payable monthly. As manager of the
assets of the Fund, 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 Agreement provides that if the
Fund's expenses, exclusive of taxes, interest, and extraordinary expenses,
exceed specified limits, such excess, up to the amount of the management fee,
will be paid by the Adviser. In addition, the Adviser agreed not to impose all
or a portion of its management fee until February 28, 1994, and during such
period to maintain the annualized expenses of the Fund at not more than 1.50%
of average daily net assets. Effective March 1, 1994, the Adviser is no longer
maintaining the Fund's annualized expenses at the specified rate. For the year
ended October 31, 1994, the Adviser did not impose a portion of its management
fee amounting to $160,728 and the amount imposed amounted to $2,497,457.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended October 31, 1994, the amount charged by SSC aggregated
$596,637, of which $52,783 is unpaid at October 31, 1994.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1994, Directors' fees and expenses aggregated $42,934.
<PAGE>
SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------
<TABLE>
D. COMMITMENTS
- --------------------------------------------------------------------------------
As of October 31, 1994, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$2,281,326.
<CAPTION>
NET UNREALIZED
APPRECIATION
SETTLEMENT (DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
------------------------------- ----------------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
U.S. Dollars 677,435 Canadian Dollars 914,808 11/3/94 (1,077)
U.S. Dollars 95,606 British Pounds 58,379 11/9/94 (158)
U.S. Dollars 691,342 British Pounds 422,598 11/14/94 (394)
Malaysian Ringgits 262,534 U.S. Dollars 102,894 11/1/94 141
Greek Drachmas 1,768,705 U.S. Dollars 7,624 11/2/94 (10)
Japanese Yen 1,612,082 U.S. Dollars 16,604 11/4/94 (39)
Japanese Yen 530,675,000 U.S. Dollars 5,000,000 1/22/96 (721,637)
Japanese Yen 529,100,000 U.S. Dollars 5,000,000 1/25/96 (706,330)
Japanese Yen 782,080,000 U.S. Dollars 8,000,000 4/8/96 (496,307)
Japanese Yen 584,040,000 U.S. Dollars 6,000,000 4/25/96 (355,515)
-----------
(2,281,326)
===========
</TABLE>
E. RECLASSIFICATION OF CAPITAL ACCOUNTS
- --------------------------------------------------------------------------------
As required, effective November 1, 1993, the Fund has adopted the provisions of
Statement of Position 93-2 "Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies (SOP)." In implementing the SOP, the Fund has reclassified
$5,042 to decrease undistributed net investment income and $5,042 to increase
accumulated net realized gain. These reclassifications, which have no impact on
the net asset value of the Fund, are primarily attributable to certain
differences in the computation of distributable income and capital gains under
federal income tax rules and regulations versus generally accepted accounting
principles. The statement of changes in net assets and financial highlights for
prior periods have not been restated to reflect this change in presentation.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE SHAREHOLDERS
OF SCUDDER GLOBAL SMALL COMPANY FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Global Small Company Fund including the investment portfolio, as of October 31,
1994, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the three years in the
period then ended and for the period September 10, 1991 (commencement of
operations) to October 31, 1991. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Global Small Company Fund as of October 31, 1994, the results of its
operations for the year then ended, the changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
three years in the period then ended, and for the period September 10, 1991
(commencement of operations) to October 31, 1991 in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 12, 1994
<PAGE>
SCUDDER GLOBAL SMALL COMPANY FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund will mail shareholders IRS Form 1099-Div in late January, summarizing
all taxable distributions paid for 1994.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$1,283,681 as capital gain dividends for its taxable year ended October 31,
1994.
The Fund paid foreign taxes of $222,510 and the Fund recognized $222,510 of
foreign source income during the taxable year ended October 31, 1994. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.014 per
share of foreign taxes and $.014 of gross income from foreign sources as having
been paid in the taxable year ended October 31, 1994.
Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Service
Representative at 1-800-225-5163.
<PAGE>
OFFICERS AND DIRECTORS
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Daniel Pierce*
Vice President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant to Bessemer Securities
Corporation
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Robert G. Stone, Jr.
Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia University
Graduate School of Business
Carol L. Franklin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Douglas M. Loudon*
Vice President
Gerald J. Moran*
Vice President
Cornelia Small*
Vice President
Lawrence Teitelbaum*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Juris Padegs*
Vice President and Assistant Secretary
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER SERVICE CORPORATION
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR INFORMATION
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
SCUDDER GROUP RETIREMENT SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Information and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
Celebrating 75 Years of Serving Investors
This year marks the 75th anniversary of the founding of Scudder,
Stevens & Clark, Inc., investment adviser for the Scudder Funds.
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder was the first independent investment counsel firm in the
United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load
mutual fund. Today we offer 36 pure no load(tm) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped Scudder
become one of the largest and most respected investment managers in the
world. Though times have changed since our beginnings, we remain committed
to our longstanding principles: managing money with integrity and
distinction, keeping the interests of our clients first; providing access
to investments and markets that may not be easily available to individuals;
and making investing as simple and convenient as possible through friendly,
comprehensive service.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Short Term
Global Income Fund
Annual Report
October 31, 1994
* A fund designed to provide high current income by investing primarily
in short-term, high-grade fixed-income securities denominated in
foreign currencies and the U.S. dollar.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
14 Financial Statements
17 Financial Highlights
18 Notes to Financial Statements
26 Report of Independent Accountants
27 Tax Information
29 Officers and Directors
30 Investment Products Services
31 How to Contact Scudder
HIGHLIGHTS
* Scudder Short Term Global Income Fund generated an annual total return
of -0.25% for the year ended October 31, 1994, compared to an average
annual return of -0.66% for the 34 short world multimarket funds
tracked by Lipper Analytical Services.
* To avoid the potentially negative impact of currency fluctuation,
approximately 26% of the portfolio was invested in U.S.
dollar-denominated bonds as of October 31, while another 13% was in
bonds issued by so-called dollar-block countries, namely Australia and
New Zealand.
* The Fund did suffer currency-related losses during the year, however,
resulting from the declining U.S. dollar relative to major European
currencies. Since U.S. tax law treats such losses as offsets to
ordinary income, most of the Fund's 1994 income payments will be
treated as nontaxable distributions.
* The Fund's relatively high level of income ($0.87 per share) was
achieved during a challenging investment environment, and partially
offset the Fund's price decline of $0.90 per share for the period. Due
to higher interest rates around the world, the Fund's 30-day net
annualized yield was 8.13% on October 31, 1994 versus 6.63% on October
31, 1993.
LETTER FROM THE FUND'S CHAIRMAN
Dear Shareholders,
Interest rates continued to rise in the third quarter of 1994 but at a
slower rate than in the previous two quarters. However, investors' fears of
higher inflation remain a problem for the bond market. Throughout the year,
investors have reacted swiftly to reports of robust economic growth in the
United States, pushing bond prices lower and yields on long-term securities
higher as
a result.
In the months ahead, interest rates may rise further in the face of
continued monetary tightening by the Federal Reserve. In addition, with
finite savings around the world, capital to invest in financial markets and
growing economies is increasingly in short supply, adding upward pressure
to interest rates as countries compete for savings.
What does this mean for fixed-income investors? Because interest rates
are now higher, investors are currently receiving more income than in prior
months. Rising interest rates detract from bond price performance (since
bond prices move in the opposite direction of interest rates), so our
investment strategy will focus on providing a competitive level of income,
while balancing changing bond prices with an emphasis on capital
preservation. Your Fund's investment team also plans to seek out potential
opportunities in anticipation of an expected 1995 peak in inflation and an
eventual turnaround in the trend of bond prices. In the near-term, current
yields will likely make up most of your Fund's total return.
Please call Scudder Investor Information at 1-800-225-2470 if you have
questions about your Fund or other Scudder investments. Page 31 contains
more information on how to contact Scudder. Thank you for choosing Scudder
Short Term Global Income Fund to help meet your investment needs.
Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Short Term Global Income Fund
<PAGE>
Scudder Short Term Global Income Fund
Performance Update as of October 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- ------------------------------------------------------------------
Scudder Short Term Global Income Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 9,975 -.25% -.25%
Life of
Fund* $12,290 22.90% 5.79%
Salomon Brothers Currency-Hedged
World Government Bond Index (1-3 years)
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,187 1.87% 1.87%
Life of
Fund* $12,210 22.10% 5.73%
*The Fund commenced operations on
March 1, 1991. Index comparisons
begin March 31, 1991.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly Periods ended October 31
Scudder Short Term Global Income Fund
Year Amount
- --------------------
3/31/91 10000
91 10653
92 11487
93 12307
94 12277
Salomon Brothers Currency-Hedged World
Government Bond Index (1-3 years)
Year Amount
- --------------------
3/31/91 10000
91 10465
92 11327
93 11986
94 12210
The unmanaged Salomon Brothers Currency-Hedged World
Government Bond Index (1-3 years) consists of worldwide
fixed-rate government bonds with one-to-three years to
maturity. Index returns assume reinvestment of dividends
and, unlike Fund returns, do not reflect and fees or expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly Periods ended October 31
- ----------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1991* 1992 1993 1994
-------------------------------
Net Asset Value... $12.01 $11.84 $11.68 $10.78
Income Dividends.. $ .76 $ 1.08 $ .95 $ .87
Capital Gains
Dividends......... $ -- $ -- $ .02 $ --
Fund Total
Return (%)........ 6.65 7.83 7.14 -.25
Index Total
Return (%)........ 5.56 7.56 6.08 1.87
</TABLE>
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 that an investor's shares, when
redeemed, may be worth more or less than when purchased. If the Advisor
had not temporarily capped expenses, the average annual total return for the
Fund for the one year and life of Fund would have been lower.
Portfolio Summary as of October 31, 1994
- ---------------------------------------------------------------------------
Market Exposure
- ---------------------------------------------------------------------------
Debt Currency
Holdings Exposure(a)
-------- -----------
Australia 7.7% 2.0% We have maintained the
Belgium 0.0 -4.1 Fund's conservative
Canada 0.0 0.4 strategy by constructing
Chile 2.4 2.4 a well-diversified
Czech 0.3 0.3 portfolio representing
Denmark 8.4 1.9 17 countries, while
ECU 9.5 7.0 hedging the portfolio to
Finland 0.0 -3.8 help manage the impact of
France 8.2 -5.8 currency exchange
Germany 3.1 -2.6 fluctuations.
Italy 8.5 7.2
Japan 0.0 -0.9
New Zealand 5.3 0.8
South Africa 2.6 2.6
Spain 3.7 1.3
Sweden 4.8 1.8
Switzerland 0.0 -2.6
Thailand 9.3 9.3
Turkey 0.1 0.1
U.S. 26.1 82.7
------ ------
100.0% 100.0%
====== ======
(a) Currency exposure after taking into account the effects
of foreign currency options, futures, and forward contracts.
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly investment portfolio summary is available upon request.
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Throughout the year, rising interest rates around the world have
caused bond prices to fall and exchange rates to fluctuate. The U.S.
Federal Reserve played a significant role in altering the direction of
interest rates this year by initiating a series of increases in short-term
interest rates. In early 1994, it was expected that the Fed's actions on
short-term rates would help stabilize long-term rates (which are determined
primarily by bond market activity) and keep inflation in check. As 1994
progressed, however, investors drove both short- and long-term global
interest rates higher and bond prices lower, due in part to fears that
inflation would escalate. Negative market sentiment was also exacerbated by
the growing competition for_and therefore the rising cost of_capital among
governments and corporations around the world.
While Scudder Short Term Global Income Fund's performance for the
fiscal year ended October 31, 1994, was affected by this challenging
investment climate, the Fund has also provided a relatively high level of
income, maintained a well-diversified portfolio, and taken actions to help
reduce share-price volatility. Reflecting generally higher interest rates,
the Fund provided a 30-day net annualized yield of 8.13% on October 31,
1994, compared with 6.63% on October 31, 1993. The Fund's net asset value
declined to $10.78 per share on October 31, down from $11.68 at the end of
the previous year. Fortunately, the $0.87 per share in distributions
shareholders received during the year largely offset the price decline.
Price change plus distributions translated into an essentially flat total
return of -0.25% for the 12 months_above average for the category.
According to Lipper Analytical Services, the average short world
multimarket fund returned -0.66% for the 12 months. Lipper, which tracked
34 funds for the period, is an independent analyst of investment
performance. The Fund's average annual total return for the three years
ended October 31 was 4.84%, versus 2.55% on average for the 23 short world
multimarket funds tracked by Lipper.
Defensive Investment Strategy
At the beginning of the Fund's fiscal year, we expected short-term
interest rates to decline throughout most of Europe, but anticipated some
increase in U.S. interest rates. Consequently, we maintained the Fund's
core holdings in high-yielding government bonds issued by Ireland, Italy,
and Spain, and also kept the Fund heavily hedged to help protect against
weakening local currencies. At present, much of the Fund's currency
exposure is either to the dollar or dollar-linked emerging markets, as in
Southeast Asia.
As 1994 progressed, however, positive economic fundamentals were
overwhelmed by worldwide concern about rising U.S. interest rates, which
pushed global markets lower and weakened the dollar. Consequently, over the
course of the year, our hedges lost money as European currencies
strengthened against the dollar. Since U.S. tax law treats foreign currency
losses as offsets to ordinary income, approximately 98% of the Fund's 1994
income payments will be treated as nontaxable distributions. In this year's
challenging environment, we maintained the Fund's conservative strategy by
structuring a well-diversified portfolio (17 countries as of October 31)
and keeping a relatively short average effective maturity (2.1 years).
The Fund's global investment strategy allows us to find markets where
we believe the income stream from bond investments in relatively stable
currencies has the potential to be higher than might be available from U.S.
instruments. We believe this strategy enables the Fund to provide a degree
of share-price stability while focusing on higher yield.
Because we anticipate near-term currency volatility, we invested
approximately 13% of the portfolio in the United States as of October 31.
We invested another 13% in bonds issued by so-called dollar-block
countries, namely Australia and New Zealand, to add stability to the
portfolio. We also bought dollar-denominated bonds in Latin America and
Europe that offer the interest-rate exposure of foreign markets without the
risk of currency fluctuation.
Fiscal and Labor Policies in Denmark and Italy Show Improvement
At the end of the period, more than 40% of the Fund was invested in
Europe, led by holdings in Denmark and Italy. We believe Denmark is one of
the best-managed European countries in terms of its fiscal and labor
markets. Indeed, our holdings in Denmark provided some of the best
investment returns for the portfolio during the course of 1994. The
political situation in Italy remains uncertain; however, we see signs of
fundamental improvement in terms of fiscal management and moderating wage
growth.
Shifting Portfolio Allocations
Among the countries represented in the Fund, Germany is a small and
recent addition. Until a few months ago, we had avoided Germany altogether
because of its resistance to lowering interest rates. We are concerned
about the German budget deficit, which continues to balloon because of the
heavy cost of reunification, and will monitor the situation closely.
We have also added small positions in the Czech Republic and South
Africa. While these markets are not yet liquid enough to permit large core
holdings, we are confident we have added positions that will make positive
contributions to the Fund's long-term performance.
At the same time, we have eliminated the Fund's positions in Greece
and Malaysia. Greece has generated much income for the Fund in the recent
past. But we believe the current economic and political climate is not
sufficiently stable to warrant the additional risk. We withdrew from the
Malaysian market following certain developments in the currency markets
that called into question the near-term credibility of the Malaysian
central bank.
Looking Ahead
Looking ahead, we expect interest rates to continue rising as an
ever-expanding list of countries tries to attract scarce global capital for
investment in financial markets and growing economies. The interest-rate
environment will provide us with both investment opportunities and risks.
Because of continued volatility in the currency markets, we will remain
cautious and continue our dollar-based currency exposure. At the same time,
we will also continue research into markets that we feel will add to your
Fund's yield without significantly affecting share-price volatility.
Sincerely,
Your Portfolio Management Team
/s/Margaret Craddock /s/Gary P. Johnson
Margaret Craddock Gary P. Johnson
/s/Lawrence Teitelbaum
Lawrence Teitelbaum
Scudder Short Term Global Income Fund:
A Team Approach to Investing
Scudder Short Term Global Income Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are
supported by Scudder's large staff of economists, research analysts,
traders, and other investment specialists who work in Scudder's offices
across the United States and abroad. Scudder believes its team approach
benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Margaret Craddock has set the Fund's investment
strategy and overseen its daily operation since she joined Scudder in 1991.
Maggie has seven years of experience in global fixed-income research and
investing. Gary P. Johnson, Portfolio Manager, concentrates on the Fund's
hedging strategies and research, a role he has filled since the Fund
commenced operations. Gary joined Scudder in 1987 and has worked with
quantitative analysis and strategic trading since 1982. Lawrence
Teitelbaum, Portfolio Manager, contributes expertise on global interest
rates and currency strategies, a role he assumed when he joined Scudder in
1993. Larry has worked with global fixed-income investments and strategies
since 1981.
<PAGE>
<TABLE>
SCUDDER SHORT TERM GLOBAL INCOME FUND INVESTMENT PORTFOLIO as of October 31, 1994
- -------------------------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
73.8% FOREIGN DENOMINATED DEBT OBLIGATIONS
AUSTRALIAN DOLLARS 7.7% AUD 53,625,000 Commonwealth of Australia, 12.5%, 1/15/98 . . . . 42,839,339
----------
CHILEAN PESOS 2.4% CLP 626,144,783 Citibank indexed Time Deposit, 16.2%, 11/10/94 . 1,507,693
542,658,812 Citibank indexed Time Deposit, 16.5%, 1/4/95(b) . 1,306,667
2,401,068,663 Citibank indexed Time Deposit, 14.25%, 1/30/95(b) 5,781,528
982,101,578 Citibank indexed Time Deposit, 14.5%, 2/6/95(b) . 2,364,800
979,362,264 Citibank indexed Time Deposit, 14.45%, 5/3/95(b) 2,358,204
----------
13,318,892
----------
CZECH KORUNA 0.3% CSK 40,000,000 Czech Republic, 14.6%, 3/18/97 . . . . . . . . . 1,594,002
----------
DANISH KRONER 8.4% DKK 154,000,000 Kingdom of Denmark, 6%, 2/10/96 . . . . . . . . . 25,643,438
20,000,000 Kingdom of Denmark, 5.25%, 8/10/96 . . . . . . . . 3,259,004
106,800,000 Kingdom of Denmark, 9%, 11/15/96 . . . . . . . . . 18,464,818
----------
47,367,260
----------
DEUTSCHEMARKS 3.0% DEM 24,000,000 Federal Republic of Germany, 8.25%, 7/21/97 . . . 16,550,404
----------
EUROPEAN CURRENCY
UNITS 9.5% ECU 1,000,000 Nacional Financiera SNC, 10.25%, 3/11/97 . . . . . 1,264,355
4,000,000 Republic of Turkey, 11.5%, 5/26/95 . . . . . . . . 5,044,744
10,500,000 United Kingdom Treasury Bond, 8%, 1/23/96. . . . . 13,447,410
28,000,000 United Kingdom Treasury Bond, 5.25%, 1/21/97 . . . 33,726,773
----------
53,483,282
----------
FRENCH FRANCS 8.2% FRF 240,000,000 Government of France, 6.5%, 10/12/96 . . . . . . . 46,107,777
----------
ITALIAN LIRE 8.5% ITL 37,000,000,000 Republic of Italy, 8.5%, 1/1/97 . . . . . . . . . 22,878,212
40,000,000,000 Republic of Italy, 8.5%, 4/1/97 . . . . . . . . . 24,546,006
----------
47,424,218
----------
NEW ZEALAND
DOLLARS 5.3% NZD 46,525,000 Government of New Zealand, 101%, 7/15/97 . . . . 29,427,416
----------
SOUTH AFRICAN RANDS 2.6% ZAL 61,200,000 Republic of South Africa, 14%, 8/15/97 . . . . . . 14,538,806
----------
SPANISH PESETAS 3.7% ESP 2,500,000,000 Kingdom of Spain, 11.85%, 8/30/96 . . . . . . . . 20,472,394
----------
SWEDISH KRONOR 4.8% SEK 105,000,000 Kingdom of Sweden, Treasury Bill, 6/21/95 . . . . 13,891,528
54,000,000 Kingdom of Sweden, Treasury Bill, 8/16/95 . . . . 7,040,943
46,000,000 Kingdom of Sweden, Treasury Bill, 9/20/95 . . . . 5,942,730
----------
26,875,201
----------
THAI BAHTS 9.3% THB 140,000,000 Bank for Agriculture and Agricultural
Cooperatives, 6.24%, 12/24/96 . . . . . . . . . 5,217,349
267,280,729 New South Wales Note, 1/27/95 . . . . . . . . . . 10,498,943
915,000,000 New South Wales Medium Term Note,
8%, 6/23/95 . . . . . . . . . . . . . . . . . . 36,442,134
----------
52,158,426
----------
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
<TABLE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount Value ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TURKISH LIRE 0.1% TKL 26,400,000,000 Republic of Turkey Treasury Bill, 12/21/94 . . . 688,824
-----------
TOTAL FOREIGN DENOMINATED DEBT
OBLIGATIONS (Cost $407,447,621) . . . . . . . 412,846,241
-----------
---------------------------------------------------------------------------------
26.1% U.S. DOLLAR DENOMINATED DEBT OBLIGATIONS
---------------------------------------------------------------------------------
U.S. DOLLARS USD 1,201,000 Associates Corp. of North America, Commercial
Paper, 4.801%, 11/1/94 . . . . . . . . . . . . 1,201,000
3,200,000 Argentina Bonos del Tesoro, Floating Rate
Bond, LIBOR, 5.319%, 5/31/96 . . . . . . . . 3,131,436
15,785,000 Argentina Bonos del Tesoro, Floating Rate Bond,
LIBOR, 5%, 9/1/97 . . . . . . . . . . . . . . 15,110,426
199,026 Federal Home Loan Mortgage Corp., REMIC,
Series 1543 PN, Interest only, 2/15/08 . . . . 751,932
2,636,916 Federal Home Loan Mortgage Corp.,
Series 1223 C, 7.25%, 7/15/20 . . . . . . . . 2,603,955
4,075,204 General Electric Capital Mortgage Services,
Inc. 1991-5 Series A (PT), 8.5%, 9/25/06*. . . 3,969,504
17,300,000 Home Savings of America Subordinated Note,
10.5%, 6/12/97 . . . . . . . . . . . . . . . . 17,701,360
12,500,000 ITT Financial Corp. Medium Term Note,
6.3%, 4/21/95 . . . . . . . . . . . . . . . . 12,223,750
2,591,267 Merrill Lynch Mortgage Investors Inc. Series
1992-B Series 4 -A, 7.85%, 4/15/12 . . . . . . 2,579,114
11,900,000 Queensland Treasury Corp. Medium Term Note,
12.1%, 7/8/95 . . . . . . . . . . . . . . . . 11,899,881
4,500,000 RJR Nabisco Inc. Medium-Term Note, 6.8%,
9/1/01 . . . . . . . . . . . . . . . . . . . . 4,303,125
3,500,000 Time Warner Inc., Ssenior Nnote, 7.45%, 2/1/98 . 3,395,000
11,000,000 U.S. Treasury Note, 5.625%, 8/31/97 . . . . . . 10,590,938
7,047,380 United Companies Financial Corp., Home Loan
Trust, Series 1993 B1, 6.075%, 7/25/14 . . . . 6,679,507
3,525,000 United Mexican States Tesobonos, 1/12/95 . . . . 3,476,778
6,374,000 United Mexican States Tesobonos, 1/26/95 . . . . 6,270,231
17,319,000 United Mexican States Tesobonos, 4/20/95 . . . . 16,704,002
15,000,000 United Mexican States Tesobonos, 8/3/95 . . . . 14,098,500
10,000,000 United Savings Association of Texas, 98.05%,
5/15/98 . . . . . . . . . . . . . . . . . . . 9,475,000
-----------
TOTAL U.S. DOLLAR DENOMINATED DEBT
OBLIGATIONS (Cost $149,169,353) . . . . . . . 146,165,439
-----------
TOTAL INVESTMENTS (Cost $556,616,974) . . . . . 559,011,680
-----------
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount Value ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------
0.1% PURCHASED OPTIONS
--------------------------------------------------------------------------------------------
AUD 20,900,000 Put on Australian Dollars, strike price
AUD.725, expiration date 11/28/94 . . . . . . . . . 6,270
AUD 49,293,000 Put on Australian Dollars, strike price AUD.725,
expiration date 11/2/94 . . . . . . . . . . . . . . --
USD 50,000,000 Put on 1 year Canadian Bankers' Acceptance
rates Trust BA, strike price 9.25%,
expiration date 4/21/95 . . . . . . . . . . . . . 110,000
CAD 64,000,000 Put on Canadian Dollars, strike price
CAD1.4103, expiration date 11/3/94 . . . . . . . . --
DEM 63,000,000 Put on Deutschemarks, strike price DEM1.7,
expiration date 11/16/94 . . . . . . . . . . . . . --
DEM 64,000,000 Put on Deutschemarks, strike price DEM1.71,
expiration date 11/17/94 . . . . . . . . . . . . . --
DEM 54,180,000 Put on Deutschemarks, strike price DEM1.61,
expiration date 3/23/95 . . . . . . . . . . . . . . 189,630
NZD 82,007,751 Put on New Zealand Dollars, strike price
NZD.5874, expiration date 12/15/94 . . . . . . . . 12,301
ESP 2,540,000,000 Put on Spanish Pesetas vs Deutschemarks,
strike price ESP84.5, expiration date 12/15/94 . . . 37,146
Number of
Contracts
--------------------------------------------------------------------------------------------
178 Put on December 1994 Eurodollar Futures,
strike price 94, expiration date 12/19/94 . . . . . 40,050
176 Put on March 1995 Eurodollar Futures, strike
price 93.75, expiration date 3/13/95 . . . . . . . . 132,000
-----------
TOTAL PURCHASED OPTIONS (Cost $3,564,656) . . . . . . 527,397
-----------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $560,181,630) (a) . . . . . . . . . . . . . 559,539,077
===========
<FN>
(a) The cost for federal income tax purposes was $560,707,823. At October 31, 1994,
net unrealized depreciation for all securities based on tax cost was $1,168,746.
This consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess of market value over tax cost of $8,262,666 and
aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $9,431,412.
(b) Securities valued in good faith by the Valuation Committee of the Board of Directors.
The cost of these securities at October 31, 1994 aggregated $11,463,798. See
Note A of the Notes to the Financial Statements.
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
----------------------------------------------------------------------
FUTURES
----------------------------------------------------------------------
* At October 31, 1994, $2,150,802 par value of General Electric Capital
Mortgage Services, Inc., 8.5%, 9/25/06 with a market value of
$2,095,016 was pledged to cover initial margin requirements on open
futures contracts.
<TABLE>
At October 31, 1994, open futures contracts purchased were as follows (Note A):
<CAPTION>
Number of Aggregate Market
Index Expiration Contracts Face Value ($) (1) Value ($) (1)
----- ---------- --------- ------------------ -------------
<S> <C> <C> <C> <C>
Euroyen . . . . . Mar 1995 1,500 377,236,082 376,238,902
===== =========== ===========
Net unrealized depreciation on open futures contracts
purchased . . . . . . . . . . . . . . . . . . . . . . . . . . (997,180)
------------
</TABLE>
<TABLE>
At October 31, 1994, open futures contracts sold short were as follows (Note A):
<CAPTION>
Number of Aggregate Market
Index Expiration Contracts Face Value ($) (1) Value ($) (1)
----- ---------- --------- ------------------ -------------
<S> <C> <C> <C> <C>
Eurolira . . . . Dec 1994 75 11,003,321 11,084,171
Eurolira . . . . Mar 1995 75 10,946,036 10,995,196
Eurodollars . . . Jun 1995 115 26,999,585 26,777,750
Eurolira . . . . Jun 1995 75 10,895,657 10,928,159
Eurodollars . . . Sep 1995 115 26,939,550 26,680,000
Eurolira . . . . Sep 1995 75 10,829,026 10,881,843
Eurodollars . . . Dec 1995 110 25,533,525 25,429,250
Eurodollars . . . Mar 1996 110 25,552,850 25,401,750
Eurodollars . . . Jun 1996 110 25,487,650 25,363,250
--- ----------- ------------
860 174,187,200 173,541,369
=== =========== ============
Net unrealized appreciation on open futures contracts
sold short . . . . . . . . . . . . . . . . . . . . . . . . . . . 645,831
------------
Total unrealized depreciation on open futures contracts . . . . . (351,349)
============
<FN>
(1) For purposes of these tables, values of foreign denominated futures
contracts have been translated into U.S. dollars using the period
ended foreign exchange rates.
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
--------------------------------------------------------------------
WRITTEN OPTIONS
--------------------------------------------------------------------
<TABLE>
At October 31, 1994 outstanding written options were as follows (Note A):
<CAPTION>
Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value ($)
------------ ----------------------------------------------------------
<S> <C> <C> <C> <C>
AUD . . . . . . 18,293 11/2/94 AUD.7419 36,623
ITL vs DEM . . . 43,000,000 11/8/94 ITTL1017.00/DEM 42,876
SEK vs DEM . . . 160,000 11/17/94 SEK4.8212/DEM 319,075
AUD . . . . . . 20,900 11/28/94 AUD./7396 131,670
ESP vs DEM . . . 2,540,000 12/15/94 ESP82.81/DEM 60,784
NZD . . . . . . 35,500 12/15/94 NZD.6007 493,450
JPY . . . . . . 934,928 6/29/95 JPY95.89 383,320
</TABLE>
<TABLE>
<CAPTION>
Number of
Contracts
---------
<S> <C> <C> <C> <C>
Eurodeutschemark
Futures . . . . . . . 250 3/13/95 94.50 99,711
3 year Australian
Bond . . . . . . . . 620 12/15/94 90.50 111,888
Canadian Bankers'
Acceptance . . . . . 50 12/19/94 93.00 87,784
---------
Total outstanding written options
(Premiums received $2,172,372). . . . . . . . . . . . . . 1,767,181
=========
</TABLE>
<TABLE>
<CAPTION>
CURRENCY ABBREVIATIONS
----------------------------------------------------------------------------
<S> <C> <C> <C>
AUD Australian Dollar ITL Italian Lira
BEF Belgian Franc JPY Japanese Yen
GBP British Pound NZD New Zealand Dollar
CAD Canadian Dollar ZAL South African Rand
CLP Chilean Peso ESP Spanish Peseta
CSK Czech Koruna SEK Swedish Krona
DKK Danish Krone CHF Swiss Franc
ECU European Currency Unit THB Thai Baht
FRF French Franc TKL Turkish Lira
DEM German Deutschemark USD United States Dollar
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-------------------------------------------------------------------------------------------------------------------------
OCTOBER 31, 1994
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $556,616,974) (Note A) . . . . . . $ 559,011,680
Purchased options, at market (identified cost $3,564,656) (Note A). . . . . . . . . . 527,397
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639
Foreign currency, at market (identified cost $1,875,771) (Note A) . . . . . . . . . . 1,908,455
Forward foreign currency exchange contracts to buy, at market
(contract cost $108,474,575) (Notes A and E) . . . . . . . . . . . . . . . . . . . . 112,113,732
Receivable on forward foreign currency exchange contracts
to sell (Notes A and E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365,049,710
Receivable on investment sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,646,644
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,784,207
Receivable on fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,342
Daily variation margin on open futures contracts (Note A) . . . . . . . . . . . . . . 17,250
Deferred organization expenses (Note A) . . . . . . . . . . . . . . . . . . . . . . . 15,524
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,015
-------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,089,616,595
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,471,820
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,484,641
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,027,672
Accrued management fee (Note C) . . . . . . . . . . . . . . . . . . . . . . . . . . 330,444
Other accrued expenses (Note C) . . . . . . . . . . . . . . . . . . . . . . . . . . 346,704
Foreign currency due to broker, at market (Note A) . . . . . . . . . . . . . . . . . 1,212,771
Written options, at market (premiums received $2,172,372) (Note A) . . . . . . . . . 1,767,181
Net payable on closed forward foreign currency exchange contracts (Note A) . . . . . 3,121,164
Payable for forward foreign currency exchange contracts to buy (Notes A and E) . . . 108,474,575
Payable for forward foreign currency exchange contracts to sell
(contract cost $365,049,710) (Notes A and E) . . . . . . . . . . . . . . . . . . . 379,450,405
------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529,687,377
-------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . $559,929,218
=============
NET ASSETS
Net assets consist of:
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,394,706
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,632,068)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (351,349)
Foreign currency related transactions . . . . . . . . . . . . . . . . . . . . . . (10,412,025)
Accumulated net realized loss (Note F) . . . . . . . . . . . . . . . . . . . . . . . (5,071,829)
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519,600
Additional paid-in capital (Note F) . . . . . . . . . . . . . . . . . . . . . . . . 575,482,183
-------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 559,929,218
=============
NET ASSET VALUE, offering and redemption price per share
($559,929,218/51,959,978 shares of capital stock
outstanding, $.01 par value, 300,000,000 shares authorized) . . . . . . . . . . . . $10.78
======
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1994
- ----------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Interest (net of foreign taxes withheld of $742,470) . . . . . . . . $ 67,681,085
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . . . . . . . $ 4,625,076
Services to shareholders (Note C) . . . . . . . . . . . . . . . . . . 1,521,715
Directors' fees and expenses (Note C) . . . . . . . . . . . . . . . . 42,932
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,039,249
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . 190,308
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,329
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,662
State registration fees . . . . . . . . . . . . . . . . . . . . . . . 67,670
Amortization of organization expenses (Note A) . . . . . . . . . . . 11,706
Interest (Note D) . . . . . . . . . . . . . . . . . . . . . . . . . . 20,424
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,140 7,727,211
--------------------------
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . 59,953,874
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,057,339)
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,752,469)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . 3,787,162
Foreign currency related transactions. . . . . . . . . . . . . . . . (36,924,956) (52,947,602)
------------ ------------
Net unrealized appreciation (depreciation) during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,537,241
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,077,116
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . (1,794,347)
Foreign currency related transactions . . . . . . . . . . . . . . . (17,137,912) (12,317,902)
------------ ------------
Net loss on investment transactions . . . . . . . . . . . . . . . . . (65,265,504)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . $ (5,311,630)
============
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,953,874 $ 87,265,028
Net realized loss from investment transactions . . . . . . . . . . . . . (52,947,602) (14,059,490)
Net unrealized depreciation on investment transactions
during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,317,902) (2,432,002)
-------------- -------------
Net increase (decrease) in net assets resulting from operations . . . . . (5,311,630) 70,773,536
-------------- -------------
Distributions to shareholders from:
Net investment income ($.02 and $.95 per share) . . . . . . . . . . . . (1,254,033) (87,265,028)
-------------- -------------
Net realized gains from investment transactions ($.02 per share) . . . . -- (1,930,308)
-------------- -------------
Tax return of capital distribution ($.85 per share). . . . . . . . . . . (58,437,746) --
-------------- -------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 212,114,019 506,619,737
Net asset value of shares issued to
shareholders in reinvestment of distributions . . . . . . . . . . . . . 45,034,626 66,970,854
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . (673,153,473) (883,422,065)
-------------- -------------
Net decrease in net assets from Fund share transactions . . . . . . . . . (416,004,828) (309,831,474)
-------------- -------------
DECREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . (481,008,237) (328,253,274)
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . . 1,040,937,455 1,369,190,729
-------------- -------------
NET ASSETS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 559,929,218 $1,040,937,455
============== =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . . . 89,107,607 115,606,640
-------------- -------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,796,142 43,147,306
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,010,556 5,700,572
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,954,327) (75,346,911)
-------------- -------------
Net decrease in Fund shares . . . . . . . . . . . . . . . . . . . . . . . (37,147,629) (26,499,033)
-------------- -------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . . 51,959,978 89,107,607
============== =============
</TABLE>
The accompanying notes are an integral part of the financial statments.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
FOR THE PERIOD
MARCH 1, 1991
(COMMENCEMENT
YEARS ENDED OCTOBER 31, OF OPERATIONS)
---------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991
---------------------------------------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . $11.68 $11.84 $12.01 $12.00
------ ------ ------ ------
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . .87 .95 1.08 .76
Net realized and unrealized gain (loss) on investment
transactions . . . . . . . . . . . . . . . . . . . . . (.90) (.14) (.17) .01
------ ------ ------ ------
Total from investment operations . . . . . . . . . . . . (.03) .81 .91 .77
------ ------ ------ ------
Less distributions from:
Net investment income . . . . . . . . . . . . . . . . . (.02) (.95) (1.08) (.76)
Net realized gains on investments . . . . . . . . . . . -- (.02) -- --
Tax return of capital distribution . . . . . . . . . . (.85) -- -- --
------ ------ ------ ------
Total distributions . . . . . . . . . . . . . . . . . . . (.87) (.97) (1.08) (.76)
------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . . $10.78 $11.68 $11.84 $12.01
====== ====== ====== ======
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . (.25) 7.14 7.83 6.65**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . . 560 1,041 1,369 205
Ratio of operating expenses, net to average daily
net assets (%) (a) . . . . . . . . . . . . . . . . . . 1.00 1.00 1.00 1.00*
Ratio of net investment income to average daily
net assets (%) . . . . . . . . . . . . . . . . . . . . 7.76 8.10 8.94 9.97*
Portfolio turnover rate (%) . . . . . . . . . . . . . . . 272.4 259.8 274.2 26.1*
(a) Reflects a per share amount of management fee not
imposed by the Adviser . . . . . . . . . . . . . . . $ .02 $ .01 $ .03 $ .06
Operating expense ratio including management fee and
other expenses not imposed (%) . . . . . . . . . . . 1.15 1.11 1.23 1.89*
<FN>
* Annualized
** Not annualized
</TABLE>
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Short Term Global Income Fund (the "Fund") is a non-diversified series
of Scudder Global Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The policies described below are followed consistently by the Fund in
the preparation of its financial statements in conformity with generally
accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which prices reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $11,811,199 (2.1% of net assets) and have
been noted in the investment portfolio as of October 31, 1994. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
OPTIONS. The Fund may write (sell) exchange-listed and over-the-counter call and
put options on securities, currencies and other financial instruments. When the
Fund writes a call, it gives the purchaser of the call option the right to buy
the underlying security or currency at the price specified in the option (the
"exercise price") at any time during the option period, generally ranging up to
nine months for American style options and for European style options at the
expiration date. When the Fund writes a put option, it gives the purchaser of
the put option the right to sell the underlying security or currency to the Fund
at the exercise price at any time during the option period, generally ranging up
to nine months for American style options and for European style options at the
expiration date. If the option expires unexercised, the Fund will realize
income, in the form of a capital gain, to the extent of the amount received for
the option (the "premium"). If the option is exercised, a decision over which
the Fund has no control, the Fund must sell the underlying security or currency
to the option holder or purchase the underlying security or currency from the
option holder at the exercise price. Certain options,
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
including options on indices will require cash settlement by the Fund if the
option is exercised. By writing a call option, the Fund foregoes, in exchange
for the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security or currency above the exercise price. By writing a put option, the
Fund, in exchange for the net premium received, accepts the risk of a decline in
the market value of the underlying security or currency below the exercise
price. The liability representing the Fund's obligation under an exchange traded
written call or put option is valued at the last sale price or, in the absence
of a sale, the mean between the closing bid and asked price or at the most
recent asked price if no bid and asked price are available. Over-the-counter
written options are valued using dealer supplied valuations.
In addition, the Fund may purchase, singly and in combination, call
and put options on securities, currencies and securities indices. Exchange
traded purchased options are valued at the last sales price or, in the absence
of a sale, the mean between the closing bid and asked prices or at the most
recent bid price if no bid and asked prices are available. Over-the-counter
purchased options are valued using dealer supplied valuations.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write (sell) call and
put options on futures contracts which are traded for bona fide hedging
purposes. Options on futures contracts will be valued in accordance with the
security and options valuation policies described above.
FUTURES CONTRACTS. The Fund may enter into interest rate, securities index and
currency futures contracts for bona fide hedging purposes. Upon entering into a
futures contract, the Fund is required to deposit with a broker an amount
("initial margin") equal to a certain percentage of the purchase price indicated
in the futures contract. Subsequent payments ("variation margin") are made or
received by the Fund each day for U.S. futures contracts (periodically for
foreign futures), dependent on the daily fluctuations in the value of the
underlying security, and are recorded for financial reporting purposes as
unrealized gains or losses by the Fund. When entering into a closing
transaction, the Fund will realize, for book purposes, a gain or loss equal to
the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price. Certain risks may arise upon entering into futures contracts
from the contingency of imperfect market conditions.
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
INDEXED SECURITIES. Indexed securities held by the Fund are investments whose
value is indexed to another financial instrument, index, currency, or commodity
(the "reference instrument"). For principal indexed securities, the principal
amount payable at maturity may be more or less than the amounts shown depending
on fluctuations in the value of the reference instrument. For coupon indexed
securities, the principal amount payable at maturity is fixed. However, the
coupon is indexed to the reference instrument. The price sensitivity of these
securities may be greater than that of non-indexed securities with similar
maturities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. Certain
risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts. Realized and unrealized
gains and losses arising from such transactions are included in net realized and
unrealized gain (loss) from foreign currency related transactions.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and
certain expenses at the daily rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on interest
and foreign withholding taxes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code 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, 1994, the Fund had a net tax basis capital loss carryforward
of approximately $4,462,620, which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
October 31, 2002, whichever occurs first.
DISTRIBUTION OF INCOME AND GAINS. Distribution of net investment income is
declared as a dividend to shareholders of record as of the close of business
each day and is distributed to shareholders monthly. During any particular year
net realized gains and certain unrealized gains (which for federal income tax
reporting purposes may be considered realized) 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.
An additional distribution may be made to the extent necessary to avoid the
payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences relate primarily to investments in options, futures,
forward foreign currency contracts and foreign currency denominated
investments. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund
may periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade date
basis. Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are accreted for both tax and financial reporting purposes.
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the year ended October 31, 1994, purchases and sales (including
maturities) of investment securities (excluding short-term investments)
aggregated $1,586,900,677 and $1,823,694,859, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended October 31, 1994 was $6,428,929,506 and $6,878,764,411, respectively.
<TABLE>
Transactions in written options for the year ended October 31, 1994 are summarized as follows:
<CAPTION>
OPTIONS ON CURRENCIES (000 OMITTED)
-----------------------------------
NUMBER OF
CONTRACTS PREMIUMS AUD CAD CHF DEM PREMIUMS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning
of Period. . . -- -- -- 45,000 72,100 -- $ 1,265,750
Written . . . 1,770 855,957 266,817 351,468 442,200 201,747 10,663,976
Closed . . . (850) (453,623) (129,328) (155,602) (316,200) (201,747) (6,665,966)
Exercised. . . -- -- (73,102) (155,157) (198,100) -- (4,277,620)
Expired . . . -- -- (25,194) (85,709) -- -- (549,803)
----- -------- -------- -------- -------- -------- ---------
End of
Period . . . 920 402,334 39,193 -- -- -- $ 436,337
===== ======== ======== ======== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS ON CURRENCIES (000 OMITTED)
-----------------------------------
ESP FRF ITL JPY NZD SEK PREMIUMS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning
of Period . . -- -- -- -- -- -- $ --
Written . . . 5,300,000 255,000 29,000,000 934,928 232,133 1,120,500 4,229,540
Closed . . . . (3,700,000) -- -- -- (89,000) (500,000) (1,182,846)
Exercised. . . -- -- -- -- (107,633) (248,000) (949,459)
Expired . . . (1,600,000) (255,000) (29,000,000) -- -- (372,500) (1,377,435)
---------- -------- ----------- ------- -------- --------- -----------
End of
Period . . . -- -- -- 934,928 35,500 -- $ 719,800
========== ======== =========== ======= ======== ========= ===========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OPTIONS ON CURRENCIES (000 OMITTED)
----------------------------------
ESP/DEM GBP/DEM ITL/DEM SEK/DEM PREMIUMS
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning
of Period. . . . -- -- -- -- $ --
Written. . . . . 8,640,000 32,100 220,045,900 1,636,500 3,989,273
Closed . . . . . (800,000) -- -- (788,000) (1009,833)
Exercised. . . . -- -- (107,045,900) (442,500) (1,241,569)
Expired. . . . . (5,300,000) (32,100) (70,000,000) (246,000) (1,123,970)
---------- ------- ------------ --------- ----------
End of
Period . . . . . 2,540,000 -- 43,000,000 160,000 $ 613,901
========== ======= ============ ========= ==========
</TABLE>
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser
a fee equal to an annual rate of 0.75% of the first $1,000,000,000 of average
daily net assets and 0.70% of such assets in excess of $1,000,000,000 computed
and accrued daily and payable monthly. As manager of the assets of the Fund, 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 Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. The
Adviser has agreed not to impose all or a portion of its management fee until
February 28, 1995, and during such period to maintain the annualized expenses of
the Fund at not more than 1.00% of average daily net assets. For the year ended
October 31, 1994, the Adviser did not impose a portion of its management fee
aggregating $1,176,118 and the amount imposed aggregated $4,625,076, which was
equivalent to an annual effective rate of 0.60% of the Fund's average daily net
assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended October 31, 1994, the amount charged by SSC aggregated
$1,083,858, of which $65,804 is unpaid at October 31, 1994.
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1994, Directors' fees and expenses aggregated $42,932.
D. SHORT-TERM DEBT
- --------------------------------------------------------------------------------
During the year ended October 31, 1994, the Fund periodically borrowed amounts
from a bank at the existing prime rates. The arrangement with the bank
allows the Fund to borrow a maximum amount based on net asset value. There were
no month-end borrowings outstanding during the year ended October 31, 1994.
During the year ended October 31, 1994, the weighted average outstanding
daily balance of bank loans (based on the number of days the loans were
outstanding) was $5,225,500 with a weighted average interest rate of
6.55. Interest expense for the year ended October 31, 1994 was $20,424
(less than $.01 per share).
E. COMMITMENTS
- --------------------------------------------------------------------------------
As of October 31, 1994, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$10,761,538
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE (U.S.$)
---------------------- ---------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
USD 20,695 DEM 31,250 11/1/94 82
JPY 3,750,000 USD 38,481 11/1/94 (234)
CSK 36,138,229 USD 1,314,117 11/4/94 (1,052)
FRF 405,119,610 USD 76,041,017 11/7/94 to 11/16/94 (2,595,253)
GBP 22,163,386 USD 33,998,635 11/8/94 (2,245,660)
USD 34,386,181 GBP 22,163,386 11/8/94 1,875,904
AUD 17,232,275 USD 12,709,998 11/14/94 to 11/28/94 (70,537)
ITL 13,972,300 USD 8,837 11/14/94 (231)
DKK 217,803,080 USD 35,902,567 11/17/94 to 1/6/95 (1,034,332)
FIM 98,284,506 USD 20,628,504 11/17/94 (714,958)
USD 44,956,185 DEM 69,273,171 11/21/94 to 1/18/95 1,119,116
USD 2,011,514 CAD 2,725,601 11/28/94 3,718
NZD 6,285,700 USD 3,835,911 11/28/94 (28,882)
CHF 52,760,170 USD 39,808,849 12/15/94 to 3/13/95 (2,342,048)
ECU 11,343,792 USD 13,977,820 12/15/94 (388,684)
BEF 720,097,000 USD 21,320,415 12/19/94 (1,965,835)
DEM 162,972,292 USD 105,464,559 1/18/95 to 3/14/95 (3,012,989)
USD 27,100,000 CHF 34,692,065 2/3/95 640,337
-----------
(10,761,538)
===========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F. RECLASSIFICATION OF CAPITAL ACCOUNTS
- --------------------------------------------------------------------------------
As required, effective November 1, 1993, the Fund has adopted the provisions of
Statement of Position 93-2 "Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies (SOP)." In implementing the SOP, the Fund
has reclassified $10,832,234 to increase distributions in excess of net
investment income, $38,912,438 to decrease accumulated net realized loss and
$28,080,204 to decrease additional paid-in capital. These reclassifications,
which have no impact on the net asset value of the Fund, are primarily
attributable to differences in the characterization of certain foreign currency
related gains and losses under federal tax regulations versus generally accepted
accounting principles. The statement of changes in net assets and financial
highlights for prior periods have not been restated to reflect this change in
presentation.
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE SHAREHOLDERS
OF SCUDDER SHORT TERM GLOBAL INCOME FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Short Term Global Income Fund including the investment portfolio, as of
October 31, 1994, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years in
the period then ended and for the period March 1, 1991 (commencement of
operations) to October 31, 1991. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Scudder Short Term Global Income Fund as of October 31, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the three years in the period then ended and for the
period March 1, 1991 (commencement of operations) to October 31, 1991 in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 20, 1994
<PAGE>
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund paid foreign taxes of $742,470 and the Fund recognized $1,996,503 of
foreign source income during the taxable year ended October 31, 1994. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.014 per share
of foreign taxes paid and $.038 of gross income earned from foreign sources in
the taxable year ended October 31, 1994.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Service
Representative at 1-800-225-5163.
<PAGE>
OFFICERS AND DIRECTORS
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director
Thomas J. Devine
Director
William H. Gleysteen, Jr.
Director
William H. Luers
Director
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia University
Graduate School of Business
Daniel Pierce*
Director and Vice President
Robert G. Stone, Jr.
Director
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Douglas M. Loudon*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Gerald J. Moran*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Juris Padegs*
Vice President and Assistant Secretary
Kathryn L. Quirk*
Vice President and Assistant Secretary
Cornelia Small*
Vice President
Lawrence Teitelbaum*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER SERVICE CORPORATION
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR INFORMATION
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
SCUDDER GROUP RETIREMENT SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Information and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
Celebrating 75 Years of Serving Investors
This year marks the 75th anniversary of the founding of Scudder,
Stevens & Clark, Inc., investment adviser for the Scudder Funds.
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder was the first independent investment counsel firm in the
United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load
mutual fund. Today we offer 36 pure no load(tm) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped Scudder
become one of the largest and most respected investment managers in the
world. Though times have changed since our beginnings, we remain committed
to our longstanding principles: managing money with integrity and
distinction, keeping the interests of our clients first; providing access
to investments and markets that may not be easily available to individuals;
and making investing as simple and convenient as possible through friendly,
comprehensive service.
<PAGE>
This prospectus sets forth concisely the information about Scudder Emerging
Markets Income Fund, a series of Scudder Global Fund, Inc. , an open-end
management investment company, that a prospective investor should know
before investing. Please retain it for future reference.
If you require more detailed information, a Statement of Additional
Information dated March 1, 1995 , as amended from time to time, may
be obtained without charge by writing Scudder Investor Services, Inc.,
Two International Place , Boston, MA 02110 -4103 or calling
1-800-225-2470. The Statement, which is incorporated by reference into this
prospectus, has been filed with the Securities and Exchange Commission.
THE FUND INVESTS PREDOMINANTLY IN LOWER QUALITY BONDS, COMMONLY REFERRED TO
AS JUNK BONDS. BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE WITH
REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. PURCHASERS
SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE
FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Contents_see page 4.
Scudder Emerging Markets Income Fund
Prospectus
March 1, 1995
A pure no-load(tm) (no sales charges) mutual fund seeking to provide high
current income and, secondarily, long-term capital appreciation through
investment primarily in high-yielding debt securities issued in emerging
markets.
Expense information
How to compare a Scudder pure no-load(tm) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Emerging Markets Income Fund (the "Fund").
By reviewing this table and those in other mutual funds' prospectuses, you
can compare the Fund's fees and expenses with those of other funds. With
Scudder's pure no-load(tm) funds, you pay no commissions to purchase or
redeem shares, or to exchange from one fund to another. As a result, all of
your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses (after expense
maintenance) : Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of
the Fund's average daily net assets for the fiscal period ended
October 31, 1994 .
Investment management fee 0.36%
12b-1 fees NONE
Other expenses 1.14%
------------
Total Fund operating expenses 1.50%**
======
Example
Based on the estimated level of total Fund operating expenses listed above,
the total expenses relating to a $1,000 investment, assuming a 5% annual
return and redemption at the end of each period, are listed below.
Investors do not pay these expenses directly; they are paid by the Fund
before it distributes its net investment income to shareholders. (As noted
above, the Fund has no redemption fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------ ------ ------ ------
$15 $47 $82 $179
See "Fund organization_Investment adviser" for further information about
the investment management fee. This example assumes reinvestment of all
dividends and distributions and that the percentage amounts listed under
"Annual Fund operating expenses" remain the same each year. This example
should not be considered a representation of past or future expenses or
return. Actual Fund expenses and return vary from year to year and may be
higher or lower than those shown.
* You may redeem by writing or calling the Fund. If you wish to receive
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction
information_Redeeming shares."
** The Adviser has agreed to maintain the total annualized
expenses of the Fund at not more than 1.50% of average daily net
assets until ___________ . If the Adviser had not decided
to maintain the Fund's expenses, it is estimated that the total
annualized expenses of the Fund would amount to 2.14% (of which
1.00% would have consisted of investment management fees).
Financial highlights
The following table includes selected data for a share outstanding
throughout the period and other performance information derived from the
audited financial statements.
If you would like more detailed information concerning the Fund's
performance, a complete portfolio listing and audited financial statements
are available in the Fund's Annual Report dated October 31, 1994 and may be
obtained without charge by writing or calling Scudder Investor Services,
Inc.
******FINANCIAL HIGHLIGHTS CHART TO BE DROPPED IN FROM
ANNUAL REPORT*******
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund
in 1928. Today, we manage in excess of $90 billion for many private
accounts and over 50 mutual fund portfolios. We manage the mutual funds in
a special program for the American Association of Retired Persons, as well
as the fund options available through Scudder Horizon Plan, a
tax-advantaged variable annuity. We also advise The Japan Fund and nine
closed-end funds that invest in countries around the world.
The Scudder Family of Funds is designed to make investing easy and less
costly. It includes money market, tax free, income and growth funds as well
as IRAs, 401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to
professional service representatives at Scudder Service Corporation and the
Scudder Investor Information department, easy exchange among funds,
shareholder reports, informative newsletters and the walk-in convenience of
Scudder Funds Centers.
All Scudder mutual funds are pure no-load(tm). This means you pay no
commissions to purchase or redeem your shares or to exchange from one fund
to another. There are no "12b-1" fees either, which many other funds now
charge to support their marketing efforts. All of your investment goes to
work for you. We look forward to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Emerging Markets Income Fund
Investment objectives
* High current income and, secondarily, long-term capital appreciation
through investment primarily in high-yielding debt securities issued
in emerging markets.
Investment characteristics
* An actively managed portfolio of lower quality bonds issued by
governments and corporations in Latin America and other emerging
markets
* focus on higher-yielding, below investment-grade debt securities
* primarily invested in U.S. dollar-denominated securities to reduce
currency risk
* daily liquidity with no sales charges
Contents
Investment objectives and policies 5
Why invest in the Fund? 7
International investment experience 8
Additional information about policies and investments 9
Special risk considerations 11
Distribution and performance information 15
Fund organization 15
Transaction information 16
Purchases 20
Exchanges and redemptions 21
Shareholder benefits 22
Directors and Officers 25
Appendix 26
Investment products and services 28
How to contact Scudder 29
Investment objectives and policies
Scudder Emerging Markets Income Fund (the "Fund"), a non-diversified
series of Scudder Global Fund, Inc., has dual investment objectives. The
Fund's primary investment objective is to provide investors with
high current income. As a secondary objective, the Fund seeks long-term
capital appreciation. In pursuing these goals, the Fund invests primarily
in high-yielding debt securities issued by governments and corporations in
emerging markets. Many nations in Latin America and other developing
regions of the world have undertaken sweeping political and economic
changes that favor increased business activity and demand for capital. In
the opinion of the Fund's investment adviser, Scudder, Stevens & Clark,
Inc. (the "Adviser"), these changes present attractive investment
opportunities, both in terms of income and appreciation potential, for
long-term investors.
Special investment considerations
The Fund involves above-average bond fund risk and can invest entirely in
high yield/high risk bonds. It is designed as a long-term investment and
not for short-term trading purposes, and should not be considered a
complete investment program. While designed to provide a high level of
current income, it may not be appropriate for all income investors. The
Fund should not be viewed as a substitute for a money market or short-term
bond fund. The Fund invests in lower quality securities of emerging market
issuers, some of which have in the past defaulted on certain of their
financial obligations. Investments in emerging markets can be volatile. The
Fund's share price and yield can fluctuate daily in response to political
events, changes in the perceived creditworthiness of emerging nations,
fluctuations in interest rates and, to a certain extent, movements in
foreign currencies. Please refer to "Special risk considerations" for
further information.
Except as otherwise indicated, the Fund's investment objectives and
policies are not fundamental and may be changed without a vote of
shareholders. Shareholders will receive written notice of any changes in
the Fund's objectives. If there is a change in investment objectives,
shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial position and needs.
There can be no assurance that the Fund's objectives will be met.
Investment policies
In seeking high current income and, secondarily, long-term capital
appreciation, the Fund invests, under normal market conditions, at least
65% of its total assets in debt securities issued by governments,
government-related entities and corporations in emerging markets, or the
return on which is derived primarily from emerging markets. The Fund
considers "emerging markets" to include any country that is defined as an
emerging or developing economy by any one of the following: the
International Bank for Reconstruction and Development (i.e., the World
Bank), the International Finance Corporation or the United Nations or its
authorities.
While the Fund takes a global approach to portfolio management, the Adviser
expects to weight its investments toward countries in Latin America,
specifically Argentina, Brazil, Mexico and Venezuela. Latin America, and
these four countries in particular, offers the largest and most liquid debt
markets of the emerging nations around the globe. In addition to Latin
America, the Adviser may pursue investment opportunities in Asia, Africa,
the Middle East and the developing countries of Europe, primarily in
Eastern Europe. The Fund deem s an issuer to be located in an
emerging market if:
* the issuer is organized under the laws of an emerging market
country;
* the issuer's principal securities trading market is in an emerging
market; or
* at least 50% of the issuer's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years is derived
from (directly or indirectly from subsidiaries) assets or activities
located in emerging markets.
Although the Fund may invest in a wide variety of high-yielding debt
obligations, under normal conditions it must invest at least 50% of its
assets in sovereign debt securities issued or guaranteed by governments,
government-related entities and central banks based in emerging markets
(including participations in and assignments of portions of loans between
governments and financial institutions); government owned, controlled or
sponsored entities located in emerging markets; entities organized and
operated for the purpose of restructuring investment characteristics of
instruments issued by government or government-related entities in emerging
markets; and debt obligations issued by supranational organizations such as
the Asian Development Bank and the Inter-American Development Bank, among
others.
The Fund may also consider for purchase any debt securities issued by
commercial banks and companies in emerging markets. The Fund may invest in
both fixed- and floating-rate issues. Debt instruments held by the Fund
take the form of bonds, notes, bills, debentures, convertible securities,
warrants, bank obligations, short-term paper, loan participations, loan
assignments, and trust interests. The Fund may invest regularly in
"Brady Bonds," which are debt securities issued under the framework of the
Brady Plan as a mechanism for debtor countries to restructure their
outstanding bank loans. Most "Brady Bonds" have their principal
collaterized by zero coupon U.S. Treasury bonds.
To reduce currency risk, the Fund invest s at least 65% of its
assets in U.S. dollar-denominated debt securities. Therefore, no more than
35% of the Fund's assets may be invested in debt securities denominated in
foreign currencies.
The Fund is not restricted by limits on weighted average
portfolio maturity or the maturity of an individual issue. Debt securities
in which the Fund may invest may have stated maturities from overnight to
30 years. The weighted average maturity of the Fund's portfolio is
actively managed and will vary from period to period based upon the
Adviser's assessment of economic and market conditions, taking into account
the Fund's investment objectives.
In addition to maturity, the Fund's investments are actively managed
in terms of geographic, industry and currency allocation. In managing the
Fund's portfolio, the Adviser take s into account such factors
as the credit quality of issuers, changes in and levels of interest rates,
projected economic growth rates, capital flows, debt levels, trends in
inflation, anticipated movements in foreign currencies, and government
initiatives.
While the Fund is not "diversified" for purposes of the Investment Company
Act of 1940, (the "1940 Act") it invest s in a minimum of
three countries at any one time and will not commit more than 40% of its
assets to issuers in a single country.
By focusing on fixed-income instruments issued in emerging markets, the
Fund invests predominantly in debt securities that are rated below
investment-grade, or unrated but equivalent to those rated below
investment-grade by internationally recognized rating agencies such as
Standard and Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's"). Debt securities rated below BBB by S&P or below Baa by Moody's
are considered to be below investment-grade. These types of high yield/high
risk debt obligations (commonly referred to as "junk bonds") are
predominantly speculative with respect to the capacity to pay interest and
repay principal in accordance with their terms and generally involve a
greater risk of default and more volatility in price than securities in
higher rating categories, such as investment-grade U.S. bonds. On occasion,
the Fund may invest up to 5% of its net assets in non-performing securities
whose quality is comparable to securities rated as low as D by S&P or C by
Moody's. During the fiscal period ended October 31, 1994, the average
monthly dollar-weighted market value of the bonds in the Fund's portfolio
was rated as follows: 10.0% AA, 2.2% A, 7.8% BBB, 24.8% BB, 54.7% B and
0.50% CCC. The bonds are rated by Moody's or S&P, or of equivalent quality
as determined by the Adviser. It is anticipated that a large portion of
the Fund's bond holdings will trade at substantial discounts from face
value. Please refer to "Special risk considerations_High yield/high risk
securities" for more information.
The Fund may invest up to 35% of its total assets in securities other than
debt obligations issued in emerging markets. These holdings include debt
securities and money market instruments issued by corporations and
governments based in developed markets, including up to 20% of total assets
in U.S. fixed-income instruments. However, for temporary, defensive or
emergency purposes, the Fund may invest without limit in U.S. debt
securities, including short-term money market securities. It is impossible
to predict for how long such alternative strategies will be utilized. The
Fund may engage in strategic transactions for hedging purposes and to seek
to increase gain. The Fund will borrow only to enhance liquidity and to
provide for redemptions and distributions. The Fund may also acquire shares
of closed-end investment companies that invest primarily in emerging market
debt securities. To the extent the Fund invests in such closed-end
investment companies, shareholders will incur certain duplicative fees and
expenses, including investment advisory fees. See "Additional information
about policies and investments" and "Special risk considerations" for more
information about these investment techniques.
Why invest in the Fund?
The Fund is designed as a convenient, relatively low cost way for investors
to participate in an actively managed portfolio of high-yielding emerging
market debt securities. The Adviser believes that emerging bond markets
will continue to expand with the economic growth in Latin America and other
developing regions, and that securities in these markets will continue to
provide an attractive combination of high current income and appreciation
potential for the long-term investor.
In recent years, many emerging markets around the world have reduced
government's role in economic and personal affairs and instituted other
changes to stimulate business investment and growth. Autocratic political
regimes have, in many cases, been replaced by more democratic institutions.
Centrally controlled economies have given way, in whole or significant
part, to free-market systems. In support of these changes, countries in
Latin America and elsewhere have reduced tax rates and budget deficits,
made strides in getting inflation under control and stabilizing exchange
rates, and have eliminated or reduced trade barriers. Added to these
important steps, developing economies have improved communications and
transportation systems; liberalized capital markets; and privatized
utilities, oil companies, banks and other state-owned industries. Although
the pace and success in accomplishing these objectives vary significantly
from country to country, these reforms have, in general, helped to reverse
flight of capital, build confidence among both local and foreign investors,
and stimulate economic expansion.
The Adviser believes that for these favorable trends to continue, however,
the emerging economies of Latin America, Asia, Africa, the Middle East and
Europe will need a steady flow of capital to continue to build
infrastructure, complement domestic savings, support currency reserves,
expand plant and equipment, and maintain competitiveness on a global basis.
Much of this capital should come from the public and private debt markets.
The world fixed-income markets are vital to the future growth of emerging
economies. These markets can present attractive opportunities for investors
in the form of high yields, which emerging economies need to offer to
attract capital, and the potential for capital appreciation, which can
result from improving creditworthiness of emerging market issuers,
declining interest rates and other factors.
In addition to an attractive return potential, the Fund can provide
diversity to a domestic investment portfolio because the emerging debt
markets do not always move in the same manner as U.S. stock and bond
markets. The Fund can also provide a way to benefit from the growth and
improving economic fundamentals of developing nations for those investors
who cannot tolerate the degree of volatility associated with emerging
market common stocks.
Direct investment in foreign securities, especially the emerging markets,
is usually impractical for an individual investor. Investors, on their own,
may find it difficult to analyze investment opportunities abroad as well as
trade and hold foreign securities. The Fund offers professional management
and administrative convenience to shareholders wishing to participate in
this relatively new asset class.
In addition, the Fund offers all the benefits of the Scudder Family of
Funds. Scudder, Stevens & Clark, Inc. manages a diverse family of pure
no-load(tm) funds and provides a wide range of services to help investors
meet their investment needs. Please refer to "Investment products and
services" for additional information.
International investment
experience
The Adviser has been a leader in international investment management for
over 40 years. Its investment company clients include Scudder International
Fund, which invests primarily in foreign securities and was initially
incorporated in Canada in 1953 as the first foreign investment company
registered with the United States Securities and Exchange Commission,
Scudder International Bond Fund, which invests internationally, Scudder
Global Fund, Scudder Short Term Global Fund and Scudder Global Small
Company Fund, which invest worldwide, The Japan Fund, Inc., which invests
in Japanese issuers, Scudder Latin America Fund, which invests in Latin
American issuers, Scudder Pacific Opportunities Fund, which invests in
Pacific Basin issuers and Scudder Greater Europe Growth Fund, which invests
in equity securities of European companies. The Adviser also manages the
assets of eight closed-end investment companies which invest in foreign
securities: The Argentina Fund, Inc., The Brazil Fund, Inc., The First
Iberian Fund, Inc., The Korea Fund, Inc., The Latin America Dollar Income
Fund, Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc. and
Scudder World Income Opportunities Fund, Inc. As of October 31,
199 4 , the Adviser was responsible for managing more than $ 22
billion of foreign securities, including approximately $ 11 billion
invested in Latin American and other emerging market debt securities. In
an effort to control risk and enhance return, the Adviser conducts its own
credit analysis and assigns its own credit risk ratings.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk. The Fund may not borrow money except as a temporary
measure for extraordinary or emergency purposes and may not make loans
except through the lending of portfolio securities , the purchase
of debt securities or through repurchase agreement s . T he
Fund may not invest more than 25% of its total assets in securities of
companies in the same industry.
In addition, as a matter of nonfundamental policy, the Fund may not invest
more than 15% of its net assets , in the aggregate, in securities
which are not readily marketable, repurchase agreements maturing in more
than seven days and restricted securities. The Fund may not invest more
than 10% of its total assets in restricted securities. A complete
description of these and other policies and restrictions is contained under
"Investment Restrictions" in the Fund's Statement of Additional
Information.
Portfolio Turnover Rate
Recent economic and market conditions have necessitated active trading,
resulting in a high portfolio turnover rate for the Fund. A high rate
involves greater transaction costs to the Fund and may result in the
realization of net capital gains, which would be taxable to shareholders
when distributed.
Brady Bonds
The Fund may invest in Brady Bonds, which are securities created through
the exchange of existing commercial bank loans to public and private
entities in certain emerging markets for new bonds in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan
debt restructurings have been implemented to date in Mexico, Uruguay,
Venezuela, Costa Rica, Argentina, Nigeria and the Philippines.
Brady Bonds have been issued only recently, and for that reason do not have
a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the
dollar) and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate
bonds or floating-rate bonds, are generally collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as
the bonds.
Brady Bonds are often viewed as having three or four valuation components:
the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments;
and any uncollateralized repayment of principal at maturity, (these
uncollateralized amounts constituting the "residual risk"). In light of the
residual risk of Brady Bonds and the history of defaults of countries
issuing Brady Bonds with respect to commercial bank loans by public and
private entities, investments in Brady Bonds may be viewed as speculative.
Indexed securities
The Fund may invest in indexed securities, the value of which is linked to
currencies, interest rates, commodities, indices or other financial
indicators ("reference instruments"). The interest rate or (unlike most
fixed-income securities) the principal amount payable at maturity of an
indexed security may be increased or decreased, depending on changes in the
value of the reference instrument.
Loan participations and assignments
The Fund may invest in fixed- and floating-rate loans arranged through
private negotiations between an issuer of emerging market debt instruments
and one or more financial institutions ("lenders"). Generally, the Fund's
investments in loans are expected to take the form of loan participations
and assignments of portions of loans from third parties.
When investing in a participation, the Fund will typically have the right
to receive payments only from the lender to the extent the lender receives
payments from the borrower, and not from the borrower itself. Likewise, the
Fund typically will be able to enforce its rights only through the lender,
and not directly against the borrower. As a result, the Fund will assume
the credit risk of both the borrower and the lender that is selling the
participation.
When the Fund purchases assignments from lenders, it will acquire direct
rights against the borrower, but these rights and the Fund's obligations
may differ from, and be more limited than those held by the assigning
lender.
Loan participations and assignments may be illiquid. Please refer to
"Special risk considerations_Illiquid investments" for more information.
Convertible securities
The Fund may invest in convertible securities which may offer higher income
than the common stocks into which they are convertible. The convertible
securities in which the Fund may invest consist of bonds, notes, debentures
and preferred stocks which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock. The
Fund may be required to permit the issuer of a convertible security to
redeem the security, convert it into the underlying common stock or sell it
to a third party. Thus, the Fund may not be able to control whether the
issuer of a convertible security chooses to convert that security. If the
issuer chooses to do so, this action could have an adverse effect on the
Fund's ability to achieve its investment objectives.
When-issued securities
The Fund may purchase securities on a when-issued or forward delivery
basis, for payment and delivery at a later date. The price and yield are
generally fixed on the date of commitment to purchase. During the period
between purchase and settlement, no interest accrues to the Fund. At the
time of settlement, the market value of the security may be more or less
than the purchase price.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund
may enter into repurchase agreements with selected banks and broker/
dealers. Under a repurchase agreement the Fund acquires securities, subject
to the seller's agreement to repurchase them at a specified time and price.
The Fund may enter into repurchase commitments with any party deemed
creditworthy by the Adviser, including foreign banks and broker/dealers, if
the transaction is entered into for investment purposes and the
counterparty's creditworthiness is at least equal to that of issuers of
securities which the Fund may purchase. Such transactions may not provide
the Fund with collateral marked-to-market during the term of the
commitment.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or
duration of the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts.
Such strategies are generally accepted as a part of modern portfolio
management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as
new instruments and strategies are developed or regulatory changes
occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as
currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to
protect against possible changes in the market value of securities held in
or to be purchased for the Fund's portfolio resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's
unrealized gains in the value of its portfolio securities, to facilitate
the sale of such securities for investment purposes, to manage the
effective maturity or duration of the Fund's portfolio, or to establish a
position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. Some Strategic Transactions
may also be used to enhance potential gain although no more than 5% of the
Fund's assets will be committed to Strategic Transactions entered into for
non-hedging purposes. Any or all of these investment techniques may
be used at any time and in any combination, and there is no
particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize
these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. The
Fund will comply with applicable regulatory requirements when implementing
these strategies, techniques and instruments. Strategic Transactions
involving financial futures and options thereon will be purchased, sold or
entered into only for bona fide hedging, risk management or portfolio
management purposes and not for speculative purposes. Please refer to
"Special risk considerations_Strategic Transactions and derivatives "
for more information.
Special risk considerations
The Fund's risks are determined by the nature of the securities held and
the portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques
that the Fund may use from time to time.
Non-diversified investment company. As a non-diversified investment
company, the Fund may invest a greater portion of its assets in the
securities of a small number of issuers which may subject the Fund to
greater market and credit risk and may cause the Fund's share price to
fluctuate more than that of a diversified investment company.
Indexed securities. Indexed securities may be positively or negatively
indexed, so that appreciation of the reference instrument may produce an
increase or a decrease in the interest rate or value of the security at
maturity. In addition, the change in the interest rate or value of the
security at maturity may be some multiple of the change in the value of the
reference instrument. Thus, in addition to the credit risk of the
security's issuer, the Fund will bear the market risk of the reference
instrument.
Foreign securities. Investments in foreign securities involve special
considerations due to more limited information, higher brokerage costs,
different accounting standards, thinner trading markets and the likely
impact of foreign taxes on the income from securities. They may also entail
certain other risks, such as the possibility of one or more of the
following: imposition of dividend or interest withholding or confiscatory
taxes; currency blockages or transfer restrictions; expropriation,
nationalization, military coups or other adverse political or economic
developments; less government supervision and regulation of securities
exchanges, brokers and listed companies; and the difficulty of enforcing
obligations in other countries. Further, it may be more difficult for the
Fund's agents to keep currently informed about corporate actions which may
affect the prices of portfolio securities. Communications between the U.S.
and foreign countries may be less reliable than within the U.S., increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Certain markets may require payment
for securities before delivery. The Fund's ability and decisions to
purchase and sell portfolio securities may be affected by laws or
regulations relating to the convertibility of currencies and repatriation
of assets. Some countries restrict the extent to which foreigners may
invest in their securities markets.
The Fund invests in securities denominated in currencies of foreign
countries. Accordingly, changes in the value of these currencies against
the U.S. dollar will result in corresponding changes in the U.S. dollar
value of the Fund's assets denominated in those currencies.
Some foreign countries also may have managed currencies, which are not free
floating against the U.S. dollar. In addition, there is risk that certain
foreign countries may restrict the free conversion of their currencies into
other currencies. Further, it generally will not be possible to reduce the
Fund's emerging market currency risk through hedging. Any devaluations in
the currencies in which the Fund's portfolio securities are denominated may
have a detrimental impact on the Fund's net asset value.
Investing in emerging markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. Emerging markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets
of the Fund is uninvested and no return is earned thereon. The inability of
the Fund to make intended security purchases due to settlement problems
could cause the Fund to miss attractive investment opportunities. Inability
to dispose of portfolio securities due to settlement problems could result
either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, in possible liability to the purchaser. Costs associated with
transactions in foreign securities are generally higher than costs
associated with transactions in U.S. securities. Such transactions also
involve additional costs for the purchase or sale of foreign currency.
Foreign investment in certain emerging market debt obligations is
restricted or controlled to varying degrees. These restrictions or controls
may at times limit or preclude foreign investment in certain emerging
market debt obligations and increase the costs and expenses of the Fund.
Certain emerging markets require prior governmental approval of investments
by foreign persons, and/or impose additional taxes on foreign investors.
These markets may also restrict investment opportunities in issuers in
industries deemed important to national interests.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in
an emerging market's balance of payments or for other reasons, a country
could impose temporary restrictions on foreign capital remittances. The
Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation of capital, as well as by
the application to the Fund of any restrictions on investments.
Throughout the last decade many emerging markets have experienced and
continue to experience high rates of inflation. In certain countries
inflation has at times accelerated rapidly to hyperinflationary levels,
creating a negative interest rate environment and sharply eroding the value
of outstanding financial assets in those countries. Increases in inflation
could have an adverse effect on the Fund's non-dollar denominated
securities and on the issuers of debt obligations generally.
Individual foreign economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross domestic product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. The securities markets, values of securities, yields and
risks associated with securities markets in different countries may change
independently of each other.
Investment in sovereign debt can involve a high degree of risk. Holders of
sovereign debt (including the Fund) may be requested to participate in the
rescheduling of such debt and to extend further loans to governmental
entities. There is no bankruptcy proceeding by which sovereign debt on
which governmental entities have defaulted may be collected in whole or in
part. Securities traded in certain emerging European securities markets may
be subject to risks due to the inexperience of financial intermediaries,
the lack of modern technology and the lack of a sufficient capital base to
expand business operations. Additionally, former Communist regimes of a
number of Eastern European countries had expropriated a large amount of
property, the claims on which have not been entirely settled. There can be
no assurance that the Fund's investments in Eastern Europe would not also
be expropriated, nationalized or otherwise confiscated. Finally, any change
in the leadership or policies of Eastern European countries, or the
countries that exercise a significant influence over those countries, may
halt the expansion of or reverse the liberalization of foreign investment
policies now occurring and adversely affect existing investment
opportunities. For a more complete description of the risks of investing in
emerging markets, including Latin America, please refer to the Fund's
Statement of Additional Information.
High yield/high risk securities. The Fund may invest in debt securities
which are rated below investment-grade (hereinafter referred to as "lower
rated securities") or which are unrated, but equivalent to those rated
below investment-grade. The lower the ratings of such debt securities, the
greater their risks render them like equity securities. These debt
instruments generally offer a higher current yield than that available from
higher grade issues, but typically involve greater risk. Lower rated and
unrated securities are especially subject to adverse changes in general
economic conditions, to changes in the financial condition of their
issuers, and to price fluctuation in response to changes in interest rates.
During periods of economic downturn or rising interest rates, issuers of
these instruments may experience financial stress that could adversely
affect their ability to make payments of principal and interest and
increase the possibility of default. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of these securities especially in a
market characterized by only a small amount of trading. Perceived credit
quality in this market can change suddenly and unexpectedly, and may not
fully reflect the actual risk posed by a particular lower rated or unrated
security. For a more complete description of the risks of high yield/high
risk securities, please refer to the Fund's Statement of Additional
Information.
Illiquid investments. The absence of a trading market can make it difficult
to ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and
it may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
Convertible securities. While convertible securities generally offer lower
yields than non-convertible debt securities of similar quality, their
prices may reflect changes in the value of the underlying common stock.
Convertible securities generally entail less credit risk than the issuer's
common stock.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted.
In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the
securities under a repurchase agreement, the Fund may encounter delay and
incur costs, including a decline in the value of securities, before being
able to sell the securities.
Strategic Transactions and derivatives . Strategic Transactions ,
including derivative contracts, have risks associated with them
including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market
movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used.
Use of put and call options may result in losses to the Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions can result in the
Fund incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements or the
inability to deliver or receive a specified currency. The use of options
and futures transactions entails certain other risks. In particular, the
variable degree of correlation between price movements of futures contracts
and price movements in the related portfolio position of the Fund creates
the possibility that losses on the hedging instrument may be greater than
gains in the value of the Fund's position. In addition, futures and options
markets may not be liquid in all circumstances and certain over-the-counter
options may have no markets. As a result, in certain markets, the Fund
might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures contracts and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to
limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than
would purchases of options, where the exposure is limited to the cost of
the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such
losses can be greater than if the Strategic Transactions had not been
utilized. The Strategic Transactions that the Fund may use and some of
their risks are described more fully in the Fund's Statement of Additional
Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute dividends from its ordinary income quarterly
in April, July, October and December. The Fund intends to distribute
realized capital gain net income after utilization of capital loss
carryforwards, if any, in December to prevent application of a federal
excise tax, although an additional distribution may be made if necessary.
Any dividends or capital gains distributions declared in October, November
or December with a record date in such a month and paid during the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared.
According to preference, shareholders may receive distributions in cash or
have them reinvested in additional shares of the Fund. If an investment is
in the form of a retirement plan, all dividends and capital gains
distributions must be reinvested into the shareholder's account.
Generally, dividends from net investment income are taxable to shareholders
as ordinary income. Certain realized gains or losses on the sale or
retirement of foreign bonds held by the Fund, to the extent attributable to
fluctuations in currency exchange rates, as well as certain other gains or
losses attributable to exchange rate fluctuations, must be treated as
ordinary income or loss. Such income or loss may increase or decrease the
Fund's income available for distribution to shareholders. If, under the
rules governing the tax treatment of foreign currency gains and losses, the
Fund's income available for distribution is decreased, a portion of the
dividends declared by the Fund may be treated for federal income tax
purposes as a nontaxable distribution.
Long-term capital gains distributions, if any, are taxable as long-term
capital gains regardless of the length of time shareholders have owned
shares. Short-term capital gains and any other taxable income distributions
are taxable as ordinary income.
The Fund sends detailed tax information about the amount and type of its
distributions to its shareholders by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance
figures are historical, show the performance of a hypothetical investment
and are not intended to indicate future performance. The "yield" of the
Fund refers to income generated by an investment in the Fund over a
specified 30-day (one month) period. Yield is expressed as an annualized
percentage. "Total return" is the change in value of an investment in the
Fund for a specified period. The "average annual total return" of the Fund
is the average annual compound rate of return of an investment in the Fund
assuming the investment has been held for one year and the life of the
Fund. "Cumulative total return" represents the cumulative change in value
of an investment in the Fund for various periods. Total return calculations
assume that all dividends and capital gains distributions during the period
were reinvested. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other
things, changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Emerging Markets Income Fund is a non-diversified series of Scudder
Global Fund, Inc. (the "Corporation"), an open-end, management investment
company registered under the 1940 Act. The Corporation was organized as a
Maryland corporation in May 1986.
The Fund's activities are supervised by the Corporation's Board of
Directors. Shareholders have one vote for each share held on matters on
which they are entitled to vote. The Fund is not required to and has no
current intention of holding annual shareholder meetings, although special
meetings may be called for purposes such as electing or removing Directors,
changing fundamental investment policies or approving an investment
management contract. Shareholders will be assisted in communicating with
other shareholders in connection with removing a Director as if Section
16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens &
Clark, Inc., a Delaware corporation, to manage the Fund's daily investment
and business affairs subject to the policies established by the Board of
Directors. The Directors have overall responsibility for the management of
the Fund under Maryland law.
The Fund pays the Adviser an annual fee of 1.00% of the Fund's average
daily net assets. The fee is payable monthly, provided that the Fund will
make interim payments as may be requested by the Adviser not to exceed 75%
of the amount of the fee then accrued on the books of the Fund and unpaid.
For the fiscal period ended October 31, 1994, the Adviser received an
investment management fee of 0.26% of the Fund's average daily net assets
on an annual basis.
The Adviser has agreed to maintain the annualized expenses of the Fund at
not more than 1.50% of the average daily net assets of the Fund until
_____________ .
Under the Investment Management Agreement with the Adviser, the Fund is
responsible for all of its other expenses including fees and expenses
incurred in connection with membership in investment company organizations;
brokers' commissions; legal, auditing and accounting expenses; taxes and
governmental fees; the fees and expenses of the transfer agent; the
expenses of and the fees for registering or qualifying securities for sale;
the fees and expenses of Directors, officers and employees of the
Corporation who are not affiliated with the Adviser; the cost of printing
and distributing reports and notices to shareholders; and the fees and
disbursements of custodians.
All of the Fund's expenses are paid out of gross investment income.
Shareholders pay no direct charges or fees for investment or administrative
services.
Scudder, Stevens & Clark, Inc. is located at 345 Park Avenue, New York, New
York.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts
02107-2291, a wholly-owned subsidiary of the Adviser, is the transfer,
shareholder servicing and dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser,
is the Fund's principal underwriter. Scudder Investor Services, Inc.
confirms, as agent, all purchases of shares of the Fund. Scudder Investor
Information is a telephone information service provided by Scudder Investor
Services, Inc.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share
after the Fund's transfer agent in Boston receives the purchase request in
good order. Purchases are made in full and fractional shares. (See "Share
price.")
By check. If you purchase shares with a check that does not clear, your
purchase will be canceled and you will be subject to any losses or fees
incurred in the transaction. Checks must be drawn on or payable through a
U.S. bank. If you purchase shares by check and redeem them within seven
business days of purchase, the Fund may hold redemption proceeds until the
purchase check has cleared, which may take up to seven business days. If
you purchase shares by federal funds wire, you may avoid this delay.
Redemption or exchange requests by telephone prior to the expiration of the
seven-day period will not be accepted.
By wire. To open a new account by wire, first call Scudder at
1-800-225-5163 to obtain an account number. A representative will instruct
you to send a completed, signed application to the transfer agent in
Boston. Accounts cannot be opened without a completed, signed application
and a Scudder fund account number. Contact your bank to arrange a wire
transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
_ the name of the fund in which the money is to be invested,
_ the account number of the fund, and
_ the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain
day's price by calling 1-800-225-5163 before the close of regular trading
on the New York Stock Exchange (the "Exchange"), normally 4 p.m. eastern
time, on that day. Orders must be for $10,000 or more and cannot be for an
amount greater than four times the value of your account at the time the
order is placed. You must include with your payment the order number given
at the time the order is placed. A confirmation with complete purchase
information is sent shortly after your order is received. If payment by
check or wire is not received within seven business days, the order will be
canceled and the shareholder will be responsible for any loss to the
Fund resulting from this cancellation. Telephone orders are not available
for shares held in Scudder IRA accounts and most other Scudder retirement
plan accounts.
By exchange. Your new account will have the same registration and address
as your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for
more information, including information about the transfer of special
account features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund)
without redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If
you elected telephone redemption to your bank on your application, you can
call to request that federal funds be sent to your authorized bank account.
If you did not elect telephone redemption to your bank on your application,
call 1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested.
If your bank cannot receive federal reserve wires, redemption
proceeds will be mailed to your bank. There will be a $5 charge for
all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until
the Fund's transfer agent has received your completed and signed
application. Telephone redemption is not available for shares held in
Scudder IRA accounts and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
Signature guarantees. For your protection and to prevent fraudulent
redemptions, on written redemption requests in excess of $50,000 we require
an original signature and an original signature guarantee for each person
in whose name the account is registered. (The Fund reserves the right,
however, to require a signature guarantee for all redemptions.) You can
obtain a signature guarantee from most banks, credit unions or savings
associations, or from broker/dealers, municipal securities broker/dealers,
government securities broker/dealers, national securities exchanges,
registered securities associations, or clearing agencies deemed eligible by
the Securities and Exchange Commission. Signature guarantees by notaries
public are not acceptable. Redemption requirements for corporations, other
organizations, trusts, fiduciaries, agents, institutional investors and
retirement plans may be different from those for regular accounts. For more
information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and
the right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be
sent to a predesignated bank account. The Fund uses procedures
designed to give reasonable assurance that telephone instructions are
genuine, including recording telephone calls, testing a caller's identity
and sending written confirmation of telephone transactions. If the Fund
does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it
reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset
value. The Fund's custodian, Brown Brothers Harriman & Co., determines net
asset value per share as of the close of regular trading on the Exchange,
normally 4 p.m. eastern time, on each day the Exchange is open for trading.
Net asset value per share is calculated by dividing the value of total Fund
assets, less all liabilities, by the total number of shares outstanding.
Trading in securities on European and Far Eastern securities exchanges is
normally completed before the close of regular trading on the Exchange.
Trading on these foreign exchanges may not take place on all days on which
there is regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange. If events materially
affecting the value of the Fund's portfolio securities occur between the
time when these foreign exchanges close and the time when the Fund's net
asset value is calculated, such securities will be valued at fair value as
determined by the Corporation's Board of Directors.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange
are executed at the net asset value per share calculated at the close of
regular trading that day.
Purchase and redemption requests received after the close of regular
trading on the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify
Scudder Service Corporation by calling 1-800-225-5163.
The Fund will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven days (or longer
in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only.
The Fund and Scudder Investor Services, Inc. each reserves the right to
restrict purchases of Fund shares (including exchanges) when a pattern of
frequent purchases and sales made in response to short-term fluctuations in
the Fund's share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is
a sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and
redemption and exchange proceeds from accounts (other than those of certain
exempt payees) without a certified Social Security or tax identification
number and certain other certified information or upon notification from
the IRS or a broker that withholding is required. The Fund reserves the
right to reject new account applications without a certified Social
Security or tax identification number. The Fund also reserves the right,
following 30 days' notice, to redeem all shares in accounts without a
certified Social Security or tax identification number. A shareholder may
avoid involuntary redemption by providing the Fund with a tax
identification number during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which
amount may be changed by the Board of Directors. Scudder retirement plans
have similar or lower minimum share balance requirements. The Fund reserves
the right, following 60 days' written notice to shareholders, to redeem all
shares in sub-minimum accounts, including accounts of new investors, where
a reduction in value has occurred due to a redemption or exchange out of
the account. Reductions in value that result solely from market activity
will not trigger an involuntary redemption. The Fund will mail the proceeds
of the redeemed account to the shareholder. The shareholder may restore the
share balance to $1,000 or more during the 60-day notice period and must
maintain it at no lower than that minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is
made at an investor's election through a member of the National Association
of Securities Dealers, Inc., other than Scudder Investor Services, Inc.,
that member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen
by the Fund and valued as they are for purposes of computing the Fund's net
asset value (a redemption-in-kind). If payment is made in securities, a
shareholder may incur transaction expenses in converting these securities
to cash. The Corporation has elected, however, to be governed by Rule 18f-1
under the 1940 Act as a result of which the Fund is obligated to redeem
shares, with respect to any one shareholder during any 90-day period,
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of the period.
Purchases
Opening
an account
Minimum initial investment: $1,000; IRAs $500
Group retirement plans (401(k), 403(b), etc.) have similar or lower
minimums. See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send your completed and signed application and check
by regular mail to: or by express,
registered,
or certified mail to:
The Scudder Funds The Scudder Funds
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 02370-1052
* By Wire
Please see Transaction information_Purchasing shares_ By wire
following these tables for details, including the ABA wire transfer
number. Then call 1-800-225-5163 for instructions.
* In Person
Visit one of our Funds Centers to complete your application with the
help of a Scudder representative. Funds Center locations are listed
under Shareholder benefits.
Purchasing additional shares
Minimum additional investment: $100; IRAs $50
Group retirement plans (401(k), 403(b), etc.) have similar or lower
minimums. See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send a check with a Scudder investment slip, or with a letter of
instruction including your account number and the complete Fund name,
to the appropriate address listed above.
* By Wire
Please see Transaction information_Purchasing shares_ By wire
following these tables for details, including the ABA wire
transfer number.
* In Person
Visit one of our Funds Centers to make an additional investment in
your Scudder fund account. Funds Center locations are listed under
Shareholder benefits.
* By Telephone
You may purchase additional shares in an amount of $10,000 or more.
Please call 1-800-225-5163 for more details.
* By Automatic Investment Plan ($50 minimum)
You may arrange to make investments on a regular basis through
automatic deductions from your bank checking account. Please call
1-800-225-5163 for more information and an enrollment form.
Exchanges and redemptions
Exchanging shares
Minimum investments: $1,000 to establish a new account; $100 to exchange
among existing accounts
* By Tele phone
To speak with a service representative, call 1-800-225-5163 from 8
a.m. to 8 p.m. eastern time or to access SAIL(tm), Scudder's
Automated Information Line, call 1-800-343-2890 (24 hours a day).
* By Mail or Fax
Print or type your instructions and include:
- the name of the Fund and the account number you are exchanging
from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime
phone number.
Send your instructions
by regular mail to: or by express, or by fax to:
registered, or
certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 02370-1052
Redeeming shares
* By Tele phone
To speak with a service representative, call 1-800-225-5163 from 8
a.m. to 8 p.m. eastern time or to access SAIL(tm), Scudder's
Automated Information Line, call 1-800-343-2890 (24 hours a day). You
may have redemption proceeds sent to your predesignated bank
account, or redemption proceeds of up to $50,000 sent to your
address of record.
* By Mail or Fax
Send your instructions for redemption to the appropriate address or
fax number above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime
phone number.
A signature guarantee is required for redemptions over $50,000. See
Transaction information_Redeeming shares following these tables.
* By Automatic Withdrawal Plan
You may arrange to receive automatic cash payments periodically if the
value of your account is $10,000 or more. Call 1-800-225-5163 for more
information and an enrollment form.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced
investment management firms, actively manages your Scudder fund investment.
Professional management is an important advantage for investors who do not
have the time or expertise to invest directly in individual securities.
A team approach to investing
Scudder Emerging Markets Income Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are
supported by Scudder's large staff of economists, research analysts,
traders, and other investment specialists who work in Scudder
offices across the United States and abroad. Scudder believes its team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio manager M. Isabel Saltzman has responsibility for the
Fund's investment strategies. Ms. Saltzman , who joined Scudder in
1990, has been involved in foreign finance and investing since 1979 and
contributes special expertise in Latin America. Lincoln Y. Rathnam ,
Portfolio Manager, is responsible for the Fund's day-to-day management.
Mr. Rathnam, who joined Scudder in 1984, has 15 years of
experience in international investing. Susan E. Gray, Portfolio
Manager, has responsibility for developing the Fund's trading strategies.
Ms. Gray, who has over three years of investment trading experience, has
worked at Scudder since 1987.
SAIL(tm)_Scudder Automated Information Line
For touchtone access to account information, prices and yields, or to
perform transactions in existing Scudder fund accounts, shareholders
can call Scudder's Automated Information Line (SAIL) at 1-800-343-2890.
During periods of extreme economic or market changes, or other conditions,
it may be difficult for you to effect telephone transactions in your
account. In such an event you should write to the Fund; please see "How to
contact Scudder" for the address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net
asset value. You can move your investments among money market, income, tax
free and growth funds with a simple toll-free call or, if you prefer, by
sending your instructions through the mail or by fax. Telephone and fax
redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some
cases, the transfer agent or Scudder Investor Services, Inc. may impose
additional conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in
additional Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a
review of portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund
reports, such as the Fund's Annual Report, may be mailed to your household
(same surname, same address). Please call 1-800-225-5163 if you wish to
receive additional shareholder reports.
Newsletters
Four times a year, Scudder sends you At the Helm, an informative newsletter
covering economic and investment developments, service enhancements and
other topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person,
Scudder Investor Services, Inc. maintains Funds Centers in Boca Raton,
Boston, Chicago, Cincinnati, Los Angeles, New York, Portland (OR), San
Diego , San Francisco and Scottsdale .
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D.
(Telephone Device for the Deaf) service. If you have access to a T.D.D.,
call 1-800-543-7916 for investment information or specific account
questions and transactions.
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for
individuals, businesses and non-profit organizations. These flexible plans
are designed for use with the Scudder Family of F unds (except
Scudder tax-free funds, which are inappropriate for such plans). Scudder
Funds offer a broad range of investment objectives and can be used to
seek almost any investment goal. Using Scudder's retirement plans can help
shareholders save on current taxes while building their retirement savings.
Scudder No-Fee IRAs. These retirement plans allow
a maximum annual contribution of $2,000 per person for anyone with
earned income . Many people can deduct all or part of their
contributions from their taxable income, and all investment earnings
accrue on a tax deferred basis. The Scudder No-Fee IRA charges no annual
custodial fee.
401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.
403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
SEP-IRAs. Easily administered retirement plans for small businesses
and self-employed individuals. The maximum annual contribution to
SEP-IRA accounts is adjusted each year for inflation.
Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start with
$2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian
for some of these plans and is paid an annual fee for some of the
above retirement plans. For information about establishing a Scudder
No-Fee IRA, SEP-IRA, Profit Sharing Plan, Money Purchase Pension
Plan or a Scudder Horizon Plan , please call 1-800-225-2470. For
information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit
Sharing or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life
Insurance Company (in New York State, Intramerica Life Insurance Company
+++S 1802(tm)). The contract is offered by Scudder Insurance Agency, Inc.
(in New York State, Nevada and Montana, Scudder Insurance Agency of New
York, Inc.). CNL, Inc. is the Principal Underwriter. Scudder Horizon Plan
is not available in all states.
Directors and Officers
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, Metropolitan
Museum of Art
Daniel Pierce*
Vice President and Director
Robert G. Stone, Jr.
Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor,
Columbia University Graduate School of Business
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Douglas M. Loudon*
Vice President
Gerald J. Moran*
Vice President
Cornelia M. Small*
Vice President
Lawrence Teitelbaum*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Juris Padegs*
Vice President and Assistant Secretary
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen *
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
Appendix
The following is a description of the ratings given by S&P and Moody's to
corporate and municipal bonds.
S&P:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the
highest rated issues only in small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. Debt rated BBB is regarded
as having an adequate capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than
in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighted by large uncertainties or major
exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating. Debt rated B has a
greater vulnerability to default but currently has the capacity to meet
interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied B or B- rating. The rating CC typically is applied to
debt subordinated to senior debt that is assigned an actual or implied CCC
rating. The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. The rating C1 is reserved
for income bonds on which no interest is being paid. Debt rated D is in
payment default. The D rating category is used when interest payments or
principal payments are not made on the date due even if the applicable
grace period had not expired, unless S&P believes that such payments will
be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. Bonds
which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over
any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest. Bonds which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in default or have
other marked shortcomings. Bonds which are rated C are the lowest rated
class of bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Investment products and services
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan* +++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided
by Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock
exchanges. ++For information on Scudder Treasurers Trust(tm), an
institutional cash management service that utilizes certain portfolios of
Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Service Corporation
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
Scudder Automated Information Line (SAIL)
1-800-343-2890
Investment Information:
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
Scudder Investor Information
1-800-225-2470
For establishing 401(k) and 403(b) plans
Scudder Group Retirement Services
1-800-323-6105
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center:
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Information and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
<PAGE>
N:\SHAREDAT\WORD_PRO\PARTB\SEMI.DOC
SCUDDER EMERGING MARKETS INCOME FUND
A Pure No-Load(tm) (No Sales Charges) Non-Diversified Mutual Fund
seeking to provide high current income and, secondarily,
long-term capital appreciation through investment
primarily in high-yielding debt securities
issued in emerging markets.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Scudder Emerging
Markets Income Fund dated March 1, 1995 , as amended from time to
time, a copy of which may be obtained without charge by writing to Scudder
Investor Services, Inc., Two International Place , Boston,
Massachusetts 02110- 4103 .
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND'S INVESTMENT OBJECTIVES AND POLICIES 1
General Investment Objectives and Policies 1
Special Investment Considerations 3
Investment Restrictions 21
PURCHASES 23
Additional Information About Opening An Account 23
Additional Information About Making Subsequent Investments 24
Checks 24
Wire Transfer of Federal Funds 24
Share Price 25
Share Certificates 25
Other Information 25
EXCHANGES AND REDEMPTIONS 25
Exchanges 25
Redemption by Telephone 26
Redemption by Mail or Fax 27
Redemption-In-Kind 27
Other Information 27
FEATURES AND SERVICES OFFERED BY THE FUND 28
The Pure No-Load(tm) Concept 28
Distribution Plan s 29
Scudder Funds Centers 30
Reports to Shareholders 30
Transaction Summaries 30
THE SCUDDER FAMILY OF FUNDS 30
SPECIAL PLAN ACCOUNTS 33
Scudder Retirement Plans: Profit-Sharing and Money Purchase 34
Pension Plans for Corporations and Self-Employed Individuals
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for 34
Corporations and Self-Employed Individuals
Scudder IRA: Individual Retirement Account 34
Scudder 403(b) Plan 35
Automatic Withdrawal Plan 35
Group or Salary Deduction Plan 36
Automatic Investment Plan 36
Uniform Transfers/Gifts to Minors Act 36
Scudder Trust Company 36
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS 36
PERFORMANCE INFORMATION 37
Average Annual Total Return 37
Cumulative Total Return 37
Total Return 38
Capital Change 38
Yield 38
Comparison of Fund Performance 39
FUND ORGANIZATION 43
INVESTMENT ADVISER 44
DIRECTORS AND OFFICERS 46
REMUNERATION 49
DISTRIBUTOR 50
TAXES 51
PORTFOLIO TRANSACTIONS 54
Brokerage 54
Portfolio Turnover 55
NET ASSET VALUE 55
ADDITIONAL INFORMATION 56
Experts 56
Other Information 56
FINANCIAL STATEMENTS 57
APPENDIX
</TABLE>
THE FUND'S INVESTMENT OBJECTIVES AND POLICIES
(See "Investment objective and policies" and "Additional information
about policies and investments" in the Fund's prospectus.)
Scudder Emerging Markets Income Fund (the "Fund"), a series of Scudder
Global Fund, Inc. (the "Corporation"), is a pure no-load(tm), non-
diversified, open-end management investment company which continuously
offers and redeems its shares. It is a company of the type commonly known
as a mutual fund.
General Investment Objectives and Policies
The Fund's primary investment objective is to provide investors with
high current income. As a secondary objective, the Fund seeks long-term
capital appreciation. In pursuing these goals, the Fund invests primarily
in high-yielding debt securities issued by governments and corporations in
emerging markets. Many nations in Latin America and other developing
regions of the world have undertaken sweeping political and economic
changes that favor increased business activity and demand for capital. In
the opinion of the Fund's investment adviser, Scudder, Stevens & Clark,
Inc. (the "Adviser"), these changes present attractive investment
opportunities, both in terms of income and appreciation potential, for long-
term investors.
The Fund involves above-average bond fund risk and can invest entirely
in high yield/high risk bonds. It is designed as a long-term investment and
not for short-term trading purposes, and should not be considered a
complete investment program. While designed to provide a high level of
current income, it may not be appropriate for all income investors. The
Fund should not be viewed as a substitute for a money market or short-term
bond fund. The Fund invests in lower quality securities of emerging market
issuers, some of which have in the past defaulted on certain of their
financial obligations. Investments in emerging markets can be volatile.
The Fund's share price and yield can fluctuate daily in response to
political events, changes in the perceived creditworthiness of emerging
nations, fluctuations in interest rates and, to a certain extent, movements
in foreign currencies. The securities in which the Fund may invest are
further described below and under "Investment objectives and policies" and
"Additional information about policies and investments" in the Fund's
prospectus.
Changes in portfolio securities are made on the basis of investment
considerations and it is against the policy of management to make changes
for trading purposes. The Fund cannot guarantee a gain or eliminate the
risk of loss. The net asset value of the Fund's shares will increase or
decrease with changes in the market prices of the Fund's investments and
there is no assurance that the Fund's objectives will be achieved. Except
as otherwise indicated, the Fund's investment objectives and policies are
not fundamental and may be changed by the Directors without a vote of the
shareholders.
In seeking high current income and, secondarily, long-term capital
appreciation, the Fund invests, under normal market conditions, at least
65% of its total assets in debt securities issued by governments,
government-related entities and corporations in emerging markets, or the
return on which is derived primarily from emerging markets. The Fund
considers "emerging markets" to include any country that is defined as an
emerging or developing economy by any one of the following: the
International Bank for Reconstruction and Development (i.e., the World
Bank), the International Finance Corporation or the United Nations or its
authorities.
While the Fund takes a global approach to portfolio management, the
Adviser expects to weight its investments toward countries in Latin
America, specifically Argentina, Brazil, Mexico and Venezuela. Latin
America, and these four countries in particular, offers the largest and
most liquid debt markets of the emerging nations around the globe. In
addition to Latin America, the Adviser may pursue investment
opportunities in Asia, Africa, the Middle East and the developing countries
of Europe, primarily in Eastern Europe. The Fund deem s an
issuer to be located in an emerging market if (i) the issuer is organized
under the laws of an emerging market country; (ii) the issuer's principal
securities trading market is in an emerging market; or (iii) at least 50%
of the issuer's non-current assets, capitalization, gross revenue or profit
in any one of the two most recent fiscal years is derived from (directly or
indirectly from subsidiaries) assets or activities located in emerging
markets.
Although the Fund may invest in a wide variety of high-yielding debt
obligations, under normal conditions it must invest at least 50% of its
assets in sovereign debt securities issued or guaranteed by governments,
government-related entities and central banks based in emerging markets
(including participations in and assignments of portions of loans between
governments and financial institutions); government owned, controlled or
sponsored entities located in emerging markets; entities organized and
operated for the purpose of restructuring investment characteristics of
instruments issued by government or government-related entities in emerging
markets; and debt obligations issued by supranational organizations such as
the Asian Development Bank and the Inter-American Development Bank, among
others.
The Fund may also consider for purchase any debt securities issued by
commercial banks and companies in emerging markets. The Fund may invest in
both fixed and floating-rate issues. Debt instruments held by the Fund take
the form of bonds, notes, bills, debentures, convertible securities,
warrants, bank obligations, short-term paper, loan participations, loan
assignments and trust interests. The Fund may invest regularly in
"Brady Bonds," which are debt securities issued under the framework of the
Brady Plan as a mechanism for debtor countries to restructure their
outstanding bank loans. Most "Brady Bonds" have their principal
collateralized by zero coupon U.S. Treasury bonds.
To reduce currency risk, the Fund invest s at least 65%
of its assets in U.S. dollar-denominated debt securities. Therefore, no
more than 35% of the Fund's assets may be invested in debt securities
denominated in foreign currencies.
The Fund is not restricted by limits on weighted average
portfolio maturity or the maturity of an individual issue. Debt securities
in which the Fund may invest may have stated maturities from overnight to
30 years. The weighted average maturity of the Fund's portfolio is
actively managed and may vary from period-to-period based upon the
Adviser's assessment of economic and market conditions, taking into account
the Fund's investment objectives.
In addition to maturity, the Fund's investments are actively
managed in terms of geographic, industry and currency allocation. In
managing the Fund's portfolio, the Adviser take s into account
such factors as the credit quality of issuers, changes in and levels of
interest rates, projected economic growth rates, capital flows, debt
levels, trends in inflation, anticipated movements in foreign currencies,
and government initiatives. While the Fund is not "diversified" for
purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), it invest s in a minimum of three countries at
any one time and will not commit more than 40% of its assets to issuers in
a single country.
By focusing on fixed-income instruments issued in emerging markets,
the Fund invest s predominantly in debt securities that are
rated below investment-grade, or unrated but equivalent to those rated
below investment grade by internationally recognized rating agencies such
as Standard and Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's"). Debt securities rated below BBB by S&P or below Baa by Moody's
are considered to be below investment-grade. These types of high
yield/high risk debt obligations (commonly referred to as "junk bonds") are
predominantly speculative with respect to the capacity to pay interest and
repay principal in accordance with their terms and generally involve a
greater risk of default and more volatility in price than securities in
higher rating categories, such as investment-grade U.S. bonds. On occasion,
the Fund may invest up to 5% of its net assets in non-performing securities
whose quality is comparable to securities rated as low as "D" by S&P or "C"
by Moody's. It is anticipated that a large portion of the Fund's bond
holdings will trade at substantial discounts from face value.
The Fund may invest up to 35% of its total assets in securities other
than debt obligations issued in emerging markets. These holdings include
debt securities and money market instruments issued by corporations and
governments based in developed markets including up to 20% of total assets
in U.S. fixed-income instruments. However, for temporary, defensive or
emergency purposes, the Fund may invest without limit in U.S. debt
securities, including short-term money market securities. It is impossible
to predict for how long such alternative strategies will be utilized. The
Fund may engage in strategic transactions for hedging purposes and to seek
to increase gain. The Fund may invest up to 15% of its net assets in
securities which are not readily marketable, repurchase agreements maturing
in more than seven days and restricted securities; and in no event may the
Fund invest more than 10% of its total assets in restricted securities. The
Fund may also acquire shares of closed-end investment companies that invest
primarily in emerging market debt securities. To the extent the Fund
invests in such closed-end investment companies, shareholders will incur
certain duplicative fees and expenses, including investment advisory fees.
Special Investment Considerations
Investing in Emerging Markets. Most emerging securities markets may have
substantially less volume and are subject to less government supervision
than U.S. securities markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. In addition, there is less regulation of securities
exchanges, securities dealers, and listed and unlisted companies in
emerging markets than in the United States.
Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements
have been unable to keep pace with the volume of securities transactions.
Delays in settlement could result in temporary periods when a portion of
the assets of the Fund is uninvested and no cash is earned thereon. The
inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems
could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser.
Costs associated with transactions in foreign securities are generally
higher than costs associated with transactions in U.S. securities. Such
transactions also involve additional costs for the purchase or sale of
foreign currency.
Foreign investment in certain emerging market debt obligations is
restricted or controlled to varying degrees. These restrictions or controls
may at times limit or preclude foreign investment in certain emerging
markets debt obligations and increase the costs and expenses of the Fund.
Certain emerging markets require prior governmental approval of investments
by foreign persons, limit the amount of investment by foreign persons in a
particular company, limit the investment by foreign persons only to a
specific class of securities of a company that may have less advantageous
rights than the classes available for purchase by domiciliaries of the
countries and/or impose additional taxes on foreign investors. Certain
emerging markets may also restrict investment opportunities in issuers in
industries deemed important to national interest.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in
an emerging market's balance of payments or for other reasons, a country
could impose temporary restrictions on foreign capital remittances. The
Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation of capital, as well as by
the application to the Fund of any restrictions on investments.
In the course of investment in emerging market debt obligations, the
Fund will be exposed to the direct or indirect consequences of political,
social and economic changes in one or more emerging markets. Political
changes in emerging market countries may affect the willingness of an
emerging market country governmental issuer to make or provide for timely
payments of its obligations. The country's economic status, as reflected,
among other things, in its inflation rate, the amount of its external debt
and its gross domestic product, also affects its ability to honor its
obligations. While the Fund manage s its assets in a manner
that will seek to minimize the exposure to such risks, and will further
reduce risk by owning the bonds of many issuers, there can be no assurance
that adverse political, social or economic changes will not cause the Fund
to suffer a loss of value in respect of the securities in the Fund's
portfolio.
The risk also exists that an emergency situation may arise in one or
more emerging markets as a result of which trading of securities may cease
or may be substantially curtailed and prices for the Fund's securities in
such markets may not be readily available. The Corporation may suspend
redemption of its shares for any period during which an emergency exists,
as determined by the Securities and Exchange Commission (the "SEC" ).
Accordingly if the Fund believes that appropriate circumstances exist, it
will promptly apply to the SEC for a determination that an emergency
is present. During the period commencing from the Fund's identification of
such condition until the date of the SEC action, the Fund's
securities in the affected markets will be valued at fair value determined
in good faith by or under the direction of the Board of Directors.
Volume and liquidity in most foreign bond markets are less than in
the United States and securities of many foreign companies are less liquid
and more volatile than securities of comparable U.S. companies. Fixed
commissions on foreign securities exchanges are generally higher than
negotiated commissions on U.S. exchanges, although the Fund endeavors to
achieve the most favorable net results on its portfolio transactions. There
is generally less government supervision and regulation of business and
industry practices, securities exchanges, brokers, dealers and listed
companies than in the United States. Mail service between the United States
and foreign countries may be slower or less reliable than within the United
States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. In addition,
with respect to certain emerging markets, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect the Fund's investments in those
countries. Moreover, individual emerging market economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. The chart
below sets forth the risk ratings of selected emerging market countries'
sovereign debt securities.
Sovereign Risk Ratings for Selected Emerging Market Countries
as of 12/31/ 94
(Source: CS First Boston Emerging Countries Capital Markets External
Credit Ratings)
TO BE UPDATED
<TABLE>
<CAPTION>
Country Moody's Standard & Poor's
<S> <C> <C>
Singapore NR AA+/stable
Taiwan NR AA+/stable
Hong Kong A3 A/negative
Portugal A1 A+/stable
South Korea A1 A+/positive
Malaysia A3 A/positive
Thailand A3 A-/stable
China Baa1 BBB/stable
Greece Baa1 BBB-/positive
Chile NR BBBi/stable
Indonesia NR BBB-/positive
Turkey Baa3 BBB/stable
Israel NR BBB/stable
Mexico Ba2 BB+/stable
Czech Republic Baa3 NR
Hungary Ba1 BB+/positive
Colombia NR BBB-
South Africa NR NR
Venezuela Ba1 BB/negative
Uruguay NR NR
Morocco NR NR
India Ba2 BB+/stable
Argentina B1 NR
Brazil B2 NR
Poland NR NR
Philippines NR NR
</TABLE>
The Fund may have limited legal recourse in the event of a default
with respect to certain debt obligations it holds. If the issuer of a
fixed-income security owned by the Fund defaults, the Fund may incur
additional expenses to seek recovery. Debt obligations issued by emerging
market country governments differ from debt obligations of private
entities; remedies from defaults on debt obligations issued by emerging
market governments, unlike those on private debt, must be pursued in the
courts of the defaulting party itself. The Fund's ability to enforce its
rights against private issuers may be limited. The ability to attach assets
to enforce a judgment may be limited. Legal recourse is therefore somewhat
diminished. Bankruptcy, moratorium and other similar laws applicable to
private issuers of debt obligations may be substantially different from
those of other countries. The political context, expressed as an emerging
market governmental issuer's willingness to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt may not
contest payments to the holders of debt obligations in the event of default
under commercial bank loan agreements. With four exceptions, (Panama,
Cuba, Costa Rica and Yugoslavia), no sovereign emerging markets borrower
has defaulted on an external bond issue since World War II.
Income from securities held by the Fund could be reduced by a
withholding tax on the source or other taxes imposed by the emerging market
countries in which the Fund makes its investments. The Fund's net asset
value may also be affected by changes in the rates or methods of taxation
applicable to the Fund or to entities in which the Fund has invested. The
Adviser will consider the cost of any taxes in determining whether to
acquire any particular investments, but can provide no assurance that the
taxes will not be subject to change.
Many emerging markets have experienced substantial, and in some
periods extremely high rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities markets of certain emerging
market countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries. Of these countries, some,
in recent years, have begun to control inflation through prudent economic
policies.
Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial
organizations and other financial institutions. Certain emerging market
governmental issuers have not been able to make payments of interest on or
principal of debt obligations as those payments have come due. Obligations
arising from past restructuring agreements may affect the economic
performance and political and social stability of those issuers.
Governments of many emerging market countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some
of the largest in any given country. As a result, government actions in the
future could have a significant effect on economic conditions in emerging
markets, which in turn, may adversely affect companies in the private
sector, general market conditions and prices and yields of certain of the
securities in the Fund's portfolio. Expropriation, confiscatory taxation,
nationalization, political, economic or social instability or other similar
developments have occurred frequently over the history of certain emerging
markets and could adversely affect the Fund's assets should these
conditions recur.
The ability of emerging market country governmental issuers to make
timely payments on their obligations is likely to be influenced strongly by
the issuer's balance of payments, including export performance, and its
access to international credits and investments. An emerging market whose
exports are concentrated in a few commodities could be vulnerable to a
decline in the international prices of one or more of those commodities.
Increased protectionism on the part of an emerging market's trading
partners could also adversely affect the country's exports and diminish its
trade account surplus, if any. To the extent that emerging markets receive
payment for its exports in currencies other than dollars or non-emerging
market currencies, its ability to make debt payments denominated in dollars
or non-emerging market currencies could be affected.
To the extent that an emerging market country cannot generate a trade
surplus, it must depend on continuing loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and on inflows of foreign investment. The access of
emerging markets to these forms of external funding may not be certain, and
a withdrawal of external funding could adversely affect the capacity of
emerging market country governmental issuers to make payments on their
obligations. In addition, the cost of servicing emerging market debt
obligations can be affected by a change in international interest rates
since the majority of these obligations carry interest rates that are
adjusted periodically based upon international rates.
Another factor bearing on the ability of emerging market countries to
repay debt obligations is the level of international reserves of the
country. Fluctuations in the level of these reserves affect the amount of
foreign exchange readily available for external debt payments and thus
could have a bearing on the capacity of emerging market countries to make
payments on these debt obligations.
Investing in Latin America. Investing in securities of Latin American
issuers may entail risks relating to the potential political and economic
instability of certain Latin American countries and the risks of
expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment and on repatriation of capital invested.
In the event of expropriation, nationalization or other confiscation by any
country, the Fund could lose its entire investment in any such country.
The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major
securities markets in the U.S. Disclosure and regulatory standards are in
many respects less stringent than U.S. standards. Furthermore, there is a
lower level of monitoring and regulation of the markets and the activities
of investors in such markets.
The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to
volume of trading in the securities of U.S. issuers could cause prices to
be erratic for reasons apart from factors that affect the soundness and
competitiveness of the securities issuers. For example, limited market size
may cause prices to be unduly influenced by traders who control large
positions. Adverse publicity and investors' perceptions, whether or not
based on in-depth fundamental analysis, may decrease the value and
liquidity of portfolio securities.
The Fund may invest a portion of its assets in securities denominated
in currencies of Latin American countries. Accordingly, changes in the
value of these currencies against the U.S. dollar may result in
corresponding changes in the U.S. dollar value of the Fund's assets
denominated in those currencies.
Some Latin American countries also may have managed currencies, which
are not free floating against the U.S. dollar. In addition, there is risk
that certain Latin American countries may restrict the free conversion of
their currencies into other currencies. Further, certain Latin American
currencies may not be internationally traded. Certain of these currencies
have experienced a steep devaluation relative to the U.S. dollar. Any
devaluations in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund's net asset value.
The economies of individual Latin American countries may differ
favorably or unfavorably from the U.S. economy in such respects as the rate
of growth of gross domestic product, the rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Certain Latin American countries have experienced high levels of inflation
which can have a debilitating effect on an economy, although some have
begun to control inflation in recent years through prudent economic
policies. Furthermore, certain Latin American countries may impose
withholding taxes on dividends payable to the Fund at a higher rate than
those imposed by other foreign countries. This may reduce the Fund's
investment income available for distribution to shareholders.
Certain Latin American countries such as Argentina, Brazil and Mexico
are among the world's largest debtors to commercial banks and foreign
governments. At times, certain Latin American countries have declared
moratoria on the payment of principal and/or interest on outstanding debt.
Latin America is a region rich in natural resources such as oil,
copper, tin, silver, iron ore, forestry, fishing, livestock and
agriculture. The region has a large population (roughly 300 million)
representing a large domestic market. Economic growth was strong in the
1960 s and 1970 s, but slowed dramatically (and in some
instances was negative) in the 1980 s as a result of poor economic
policies, higher international interest rates, and the denial of access to
new foreign capital. Although a number of Latin American countries are
currently experiencing lower rates of inflation and higher rates of real
growth in g ross d omestic p roduct than they have in the
past, other Latin American countries continue to experience significant
problems, including high inflation rates and high interest rates. Capital
flight has proven a persistent problem and external debt has been forcibly
restructured. Political turmoil, high inflation, capital repatriation
restrictions, and nationalization have further exacerbated conditions.
Governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some
of the largest in those countries. As a result, government actions in the
future could have a significant effect on economic conditions which may
adversely affect prices of certain portfolio securities. Expropriation,
confiscatory taxation, nationalization, political, economic or social
instability or other similar developments, such as military coups, have
occurred in the past and could also adversely affect the Fund's investments
in this region.
Changes in political leadership, the implementation of market oriented
economic policies, such as privatization, trade reform and fiscal and
monetary reform are among the recent steps taken to renew economic growth.
External debt is being restructured and flight capital (domestic capital
that has left home country) has begun to return. Inflation control efforts
have also been implemented. Free Trade Zones are being discussed in
various areas around the region, the most notable being a free zone among
Mexico, the U.S. and Canada and another zone among four countries in the
southernmost point of Latin America. Currencies are typically weak, but
most are now relatively free floating, and it is not unusual for the
currencies to undergo wide fluctuations in value over short periods of time
due to changes in the market.
Investing in the Pacific Basin. Economies of individual Pacific Basin
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, interest rate levels, and balance
of payments position. Of particular importance, most of the economies in
this region of the world are heavily dependent upon exports, particularly
to developed countries, and, accordingly, have been and may continue to be
adversely affected by trade barriers, managed adjustments in relative
currency values, and other protectionist measures imposed or negotiated by
the U.S. and other countries with which they trade. These economies also
have been and may continue to be negatively impacted by economic conditions
in the U.S. and other trading partners, which can lower the demand for
goods produced in the Pacific Basin.
With respect to the Peoples Republic of China and other markets in
which the Fund may participate, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments that
could adversely impact a Pacific Basin country or the Fund's investment in
the debt of that country.
Foreign companies, including Pacific Basin companies, are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and disclosure requirements comparable to those
applicable to U.S. companies. Consequently, there may be less publicly
available information about such companies than about U.S. companies.
Moreover, there is generally less government supervision and regulation in
the Pacific Basin than in the U.S.
Investing in Europe. Most Eastern European nations, including Hungary,
Poland, Czechoslovakia, and Romania have had centrally planned, socialist
economies since shortly after World War II. A number of their governments,
including those of Hungary, the Czech Republic, and Poland are currently
implementing or considering reforms directed at political and economic
liberalization, including efforts to foster multi-party political systems,
decentralize economic planning, and move toward free market economies. At
present, no Eastern European country has a developed stock market, but
Poland, Hungary, and the Czech Republic have small securities markets in
operation. Ethnic and civil conflict currently rage through the former
Yugoslavia. The outcome is uncertain.
Both the European Community (the " EC ") and Japan, among
others, have made overtures to establish trading arrangements and assist in
the economic development of the Eastern European nations. A great deal of
interest also surrounds opportunities created by the reunification of East
and West Germany. Following reunification, the Federal Republic of Germany
has remained a firm and reliable member of the EC and numerous other
international alliances and organizations. To reduce inflation caused by
the unification of East and West Germany, Germany has adopted a tight
monetary policy which has led to weakened exports and a reduced domestic
demand for goods and services. However, in the long-term, reunification
could prove to be an engine for domestic and international growth.
The conditions that have given rise to these developments are
changeable, and there is no assurance that reforms will continue or that
their goals will be achieved.
Portugal is a genuinely emerging market which has experienced rapid
growth since the mid-1980s, except for a brief period of stagnation over
1990-91. Portugal's government remains committed to privatization of the
financial system away from one dependent upon the banking system to a more
balanced structure appropriate for the requirements of a modern economy.
Inflation continues to be about three times the EC average.
Economic reforms launched in the 1980s continue to benefit Turkey in
the 1990s. Turkey's economy has grown steadily since the early 1980s, with
real growth in per capita Gross Domestic Product (the " GDP ")
increasing more than 6% annually. Agriculture remains the most important
economic sector, employing approximately 55% of the labor force, and
accounting for nearly 20% of GDP and 20% of exports. Inflation and
interest rates remain high, and a large budget deficit will continue to
cause difficulties in Turkey's substantial transformation to a dynamic free
market economy.
Like many other Western economies, Greece suffered severely from the
global oil price hikes of the 1970s, with annual GDP growth plunging from
8% to 2% in the 1980s, and inflation, unemployment, and budget deficits
rising sharply. The fall of the socialist government in 1989 and the
inability of the conservative opposition to obtain a clear majority have
led to business uncertainty and the continued prospects for flat economic
performance. Once Greece has sorted out its political situation, it will
have to face the challenges posed by the steadily increasing integration of
the EC, including the progressive lowering of trade and investment
barriers. Tourism continues as a major industry, providing a vital offset
to a sizable commodity trade deficit.
Securities traded in certain emerging European securities markets may
be subject to risks due to the inexperience of financial intermediaries,
the lack of modern technology and the lack of a sufficient capital base to
expand business operations. Additionally, former Communist regimes of a
number of Eastern European countries had expropriated a large amount of
property, the claims of which have not been entirely settled. There can be
no assurance that the Fund's investments in Eastern Europe would not also
be expropriated, nationalized or otherwise confiscated. Finally, any
change in leadership or policies of Eastern European countries, or
countries that exercise a significant influence over those countries, may
halt the expansion of or reverse the liberalization of foreign investment
policies now occurring and adversely affect existing investment
opportunities.
Investing in Africa. Africa is a continent of roughly 50 countries with a
total population of approximately 840 million people. Literacy rates (the
percentage of people who are over 15 years of age and who can read and
write) are relatively low, ranging from 20% to 60%. The primary industries
include crude oil, natural gas, manganese ore, phosphate, bauxite, copper,
iron, diamond, cotton, coffee, cocoa, timber, tobacco, sugar, tourism, and
cattle.
Many of the countries are fraught with political instability.
However, there has been a trend over the past five years toward
democratization. Many countries are moving from a military style, Marxist,
or single party government to a multi-party system. Still, there remain
many countries that do not have a stable political process. Other
countries have been enmeshed in civil wars and border clashes.
Economically, the Northern Rim countries (including Morocco, Egypt,
and Algeria) and Nigeria, Zimbabwe and South Africa are the wealthier
countries on the continent. The market capitalization of these countries
has been growing recently as more international companies invest in Africa
and as local companies start to list on the exchanges. However, religious
and ethnic strife has been a significant source of instability.
On the other end of the economic spectrum are countries, such as
Burkina, Madagascar, and Malawi, that are considered to be among the
poorest or least developed in the world. These countries are generally
landlocked or have poor natural resources. The economies of many African
countries are heavily dependent on international oil prices. Of all the
African industries, oil has been the most lucrative, accounting for 40% to
60% of many countries' GDP. However, general decline in oil prices has had
an adverse impact on many economies.
Brady Bonds. The Fund may invest in Brady Bonds, which are securities
created through the exchange of existing commercial bank loans to public
and private entities in certain emerging markets for new bonds in
connection with debt restructurings under a debt restructuring plan
introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the
"Brady Plan"). Brady Plan debt restructurings have been implemented to date
in Mexico, Uruguay, Venezuela, Costa Rica, Argentina, Nigeria, and the
Philippines.
Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the
dollar) and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed
rate bonds or floating rate bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds having the same maturity as
the bonds. Interest payments on these Brady Bonds generally are
collateralized by cash or securities in an amount that, in the case of
fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at
least one year's rolling interest payments based on the applicable interest
rate at that time and is adjusted at regular intervals thereafter. Brady
Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds,
with respect to commercial bank loans by public and private entities,
investments in Brady Bonds may be viewed as speculative. Over $82 billion
in Brady Bonds have been issued by countries in Africa and Latin America,
with 90% of these Brady Bonds being denominated in U.S. dollars.
Sovereign Debt. Investment in sovereign debt can involve a high degree of
risk. The governmental entity that controls the repayment of sovereign debt
may not be able or willing to repay the principal and/or interest when due
in accordance with the terms of such debt. A governmental entity's
willingness or ability to repay principal and interest due in a timely
manner may be affected by, among other factors, its cash flow situation,
the extent of its foreign reserves, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the International Monetary Fund, and the political constraints to
which a governmental entity may be subject. Governmental entities may also
be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or
repay principal or interest when due may result in the cancellation of such
third parties' commitments to lend funds to the governmental entity, which
may further impair such debtor's ability or willingness to service its
debts in a timely manner. Consequently, governmental entities may default
on their sovereign debt. Holders of sovereign debt (including the Fund)
may be requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. There is no bankruptcy
proceeding by which sovereign debt on which governmental entities have
defaulted may be collected in whole or in part.
Indexed Securities. The Fund may invest in indexed securities, the value
of which is linked to currencies, interest rates, commodities, indices or
other financial indicators ("reference instruments"). Most indexed
securities have maturities of three years or less.
Indexed securities differ from other types of debt securities in which
the Fund may invest in several respects. First, the interest rate or,
unlike other debt securities, the principal amount payable at maturity of
an indexed security may vary based on changes in one or more specified
reference instruments, such as an interest rate compared with a fixed
interest rate or the currency exchange rates between two currencies
(neither of which need be the currency in which the instrument is
denominated). The reference instrument need not be related to the terms of
the indexed security. For example, the principal amount of a U.S. dollar
denominated indexed security may vary based on the exchange rate of two
foreign currencies. An indexed security may be positively or negatively
indexed; that is, its value may increase or decrease if the value of the
reference instrument increases. Further, the change in the principal
amount payable or the interest rate of an indexed security may be a
multiple of the percentage change (positive or negative) in the value of
the underlying reference instrument(s).
Investment in indexed securities involves certain risks. In addition
to the credit risk of the security's issuer and the normal risks of price
changes in response to changes in interest rates, the principal amount of
indexed securities may decrease as a result of changes in the value of
reference instruments. Further, in the case of certain indexed securities
in which the interest rate is linked to a reference instrument, the
interest rate may be reduced to zero, and any further declines in the value
of the security may then reduce the principal amount payable on maturity.
Finally, indexed securities may be more volatile than the reference
instruments underlying indexed securities.
Loan Participations and Assignments. The Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between
an issuer of emerging market debt instruments and one or more financial
institutions ("Lenders"). The Fund's investments in Loans in Latin America
are expected in most instances to be in the form of participations in Loans
("Participations") and assignments of portions of Loans ("Assignments")
from third parties. Participations typically will result in the Fund having
a contractual relationship only with the Lender and not with the borrower.
The Fund will have the right to receive payments of principal, interest and
any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Fund generally
will have no right to enforce compliance by the borrower with the terms of
the loan agreement relating to the Loan, nor any rights of set-off against
the borrower, and the Fund may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a
result, the Fund will assume the credit risk of both the borrower and the
Lender that is selling the Participation. In the event of the insolvency of
the Lender selling a Participation, the Fund may be treated as a general
creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Fund will acquire Participations only if the
Lender interpositioned between the Fund and the borrower is determined by
the Adviser to be creditworthy.
When the Fund purchases Assignments from Lenders, the Fund will
acquire direct rights against the borrower on the Loan. Because Assignments
are arranged through private negotiations between potential assignees and
potential assignors, however, the rights and obligations acquired by the
Fund as the purchaser of an Assignment may differ from, and may be more
limited than, those held by the assigning Lender.
The Fund may have difficulty disposing of Assignments and
Participations. Because no liquid market for these obligations typically
exists, the Fund anticipates that these obligations could be sold only to a
limited number of institutional investors. The lack of a liquid secondary
market will have an adverse effect on the Fund's ability to dispose of
particular Assignments or Participations when necessary to meet the Fund's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations may also make it more
difficult for the Fund to assign a value to those securities for purposes
of valuing the Fund's portfolio and calculating its net asset value.
Debt Securities. The Fund may purchase "investment-grade" bonds, which are
those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated, judged to be of equivalent quality as determined by the Adviser.
Bonds rated Baa or BBB may have speculative elements as well as investment-
grade characteristics. The Fund may also invest in securities rated
Baa/BBB or lower and in unrated securities of equivalent quality in the
Adviser's judgment. The Fund may invest in debt securities which are rated
as low as C by Moody's or D by S&P. Such securities may be in default with
respect to payment of principal or interest.
The Adviser expects that a significant portion of the Fund's
investments will be purchased at a discount to par value. To the extent
developments in emerging markets result in improving credit fundamentals
and rating upgrades for countries in emerging markets, the Adviser believes
that there is the potential for capital appreciation as the improving
fundamentals become reflected in the price of the debt instruments. The
Adviser also believes that a country's sovereign credit rating (with
respect to foreign currency denominated issues) acts as a "ceiling" on the
rating of all debt issuers from that country. Thus, the ratings of private
sector companies cannot be higher than that of their home countries. The
Adviser believes, however, that many companies in emerging market
countries, if rated on a stand alone basis without regard to the rating of
the home country, possess fundamentals that could justify a higher credit
rating, particularly if they are major exporters and receive the bulk of
their revenues in U.S. dollars or other hard currencies. The Adviser seeks
to identify such opportunities and benefit from this type of market
inefficiency.
High Yield, High Risk Securities. Below investment - grade securities
(rated below Baa by Moody's and below BBB by S&P) or unrated securities of
equivalent quality in the Adviser's judgment, carry a high degree of risk
(including the possibility of default or bankruptcy of the issuers of such
securities), generally involve greater volatility of price and risk of
principal and income, and may be less liquid, than securities in the higher
rating categories and are considered speculative. The lower the ratings of
such debt securities, the greater their risks render them like equity
securities. See the Appendix to this Statement of Additional Information
for a more complete description of the ratings assigned by ratings
organizations and their respective characteristics.
An economic downturn could disrupt the high yield market and impair
the ability of issuers to repay principal and interest. Also, an increase
in interest rates would likely have a greater adverse impact on the value
of such obligations than on higher quality debt securities. During an
economic downturn or period of rising interest rates, highly leveraged
issues may experience financial stress which could adversely affect their
ability to service their principal and interest payment obligations.
Prices and yields of high yield securities will fluctuate over time and,
during periods of economic uncertainty, volatility of high yield securities
may adversely affect the Fund's net asset value. In addition, investments
in high yield zero coupon or pay-in-kind bonds, rather than income-bearing
high yield securities, may be more speculative and may be subject to
greater fluctuations in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market. A thin trading
market may limit the ability of the Fund to accurately value high yield
securities in its portfolio and to dispose of those securities. Adverse
publicity and investor perceptions may decrease the values and liquidity of
high yield securities. These securities may also involve special
registration responsibilities, liabilities and costs, and liquidity and
valuation difficulties.
Credit quality in the high yield securities market can change
suddenly and unexpectedly, and even recently issued credit ratings may not
fully reflect the actual risks posed by a particular high yield
security. For these reasons, it is the policy of the Adviser not to rely
exclusively on ratings issued by established credit rating agencies, but to
supplement such ratings with its own independent and on going review
of credit quality. The achievement of a Fund's investment objective by
investment in such securities may be more dependent on the Adviser's credit
analysis than is the case for higher quality bonds. Should the rating of a
portfolio security be downgraded, the Adviser will determine whether it is
in the best interest of the Fund to retain or dispose of such security.
Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, recent federal
regulations require savings and loan institutions to gradually reduce their
holdings of this type of security. Also, recent legislation restricts the
issuer's tax deduction for interest payments on these securities. Such
legislation may significantly depress the prices of outstanding securities
of this type. For more information regarding tax issues related to high
yield securities, see "TAXES."
Borrowing. The Fund is authorized to borrow money for purposes of
liquidity and to provide for redemptions and distributions. The Fund will
borrow only when the Adviser believes that borrowing will benefit the Fund
after taking into account considerations such as the costs of the
borrowing. The Fund does not expect to borrow for investment purposes, to
increase return or leverage the portfolio. Borrowing by the Fund will
involve special risk considerations. Although the principal of the Fund's
borrowings will be fixed, the Fund's assets may change in value during the
time a borrowing is outstanding, thus increasing exposure to capital risk.
Illiquid Securities. The Fund may occasionally purchase securities other
than in the open market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open market,
the securities so purchased are often "restricted securities" or "not
readily marketable," i.e., securities which cannot be sold to the public
without registration under the Securities Act of 1933 (the "1933
Act") or the availability of an exemption from registration (such as
Rules 144 or 144A) or because they are subject to other legal or
contractual delays in or restrictions on resale.
Generally speaking, restricted securities may be sold only to
qualified institutional buyers, or in a privately negotiated transaction to
a limited number of purchasers, or in limited quantities after they have
been held for a specified period of time and other conditions are met
pursuant to an exemption from registration, or in a public offering for
which a registration statement is in effect under the 1933
Act . The Fund may be deemed to be an "underwriter" for purposes of
the 1933 Act when selling restricted securities to the
public, and in such event the Fund may be liable to purchasers of such
securities if the registration statement prepared by the issuer, or the
prospectus forming a part of it, is materially inaccurate or misleading.
When-Issued Securities. The Fund may from time to time purchase securities
on a "when-issued" or "forward delivery" basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the
when-issued or forward delivery securities takes place at a later date.
During the period between purchase and settlement, no payment is made by
the Fund to the issuer and no interest accrues to the Fund. To the extent
that assets of the Fund are held in cash pending the settlement of a
purchase of securities, the Fund would earn no income; however, it is the
Fund's intention to be fully invested to the extent practicable and subject
to the policies stated above. While when-issued or forward delivery
securities may be sold prior to the settlement date, the Fund intends to
purchase such securities with the purpose of actually acquiring them unless
a sale appears desirable for investment reasons. At the time the Fund
makes the commitment to purchase a security on a when-issued or forward
delivery basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The market value of the
when-issued or forward delivery securities may be more or less than the
purchase price. The Fund does not believe that its net asset value or
income will be adversely affected by its purchase of securities on a
when-issued or forward delivery basis.
Lending of Portfolio Securities. The Fund may seek to increase its income
by lending portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve System and
the SEC , such loans may be made to member firms of the New York
Stock Exchange (the "Exchange"), and would be required to be secured
continuously by collateral in cash, U.S. Government securities or other
high grade debt obligations maintained on a current basis at an amount at
least equal to the market value and accrued interest of the securities
loaned. The Fund would have the right to call a loan and obtain the
securities loaned on no more than five days' notice. During the existence
of a loan, the Fund would continue to receive the equivalent of the
interest paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. As with other
extensions of credit there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities fail
financially. However, the loans would be made only to firms deemed by the
Adviser to be of good standing, and when, in the judgment of the Adviser,
the consideration which can be earned currently from securities loans of
this type justifies the attendant risk. If the Fund determines to make
securities loans, the value of the securities loaned will not exceed 30% of
the value of the Fund's total assets at the time any loan is made.
Convertible Securities. The Fund may invest in convertible securities,
that is, bonds, notes, debentures, preferred stocks and other securities
which are convertible into common stock. Investments in convertible
securities can provide an opportunity for capital appreciation and/or
income through interest and dividend payments by virtue of their conversion
or exchange features. The Fund will limit its purchases of convertible
securities to debt securities convertible into common stocks.
The convertible securities in which the Fund may invest are either
fixed income or zero coupon debt securities which may be converted or
exchanged at a stated or determinable exchange ratio into underlying shares
of common stock. The exchange ratio for any particular convertible
security may be adjusted from time to time due to stock splits, dividends,
spin-offs, other corporate distributions or scheduled changes in the
exchange ratio. Convertible debt securities and convertible preferred
stocks, until converted, have general characteristics similar to both debt
and equity securities. Although to a lesser extent than with debt
securities generally, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically changes as
the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities.
A unique feature of convertible securities is that as the market price of
the underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices of the
convertible securities tend to rise as a reflection of the value of the
underlying common stock, although typically not as much as the underlying
common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of
course, like all debt securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may
default on their obligations. Convertible securities generally offer lower
yields than non-convertible securities of similar quality because of their
conversion or exchange features.
Repurchase Agreements. The Fund may enter into repurchase agreements with
member banks of the Federal Reserve System and any broker/dealer which is
recognized as a reporting government securities dealer if the
creditworthiness of the bank or broker/dealer has been determined by the
Adviser to be at least as high as that of other obligations the Fund may
purchase or to be at least equal to that of issuers of commercial paper
rated within the two highest grades assigned by Moody's or S&P.
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which
the Fund acquires a security ("Obligation") and the seller agrees, at the
time of sale, to repurchase the Obligation at a specified time and price.
Obligations subject to a repurchase agreement are held in a segregated
account and the value of such obligations is kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than
the purchase price, the difference being income to the Fund, or the
purchase and repurchase prices may be the same, with interest at a stated
rate due to the Fund together with the repurchase price upon repurchase.
In either case, the income to the Fund is unrelated to the interest rate on
the Obligation itself. Obligations will be held by the Fund's custodian,
Brown Brothers Harriman & Co. (the "Custodian") or in the Federal
Reserve Book Entry System.
For purposes of the 1940 Act , a repurchase agreement is
deemed to be a loan from the Fund to the seller of the Obligation subject
to the repurchase agreement and is therefore subject to the Fund's
investment restriction applicable to loans. It is not clear whether a
court would consider the Obligation purchased by the Fund subject to a
repurchase agreement as being owned by the Fund or as being collateral for
a loan by the Fund to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller of the
Obligation before repurchase of the Obligation under a repurchase
agreement, the Fund may encounter delay and incur costs before being able
to sell the security. Delays may cause loss of interest or decline in
price of the Obligation. If the court characterizes the transaction as a
loan and the Fund has not perfected a security interest in the Obligation,
the Fund may be required to return the Obligation to the seller's estate
and be treated as an unsecured creditor of the seller. As an unsecured
creditor, the Fund would be at the risk of losing some or all of the
principal and income involved in the transaction. As with any unsecured
debt instrument purchased for the Fund, the Adviser seeks to minimize the
risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligor, in this case, the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings,
there is also the risk that the seller may fail to repurchase the
Obligation, in which case the Fund may incur a loss if the proceeds to the
Fund of its sale of the securities underlying the repurchase agreement to a
third party are less than the repurchase price. To protect against such
potential loss, if the market value (including interest) of the Obligation
subject to the repurchase agreement becomes less than the repurchase price
(including interest), the Fund will direct the seller of the Obligation to
deliver additional securities so that the value (including interest) of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Fund will be unsuccessful in
seeking to impose on the seller a contractual obligation to deliver
additional securities.
Repurchase Commitments. The Fund may enter into repurchase commitments
with any party deemed creditworthy by the Adviser, including foreign banks
and broker/dealers, if the transaction is entered into for investment
purposes and the counterparty's creditworthiness is at least equal to that
of issuers of securities which the Fund may purchase. Such transactions
may not provide the Fund with collateral marked-to-market during the term
of the commitment.
Foreign Securities. Investors should recognize that investing in foreign
securities involves certain special considerations, including those set
forth below, which are not typically associated with investing in U.S.
securities and which may favorably or unfavorably affect the Fund's
performance. As foreign companies are not generally subject to uniform
accounting and auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies, there
may be less publicly available information about a foreign company than
about a domestic company. Volume and liquidity in most foreign bond
markets are less than the volume and liquidity in the U.S. and at times,
volatility of price can be greater than in the U.S. Further, foreign
markets have different clearance and settlement procedures and in certain
markets there have been times when settlements have been unable to keep
pace with the volume of securities transactions making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due
to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to
settlement problems either could result in losses to the Fund due to
subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible
liability to the purchaser. Further, the Fund may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign
courts. There is generally less government supervision and regulation of
business and industry practices, brokers and listed companies than in the
U.S. It may be more difficult for the Fund's agents to keep currently
informed about corporate actions or other matters which may affect the
prices of portfolio securities. Communications between the U.S. and
foreign countries may be less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or
loss of certificates for portfolio securities. In addition, with respect
to certain foreign countries, there is the possibility of nationalization,
expropriation, the imposition of withholding or confiscatory taxes,
political, social, or economic instability, or diplomatic developments
which could affect U.S. investments in those countries. Investments in
foreign securities may also entail certain risks, such as possible currency
blockages or transfer restrictions, and the difficulty of enforcing rights
in other countries. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence
on foreign economic assistance may be greater in these countries than in
developed countries. The management of the Fund seeks to mitigate the
risks associated with these considerations through active professional
management.
Investments in foreign securities usually will involve currencies of
foreign countries. Moreover, the Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs
and the value of these assets for the Fund as measured in U.S. dollars may
be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Fund may incur
costs in connection with conversions between various currencies. Although
the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies, if any, into U.S.
dollars on a daily basis. It may do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Fund at one rate, while offering a lesser
rate of exchange should the Fund desire to resell that currency to the
dealer. The Fund will conduct its foreign currency exchange transactions,
if any, either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market or through forward foreign currency
exchange contracts. (See "Currency Transactions" for more information.)
To the extent that the Fund invests in foreign securities, the Fund's
share price could reflect the movements of the different bond markets in
which it is invested and the currencies in which the investments are
denominated; the strength or weakness of the U.S. dollar against foreign
currencies could account for part of that Fund's investment performance.
Strategic Transactions and Derivatives . The Fund may, but is not
required to, utilize various other investment strategies as described below
to hedge various market risks (such as interest rates, currency exchange
rates, and broad or specific equity or fixed-income market movements), to
manage the effective maturity or duration of the Fund's portfolio, or to
enhance potential gain. These strategies may be executed through the use
of derivative contracts. Such strategies are generally accepted as a
part of modern portfolio management and are regularly utilized by many
mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as
currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions"). Strategic Transactions may be used
without limit to attempt to protect against possible changes in the
market value of securities held in or to be purchased for the Fund's
portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for
investment purposes, to manage the effective maturity or duration of the
Fund's portfolio, or to establish a position in the derivatives markets as
a temporary substitute for purchasing or selling particular securities.
Some Strategic Transactions may also be used to enhance potential gain
although no more than 5% of the Fund's assets will be committed to
Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any
combination, and there is no particular strategy that dictates the use
of one technique rather than another, as use of any Strategic Transaction
is a function of numerous variables including market conditions. The
ability of the Fund to utilize these Strategic Transactions successfully
will depend on the Adviser's ability to predict pertinent market movements,
which cannot be assured. The Fund will comply with applicable regulatory
requirements when implementing these strategies, techniques and
instruments. Strategic Transactions involving financial futures and
options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.
Strategic Transactions , including derivative contracts, have
risks associated with them including possible default by the other party to
the transaction, illiquidity and, to the extent the Adviser's view as to
certain market movements is incorrect, the risk that the use of such
Strategic Transactions could result in losses greater than if they had not
been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or
for prices higher than (in the case of put options) or lower than (in the
case of call options) current market values, limit the amount of
appreciation the Fund can realize on its investments or cause the Fund to
hold a security it might otherwise sell. The use of currency transactions
can result in the Fund incurring losses as a result of a number of factors
including the imposition of exchange controls, suspension of settlements,
or the inability to deliver or receive a specified currency. The use of
options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of
the Fund creates the possibility that losses on the hedging instrument may
be greater than gains in the value of the Fund's position. In addition,
futures and options markets may not be liquid in all circumstances and
certain over-the-counter options may have no markets. As a result, in
certain markets, the Fund might not be able to close out a transaction
without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the
risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is
limited to the cost of the initial premium. Losses resulting from the use
of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions
had not been utilized.
General Characteristics of Options. Put options and call options typically
have similar structural characteristics and operational mechanics
regardless of the underlying instrument on which they are purchased or
sold. Thus, the following general discussion relates to each of the
particular types of options discussed in greater detail below. In
addition, many Strategic Transactions involving options require segregation
of Fund assets in special accounts, as described below under "Use of
Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the
underlying security, commodity, index, currency or other instrument at the
exercise price. For instance, the Fund's purchase of a put option on a
security might be designed to protect its holdings in the underlying
instrument (or, in some cases, a similar instrument) against a substantial
decline in the market value by giving the Fund the right to sell such
instrument at the option exercise price. A call option, upon payment of a
premium, gives the purchaser of the option the right to buy, and the seller
the obligation to sell, the underlying instrument at the exercise price.
The Fund's purchase of a call option on a security, financial future,
index, currency or other instrument might be intended to protect the Fund
against an increase in the price of the underlying instrument that it
intends to purchase in the future by fixing the price at which it may
purchase such instrument. An American style put or call option may be
exercised at any time during the option period while a European style put
or call option may be exercised only upon expiration or during a fixed
period prior thereto. The Fund is authorized to purchase and sell exchange
listed options and over-the-counter options ("OTC options"). Exchange
listed options are issued by a regulated intermediary such as the Options
Clearing Corporation ("OCC"), which guarantees the performance of the
obligations of the parties to such options. The discussion below uses the
OCC as an example, but is also applicable to other financial
intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or
currency, although in the future cash settlement may become available.
Index options and Eurodollar instruments are cash settled for the net
amount, if any, by which the option is "in-the-money" (i.e., where the
value of the underlying instrument exceeds, in the case of a call option,
or is less than, in the case of a put option, the exercise price of the
option) at the time the option is exercised. Frequently, rather than
taking or making delivery of the underlying instrument through the process
of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of
the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon
the liquidity of the option market. Among the possible reasons for the
absence of a liquid option market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions
imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of
options or underlying securities including reaching daily price limits;
(iv) interruption of the normal operations of the OCC or an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current
trading volume; or (vi) a decision by one or more exchanges to discontinue
the trading of options (or a particular class or series of options), in
which event the relevant market for that option on that exchange would
cease to exist, although outstanding options on that exchange would
generally continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the
hours during which the underlying financial instruments are traded. To the
extent that the option markets close before the markets for the underlying
financial instruments, significant price and rate movements can take place
in the underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers,
financial institutions or other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. In contrast to exchange listed
options, which generally have standardized terms and performance mechanics,
all the terms of an OTC option, including such terms as method of
settlement, term, exercise price, premium, guarantees and security, are set
by negotiation of the parties. The Fund will only sell OTC options (other
than OTC currency options) that are subject to a buy-back provision
permitting the Fund to require the Counterparty to sell the option back to
the Fund at a formula price within seven days. The Fund expects generally
to enter into OTC options that have cash settlement provisions, although it
is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails
to make or take delivery of the security, currency or other instrument
underlying an OTC option it has entered into with the Fund or fails to make
a cash settlement payment due in accordance with the terms of that option,
the Fund will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Accordingly, the Adviser must
assess the creditworthiness of each such Counterparty or any guarantor or
credit enhancement of the Counterparty's credit to determine the likelihood
that the terms of the OTC option will be satisfied. The Fund will engage
in OTC option transactions only with U.S. government securities dealers
recognized by the Federal Reserve Bank of New York as "primary dealers" or
broker/dealers, domestic or foreign banks or other financial institutions
which have received (or the guarantors of the obligation of which have
received) a short-term credit rating of A-1 from Standard & Poor's ("S&P")
or P-1 from Moody's Investors Service ("Moody's") or an equivalent rating
from any nationally recognized statistical rating organization ("NRSRO")
or , in the case of OTC currency transactions, are determined to be
of equivalent credit quality by the Adviser. The staff of the SEC
currently takes the position that OTC options purchased by the Fund, and
portfolio securities "covering" the amount of the Fund's obligation
pursuant to an OTC option sold by it (the cost of the sell-back plus the in-
the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on investing no more than 10% of its assets in illiquid
securities.
If the Fund sells a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio or will increase the Fund's income. The sale of put options can
also provide income.
The Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities,
corporate debt securities, equity securities (including convertible
securities ) and Eurodollar instruments that are traded on U.S. and
foreign securities exchanges and in the over-the-counter markets, and on
securities indices, currencies and futures contracts. All calls sold by
the Fund must be "covered" (i.e., the Fund must own the securities or
futures contract subject to the call) or must meet the asset segregation
requirements described below as long as the call is outstanding. Even
though the Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the Fund during the term of the
option to possible loss of opportunity to realize appreciation in the
market price of the underlying security or instrument and may require the
Fund to hold a security or instrument which it might otherwise have sold.
The Fund may purchase and sell put options on securities including
U.S. Treasury and agency securities, mortgage-backed securities,
foreign sovereign debt, corporate debt securities, equity securities
(including convertible securities ) and Eurodollar instruments
(whether or not it holds the above securities in its portfolio), and on
securities indices, currencies and futures contracts other than futures on
individual corporate debt and individual equity securities. The Fund will
not sell put options if, as a result, more than 50% of the Fund's assets
would be required to be segregated to cover its potential obligations under
such put options other than those with respect to futures and options
thereon. In selling put options, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price above
the market price.
General Characteristics of Futures. The Fund may enter into financial
futures contracts or purchase or sell put and call options on such futures
as a hedge against anticipated interest rate, currency or equity market
changes, for duration management and for risk management purposes. Futures
are generally bought and sold on the commodities exchanges where they are
listed with payment of initial and variation margin as described below.
The sale of a futures contract creates a firm obligation by the Fund, as
seller, to deliver to the buyer the specific type of financial instrument
called for in the contract at a specific future time for a specified price
(or, with respect to index futures and Eurodollar instruments, the net cash
amount). Options on futures contracts are similar to options on securities
except that an option on a futures contract gives the purchaser the right
in return for the premium paid to assume a position in a futures contract
and obligates the seller to deliver such position.
The Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the Commodity Futures Trading
Commission and will be entered into only for bona fide hedging, risk
management (including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option
thereon requires the Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount
of the contract (but may be higher in some circumstances). Additional cash
or assets (variation margin) may be required to be deposited thereafter on
a daily basis as the mark to market value of the contract fluctuates. The
purchase of an option on financial futures involves payment of a premium
for the option without any further obligation on the part of the Fund. If
the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can
be offset prior to settlement at an advantageous price, nor that delivery
will occur.
The Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of
the amount of its initial margin and premiums on open futures contracts and
options thereon would exceed 5% of the Fund's total assets (taken at
current value); however, in the case of an option that is in-the-money at
the time of the purchase, the in-the-money amount may be excluded in
calculating the 5% limitation. The segregation requirements with respect
to futures contracts and options thereon are described below.
Options on Securities Indices and Other Financial Indices. The Fund also
may purchase and sell call and put options on securities indices and other
financial indices and in so doing can achieve many of the same objectives
it would achieve through the sale or purchase of options on individual
securities or other instruments. Options on securities indices and other
financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, they settle by cash settlement, i.e., an option on an index
gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is
based exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option (except if, in the case of an OTC
option, physical delivery is specified). This amount of cash is equal to
the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery
of this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry
or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to
options on securities.
Currency Transactions. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings
denominated in particular currencies against fluctuations in relative
value. Currency transactions include forward currency contracts, exchange
listed currency futures, exchange listed and OTC options on currencies, and
currency swaps. A forward currency contract involves a privately
negotiated obligation to purchase or sell (with delivery generally
required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at
a price set at the time of the contract. A currency swap is an agreement
to exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap, which is
described below. The Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from a NRSRO or are
determined to be of equivalent credit quality by the Adviser .
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction
with respect to specific assets or liabilities of the Fund, which will
generally arise in connection with the purchase or sale of its portfolio
securities or the receipt of income therefrom. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at
the time of entering into the transaction) of the securities held in its
portfolio that are denominated or generally quoted in or currently
convertible into such currency, other than with respect to proxy
hedging or cross hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in
value relative to other currencies to which the Fund has or in which the
Fund expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage
in proxy hedging. Proxy hedging is often used when the currency to which
the Fund's portfolio is exposed is difficult to hedge or to hedge against
the dollar. Proxy hedging entails entering into a commitment or option to
sell a currency whose changes in value are generally considered to be
correlated to a currency or currencies in which some or all of the Fund's
portfolio securities are or are expected to be denominated, in exchange for
U.S. dollars. The amount of the commitment or option would not exceed the
value of the Fund's securities denominated in correlated currencies. For
example, if the Adviser considers that the Austrian schilling is correlated
to the German deutschemark (the "D-mark"), the Fund holds securities
denominated in schillings and the Adviser believes that the value of
schillings will decline against the U.S. dollar, the Adviser may enter into
a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to the Fund if the currency being hedged fluctuates in value to a
degree or in a direction that is not anticipated. Further, there is the
risk that the perceived correlation between various currencies may not be
present or may not be present during the particular time that the Fund is
engaging in proxy hedging. If the Fund enters into a currency hedging
transaction, the Fund will comply with the asset segregation requirements
described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency
control is of great importance to the issuing governments and influences
economic planning and policy, purchases and sales of currency and related
instruments can be negatively affected by government exchange controls,
blockages, and manipulations or exchange restrictions imposed by
governments. These can result in losses to the Fund if it is unable to
deliver or receive currency or funds in settlement of obligations and could
also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs. Buyers and
sellers of currency futures are subject to the same risks that apply to the
use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in
the issuing nation. Trading options on currency futures is relatively new,
and the ability to establish and close out positions on such options is
subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors
extrinsic to that country's economy.
Combined Transactions. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions,
multiple currency transactions (including forward currency contracts) and
multiple interest rate transactions and any combination of futures,
options, currency and interest rate transactions ("component"
transactions), instead of a single Strategic Transaction, as part of a
single or combined strategy when, in the opinion of the Adviser, it is in
the best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its component
transactions. Although combined transactions are normally entered into
based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks
or hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into
which the Fund may enter are interest rate, currency and index swaps and
the purchase or sale of related caps, floors and collars. The Fund expects
to enter into these transactions primarily to preserve a return or spread
on a particular investment or portion of its portfolio, to protect against
currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates
purchasing at a later date. The Fund intends to use these transactions as
hedges and not as speculative investments and will not sell interest rate
caps or floors where it does not own securities or other instruments
providing the income stream the Fund may be obligated to pay. Interest
rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional
amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative
value differential among them and an index swap is an agreement to swap
cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to
the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments
on a notional principal amount from the party selling such floor to the
extent that a specified index falls below a predetermined interest rate or
amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as
these swaps, caps, floors and collars are entered into for good faith
hedging purposes, the Adviser and the Fund believe such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not
treat them as being subject to its borrowing restrictions. The Fund will
not enter into any swap, cap, floor or collar transaction unless, at the
time of entering into such transaction, the unsecured long-term debt of the
Counterparty, combined with any credit enhancements, is rated at least A by
S&P or Moody's or has an equivalent rating from a NRSRO or is determined to
be of equivalent credit quality by the Adviser. If there is a default by
the Counterparty, the Fund may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank
Offered Rate ("LIBOR"), although foreign currency-denominated instruments
are available from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds and sellers to
obtain a fixed rate for borrowings. The Fund might use Eurodollar futures
contracts and options thereon to hedge against changes in LIBOR, to which
many interest rate swaps and fixed-income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside
the U.S., Strategic Transactions may not be regulated as rigorously as in
the U.S., may not involve a clearing mechanism and related guarantees, and
are subject to the risk of governmental actions affecting trading in, or
the prices of, foreign securities, currencies and other instruments. The
value of such positions also could be adversely affected by: (i) other
complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions,
(iii) delays in the Fund's ability to act upon economic events occurring in
foreign markets during non-business hours in the U.S., (iv) the imposition
of different exercise and settlement terms and procedures and margin
requirements than in the U.S., and (v) lower trading volume and liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions,
in addition to other requirements, require that the Fund segregate liquid
high grade assets with its custodian to the extent Fund obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any
obligation by the Fund to pay or deliver securities or assets must be
covered at all times by the securities, instruments or currency required to
be delivered, or, subject to any regulatory restrictions, an amount of cash
or liquid high grade securities at least equal to the current amount of the
obligation must be segregated with the custodian. The segregated assets
cannot be sold or transferred unless equivalent assets are substituted in
their place or it is no longer necessary to segregate them. For example, a
call option written by the Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate liquid
high-grade securities sufficient to purchase and deliver the securities if
the call is exercised. A call option sold by the Fund on an index will
require the Fund to own portfolio securities which correlate with the index
or to segregate liquid high grade assets equal to the excess of the index
value over the exercise price on a current basis. A put option written by
the Fund requires the Fund to segregate liquid, high grade assets equal to
the exercise price.
Except when the Fund enters into a forward contract for the purchase
or sale of a security denominated in a particular currency, which requires
no segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency
or liquid securities denominated in that currency equal to the Fund's
obligations or to segregate liquid high grade assets equal to the amount of
the Fund's obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange
listed index options, will generally provide for cash settlement. As a
result, when the Fund sells these instruments it will only segregate an
amount of assets equal to its accrued net obligations, as there is no
requirement for payment or delivery of amounts in excess of the net amount.
These amounts will equal 100% of the exercise price in the case of a non
cash-settled put, the same as an OCC guaranteed listed option sold by the
Fund, or the in-the-money amount plus any sell-back formula amount in the
case of a cash-settled put or call. In addition, when the Fund sells a
call option on an index at a time when the in-the-money amount exceeds the
exercise price, the Fund will segregate, until the option expires or is
closed out, cash or cash equivalents equal in value to such excess. OCC
issued and exchange listed options sold by the Fund other than those above
generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount
of assets equal to the full value of the option. OTC options settling with
physical delivery, or with an election of either physical delivery or cash
settlement will be treated the same as other options settling with physical
delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to
each swap on a daily basis and will segregate an amount of cash or liquid
high grade securities having a value equal to the accrued excess. Caps,
floors and collars require segregation of assets with a value equal to the
Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into
offsetting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related options
and Strategic Transactions. For example, the Fund could purchase a put
option if the strike price of that option is the same or higher than the
strike price of a put option sold by the Fund. Moreover, instead of
segregating assets if the Fund held a futures or forward contract, it could
purchase a put option on the same futures or forward contract with a strike
price as high or higher than the price of the contract held. Other
Strategic Transactions may also be offset in combinations. If the
offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such
time, assets equal to any remaining obligation would need to be segregated.
The Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. (See "TAXES.")
Investment Restrictions
Unless specified to the contrary, the following restrictions may not
be changed without the approval of a majority of the outstanding voting
securities of the Fund involved which, under the 1940 Act and the rules
thereunder and as used in this Statement of Additional Information, means
the lesser of (1) 67% or more of the voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or (2) more
than 50% of the outstanding voting securities of a Fund. Any investment
restrictions herein which involve a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.
As a matter of fundamental policy the Fund may not:
(1) borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase
agreements provided that the Fund maintains asset coverage of 300% for
all borrowings;
(2) purchase or sell real estate (except that the Fund may invest in
(i) securities of companies which deal in real estate or mortgages,
and (ii) securities secured by real estate or interests therein, and
that the Fund reserves freedom of action to hold and to sell real
estate acquired as a result of the Fund's ownership of securities); or
purchase or sell physical commodities or contracts relating to
physical commodities;
(3) act as an underwriter of securities issued by others, except to
the extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;
(4) make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent the entry into repurchase
agreements, loan assignments and loan participations and the purchase
of debt securities in accordance with its investment objective and
investment policies may be deemed to be loans;
(5) issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur and except for shares of
the separate classes or series of the Fund, provided that collateral
arrangements with respect to Strategic Transactions and other
permitted investments, including deposits of initial and variation
margin, are not considered to be the issuance of senior securities for
purposes of this restriction; and
(6) purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to be
invested in the securities of one or more issuers having their
principal business activities in the same industry, provided that
there is no limitation with respect to investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. For the purposes of this restriction, telephone
companies are considered to be in a separate industry from gas and
electric public utilities, wholly-owned finance companies are
considered to be in the same industry of their parents if their
activities are primarily related to financing the activities of their
parents, and each foreign government, its agencies or
instrumentalities as well as supranational organizations as a group,
are each considered to be a separate industry.
As a matter of nonfundamental policy the Fund may not:
(a) purchase or retain securities of any open-end investment company
or securities of closed-end investment companies except by purchase in
the open market where no commission or profit to a sponsor or dealer
results from such purchases, or except when such purchase, though not
made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets; in any event the Fund may not
purchase more than 3% of the outstanding voting securities of another
investment company, may not invest more than 5% of its assets in
another investment company, and may not invest more than 10% of its
assets in other investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer, director or
trustee of the Fund or a member, officer, director or trustee of the
investment adviser of the Fund if one or more of such individuals owns
beneficially more than one-half of one percent (1/2%) of the
outstanding shares or securities or both (taken at market value) of
such issuer and such individuals owning more than one-half of one
percent (1/2%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both;
(d) purchase securities on margin or make short sales unless, by
virtue of its ownership of other securities, it has the right to
obtain securities equivalent in kind and amount to the securities sold
and, if the right is conditional, the sale is made upon the same
conditions, except in connection with arbitrage transactions and
except that the Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities;
(e) invest more than 15% of its net assets in securities which are
not readily marketable, the disposition of which is restricted under
Federal securities laws, or in repurchase agreements not terminable
within 7 days, and the Fund will not invest more than 10% of its total
assets in restricted securities;
(f) purchase securities of any issuer with a record of less than
three years of continuous operations, including predecessors, except
U.S. Government securities, municipal obligations, securities of such
issuers which are rated by at least one nationally recognized
statistical rating organization and obligations issued or guaranteed
by any foreign government or its agencies or instrumentalities, if
such purchase would cause the investments of the Fund in all such
issuers to exceed 5% of the total assets of the Fund taken at market
value;
(g) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund at any
time do not exceed 20% of its net assets; or sell put options on
securities if, as a result, the aggregate value of the obligations
underlying such put options would exceed 50% of the Fund's net assets;
(h) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to all futures contracts entered into on behalf of
the Fund and the premiums paid for options on futures contracts does
not exceed 5% of the Fund's total assets; provided that in the case of
an option that is in-the-money at the time of purchase, the in-the-
money amount may be excluded in computing the 5% limit;
(i) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which own or
invest in such interests);
(j) purchase warrants if as a result warrants taken at the lower of
cost or market value would represent more than 5% of the value of the
Fund's net assets or more than 2% of its net assets in warrants that
are not listed on the New York or American Stock Exchanges or on an
exchange with comparable listing requirements (for this purpose,
warrants attached to securities will be deemed to have no value);
(k) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the time any
loan is made; all loans of portfolio securities will be fully
collateralized and marked to market daily. The Fund has no current
intention of making loans of portfolio securities that would amount to
greater than 5% of the Fund's total assets;
(l) purchase or sell real estate limited partnership interests;
and
(m) borrow money in excess of 5% of its total assets (taken at market
value) , except for temporary or emergency purposes, or borrow
other than from banks; however, in the case of reverse repurchase
agreements the Fund may invest in such agreements with other than
banks subject to total net asset coverage of 300% for such agreements
and all borrowings .
The foregoing restrictions with respect to repurchase agreements shall
be construed to be for repurchase agreements entered into for the
investment of available cash consistent with the Fund's repurchase
agreement procedures, not repurchase commitments entered into for general
investment purposes.
PURCHASES
(See "Purchases" and "Transaction information" in the Fund's prospectus)
Additional Information About Opening An Account
Clients having a regular investment counsel account with the Adviser
or its affiliates and members of their immediate families, officers and
employees of the Adviser or of any affiliated organization and their
immediate families, members of the National Association of Securities
Dealers, Inc. ("NASD") and banks may, if they prefer, subscribe initially
for at least $1,000 of Fund shares through Scudder Investor Services, Inc.
(the "Distributor") by letter, fax, TWX or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified taxpayer identification number, clients
having a regular investment counsel account with the Adviser or its
affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate
families, members of the NASD and banks may open an account by wire. These
investors must call 1-800-225-5163 to get an account number. During the
call, the investor will be asked to indicate the Fund name, amount to be
wired ($1,000 minimum), name of bank or trust company from which the wire
will be sent, the exact registration of the new account, the taxpayer
identification or Social Security number, address and telephone number.
The investor must then call the bank to arrange a wire transfer to The
Scudder Funds, State Street Bank and Trust Company, Boston, MA
021 01 , ABA Number 011000028, Account Number 9903-5552. The
investor must give the Scudder fund name, account name and new account
number. Finally, the investor must send the completed and signed
application to the Fund promptly.
The minimum initial purchase amount is less than $1,000 under certain
special plan accounts.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more, and for an amount not
greater than four times the value of the shareholder's account, may be
placed by telephone, fax, etc. by members of the NASD, by banks, and by
established shareholders [except by Scudder Individual Retirement Account
(IRA), Scudder Profit Sharing and Money Purchase Pension Plans, Scudder
401(k) and Scudder 403(b) Plan holders]. Orders placed in this manner may
be directed to any office of the Distributor listed in the Fund's
prospectus. A two-part invoice of the purchase will be mailed out promptly
following receipt of a request to buy. Payment should be attached to a
copy of the invoice for proper identification. Federal regulations require
that payment be received within seven business days. If payment is not
received within that time, the shares may be canceled. In the event of
such cancellation or cancellation at the purchaser's request, the purchaser
will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. If the purchaser is a
shareholder, the Fund shall have the authority, as agent of the
shareholder, to redeem shares in the account in order to reimburse the Fund
or the principal underwriter for the loss incurred. Net losses on such
transactions which are not recovered from the purchaser will be absorbed by
the principal underwriter. Any net profit on the liquidation of unpaid
shares will accrue to the Fund.
Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn
on, or payable through, a U.S. bank.
If shares of the Fund are purchased by a check which proves to be
uncollectible, the Fund reserves the right to cancel the purchase
immediately and the purchaser will be responsible for any loss incurred by
the Fund or the principal underwriter by reason of such cancellation. If
the purchaser is a shareholder, the Fund will have the authority, as agent
of the shareholder, to redeem shares in the account in order to reimburse
the Fund or the principal underwriter for the loss incurred. Investors
whose orders have been canceled may be prohibited from or restricted in
placing future orders in any of the Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on a selected day, your bank must forward federal funds by wire
transfer and provide the required account information so as to be available
to the Fund prior to the close of regular trading on the Exchange
(normally 4 p.m. eastern time).
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently the Distributor pays a fee for receipt by the
Custodian of "wired funds," but the right to charge investors for this
service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include Martin Luther King, Jr. Day (the 3rd
Monday in January), Columbus Day (the 2nd Monday in October) and
Veterans Day (November 11). Investors are not able to purchase
shares by wiring federal funds on such holidays because the Custodian is
not open to receive such federal funds on behalf of the Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset
value normally will be computed as of the close of regular trading on the
Exchange on each day during which the Exchange is open for trading. Orders
received after the close of regular trading on the Exchange will receive
the next day's net asset value. If the order has been placed by a member
of the NASD, other than the Distributor, it is the responsibility of that
member broker, rather than the Fund, to forward the purchase order to the
Fund's transfer agent in Boston by the close of regular trading on the
Exchange.
Share Certificates
Due to the desire of the Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the
Fund.
Other Information
If purchases or redemptions of Fund shares are arranged and settlement
is made at the investor's election through a member of the NASD other than
the Distributor, that member may, at its discretion, charge a fee for that
service.
The Board of Directors and the Distributor each have the right to
limit the amount of purchases by and to refuse to sell to any person. The
Directors and the Distributor may suspend or terminate the offering of
shares of the Fund at any time.
The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders
without a certified tax identification number and certain other certified
information (e.g., from exempt organizations, certification of exempt
status) will be returned to the investor.
The Fund may issue shares of the Fund at net asset value in connection
with any merger or consolidation with, or acquisition of the assets of, any
investment company (or series thereof) or personal holding company, subject
to the requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information" in the
Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may
be either an additional investment into an existing account or may involve
opening a new account in another fund. When an exchange involves a new
account, the new account will be established with the same registration,
tax identification number, address, telephone redemption option, SAIL
(Scudder Automated Information Line) and dividend option as the existing
account. Other features will not carry over automatically to the new
account. Exchanges into a new fund account must be for a minimum of
$1,000. When an exchange represents an additional investment into an
existing account, the account receiving the exchange proceeds must have
identical registration, tax identification number, address, and account
options/features as the account of origin. Exchanges into an existing
account must be for $100 or more. If the account receiving the exchange
proceeds is different in any respect, the exchange request must be in
writing and must contain an original signature guarantee as described under
"Transaction information--Redeeming shares--Signature guarantees" in the
Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective
net asset value determined on that day. Exchange orders received after the
close will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder Fund to
an existing account in another Scudder Fund through Scudder's Automatic
Exchange Program. Exchanges must be for a minimum of $50. Shareholders
may add this free feature over the phone or in writing. Automatic
Exchanges will continue until the shareholder requests by phone or in
writing to have the feature removed, or until the originating account is
depleted. The Trust and the Transfer Agent each reserves the right to
suspend or terminate the privilege of the Automatic Exchange Program at any
time.
There is no charge to the shareholder for any exchange described
above. An exchange into another Scudder fund is a redemption of shares,
and therefore may result in tax consequences (gain or loss) to the
shareholder and the proceeds of such exchange may be subject to backup
withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Corporation
employs procedures, including recording telephone calls, testing a caller's
identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the
Corporation does not follow such procedures, it may be liable for losses
due to unauthorized or fraudulent telephone instructions. The Corporation
will not be liable for acting upon instructions communicated by telephone
that it reasonably believes to be genuine. The Corporation, the Fund and
the Transfer Agent each reserves the right to suspend or terminate the
privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain a prospectus of the Scudder fund into which the
exchange is being contemplated from the Distributor.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
Shareholders currently receive the right automatically without having
to elect it, to redeem by telephone up to $50,000 to their address of
record. Shareholders may also request by telephone to have the proceeds
mailed or wired to their predesignated bank account. In order to request
wire redemptions by telephone, shareholders must have completed and
returned to the Transfer Agent the application, including the designation
of a bank account to which the redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish the telephone redemption
privilege must complete the appropriate section on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
pension and profit-sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption proceeds should either
return a Telephone Redemption Option Form (available upon request), or
send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appears on the account. An original signature
and an original signature guarantee are required for each person in
whose name the account is registered.
If a request for a redemption to a shareholder's bank account is made
by telephone or fax, payment will be made by Federal Reserve bank wire to
the bank account designated on the application, unless a request is made
that the redemption be mailed to the designated bank account. There will
be a $5 charge for all wire redemptions.
Note: Investors designating a savings bank to receive their
telephone redemption proceeds are advised that if the savings
bank is not a participant in the Federal Reserve System,
redemption proceeds must be wired through a commercial bank which
is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that
investors wishing to use a savings bank discuss wire procedures
with their bank and submit any special wire transfer information
with the telephone redemption authorization. If appropriate wire
information is not supplied, redemption proceeds will be mailed
to the designated bank.
The Corporation employs procedures, including recording telephone
calls, testing a caller's identity, and sending written confirmation of
telephone transactions, designed to give reasonable assurance that
instructions communicated by telephone are genuine, and to discourage
fraud. To the extent that the Corporation does not follow such procedures,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions. The Corporation will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption by Mail or Fax
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted
to, stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax required
in some states when settling estates.
It is suggested that shareholders holding shares registered in other
than individual names contact the Transfer Agent prior to redemptions to
ensure that all necessary documents accompany the request. When shares are
held in the name of a corporation, trust, fiduciary agent, attorney or
partnership, the Transfer Agent requires, in addition to the stock power,
certified evidence of authority to sign. These procedures are for the
protection of shareholders and should be followed to ensure prompt payment.
Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within seven business
days after receipt by the Transfer Agent of a request for redemption that
complies with the above requirements. Delays of more than seven days of
payment for shares tendered for redemption may result but only until the
purchase check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information please call 1-800-225-5163.
Redemption-In-Kind
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase
order by making payment in whole or in part in readily marketable
securities chosen by the Fund and valued as they are for purposes of
computing the Fund's net asset value (a redemption-in-kind). If payment is
made in securities, a shareholder may incur transaction expenses in
converting these securities into cash. The Corporation has elected,
however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Other Information
Clients, officers or employees of the Adviser or of an affiliated
organization, and members of such clients', officers' or employees'
immediate families, banks and members of the NASD may direct repurchase
requests to the Fund through the Distributor at Two International
Place , Boston, Massachusetts 02110- 4103 by letter, fax, TWX or
telephone. A two-part confirmation will be mailed out promptly after
receipt of the redemption request. A written request in good order as
described above and any certificates with a proper, original signature
guarantee(s), as described in the Fund's prospectus under "Transaction
information--Redeeming shares--Signature guarantees," should be sent with a
copy of the invoice to Scudder Service Corporation, Confirmed Processing
Department, Two International Place , Boston, Massachusetts 02110-
4103 . Failure to deliver required documents (see above) by the
settlement date may result in cancellation of the trade and the shareholder
will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. The Fund will have the
authority, as agent of the shareholder, to redeem shares in the account in
order to reimburse the Fund or the principal underwriter for the loss
incurred. Net losses on such transactions which are not recovered from the
shareholder will be absorbed by the principal underwriter. Any net gains
so resulting will accrue to the Fund. For this group, repurchases will be
carried out at the net asset value next computed after such repurchase
requests have been received. The arrangements described in this paragraph
for repurchasing shares are discretionary and may be discontinued at any
time.
If a shareholder redeems all shares in the account after the record
date of a dividend , the shareholder will receive in addition to the net
asset value thereof, all declared but unpaid dividends thereon. The value
of shares redeemed or repurchased may be more or less than the
shareholder's cost depending on the net asset value at the time of
redemption or repurchase. The Fund does not impose a redemption or
repurchase charge although a wire charge may be applicable for redemption
proceeds wired to an investor's bank account. Redemption of shares,
including an exchange into another Scudder fund, may result in tax
consequences (gain or loss) to the shareholder and the proceeds of such
redemptions may be subject to backup withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be
suspended at times during which (a) the Exchange is closed, other than
customary weekend and holiday closings, (b) trading on the Exchange is
restricted, (c) an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its
net assets, or (d) a governmental body having jurisdiction over the Fund
may by order permit such a suspension for the protection of the Fund's
shareholders; provided that applicable rules and regulations of the SEC (or
any succeeding governmental authority) will govern as to whether the
conditions prescribed in (b), (c) or (d) exist.
If transactions at any time reduce a shareholder's account balance in
the Fund to below $1,000 in value, the Fund may notify the shareholder
that, unless the account balance is brought up to at least $1,000, the Fund
will redeem all shares and close the account by making payment to the
shareholder. The shareholder has sixty days to bring the account balance
up to $1,000 before any action will be taken by the Fund. No transfer from
an existing account to a new fund account may be for less than $1,000 or
the new account will be redeemed as described above. (This policy applies
to accounts of new shareholders, but does not apply to certain Special Plan
Accounts.) The Directors have the authority to change the minimum account
size.
FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Fund's prospectus.)
The Pure No-Load(tm) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from
the vast majority of mutual funds available today. The primary distinction
is between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees
are distribution-related fees charged against fund assets and are distinct
from service fees, which are charged for personal services and/or
maintenance of shareholder accounts. Asset-based sales charges and service
fees are typically paid pursuant to distribution plans adopted under 12b-1
under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed.
The maximum front-end or back-end load varies, and depends upon whether or
not a fund also charges a 12b-1 fee and/or a service fee or offers
investors various sales-related services such as dividend reinvestment.
The maximum charge for a 12b-1 fee is 0.75% of a fund's average annual net
assets, and the maximum charge for a service fee is 0.25% of a fund's
average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual
fund can call itself a "no-load" fund only if the 12b-1 fee and/or service
fee does not exceed 0.25% of a fund's average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(tm)
to distinguish Scudder funds from other no-load mutual funds. Scudder
pioneered the no-load concept when it created the nation's first no-load
fund in 1928, and later developed the nation's first family of no-load
mutual funds.
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same
amount in a load fund that collects an 8.50% front-end load, a load fund
that collects only a 0.75% 12b-1 and/or service fee, and a no-load fund
charging only a 0.25% 12b-1 and/or service fee. The hypothetical figures
in the chart show the value of an account assuming a constant 10% rate of
return over the time periods indicated and reinvestment of dividends and
distributions.
<TABLE>
<CAPTION>
Scudder Load Fund No-Load Fund
Pure No- 8.50% Load with 0.75% with 0.25%
YEARS Load(tm) Fund Fund 12b-1 Fee 12b-1 Fee
----- ------------- ---- --------- ---------
<C> <C> <C> <C> <C>
10 $25,937 $23,733 $24,222 $25,354
15 41,772 38,222 37,698 40,371
20 67,275 61,557 58,672 64,282
</TABLE>
Investors are encouraged to review the fee tables on page 2 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Distribution Plan s
Investors have freedom to choose whether to receive cash or to
reinvest any dividends from net investment income or distributions from
realized capital gains in additional shares of the Fund. A change of
instructions for the method of payment must be received by the Transfer
Agent at least five days prior to a dividend record date. Shareholders may
change their dividend option either by calling 1-800-225-5163 or by sending
written instructions to the Transfer Agent. See "How to contact
Scudder" in the Prospectus for the address. Please include your
account number with your written request.
Reinvestment is usually made on the day following the record
date. Investors may leave standing instructions with the Transfer Agent
designating their option for either reinvestment or cash distribution of
any income dividends or capital gains distributions. If no election is
made, dividends and distributions will be invested in additional shares of
the Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of
record is with a member bank of the Automated Clearing House Network (ACH)
can have income and capital gains distributions automatically deposited to
their personal bank account usually within three business days after the
Fund pays its distribution. A DistributionsDirect request form can be
obtained by calling 1-800-225-5163.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement
plan accounts, the reinvestment of dividends and capital gains is also
required.
Scudder Funds Centers
Investors may visit any of the Fund Centers maintained by the
Distributor. The Centers are designed to provide individuals with services
during any business day. Investors may pick up literature or find
assistance with opening an account, adding monies or special options to
existing accounts, making exchanges within the Scudder Family of Funds,
redeeming shares, or opening retirement plans. Checks should not be mailed
to the Centers but to "The Scudder Funds" at the address listed under "How
to Contact Scudder" in the Prospectus.
Reports to Shareholders
The Fund issues shareholders financial statements examined by
independent accountants on a semiannual basis and audited annually. These
include a list of investments held and statements of assets and
liabilities, operations, changes in net assets and financial
highlights . The Fund presently intends to distribute to shareholders
informal quarterly reports during the intervening quarters, containing a
summary of the Fund's performance and portfolio holdings.
Transaction Summaries
Annual summaries of all transactions in each Fund account are
available to shareholders. The summaries may be obtained by calling 1-
800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Fund's prospectus.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist
investors in choosing a Scudder fund, descriptions of the Scudder funds'
objectives follow. Initial purchases in each Scudder fund must be at least
$1,000 or $500 in the case of IRAs . Subsequent purchases must be
for $100 or more. Minimum investments for special plan accounts may be
lower.
MONEY MARKET
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity
and stability of capital and consistent therewith to provide current
income through investment in a supervised portfolio of U.S. Government
and U.S. Government guaranteed obligations with maturities of not more
than 762 calendar days . The Fund intends to seek to maintain a
constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible.
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible
enhancement of principal value by actively managing currency, bond
market and maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate-and
long-term bonds.
Scudder Short Term Global Income Fund seeks to provide high current
income from a portfolio of high-grade money market instruments and
short-term bonds denominated in foreign currencies and the U.S.
dollar.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization
of reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in
investment-grade municipal securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is
exempt from regular federal income tax primarily through investments
in long-term municipal securities with an emphasis on high quality.
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from
New York state, New York City and regular federal income taxes through
the professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state,
municipal and local government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt
from both Pennsylvania and regular federal income taxes through a
portfolio consisting of Pennsylvania state, municipal and local
government obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Capital Growth Fund seeks to maximize long-term growth of
capital through a broad and flexible investment program emphasizing
common stocks.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Global Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable equity securities
selected on a worldwide basis. It may also invest in debt securities
of U.S. and foreign issuers. Income is an incidental consideration.
Scudder Global Small Company Fund seeks above-average capital
appreciation over the long term by investing primarily in the equity
securities of small companies located throughout the world.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Quality Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Value Fund seeks long-term growth of capital through
investment in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
* These funds are not available for sale in all states. For
information, contact Scudder Investor Services, Inc.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds,"
and in other leading newspapers throughout the country. Investors will
notice the net asset value and offering price are the same, reflecting the
fact that no sales commission or "load" is charged on the sale of shares of
the Scudder Funds. The latest seven-day yields for the money-market funds
can be found every Monday and Thursday in the "Money-Market Funds" section
of The Wall Street Journal. This information also may be obtained by
calling the Scudder Automated Information Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and
diversified investment portfolios; pure no-load funds with no
commissions to purchase or redeem shares or Rule 12b-1 distribution
fees; individual attention from a Scudder Service Representative;
easy telephone exchanges into Scudder money market, tax free,
income, and growth funds; shares redeemable at net asset value at any time.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By Automatic Withdrawal
Plan" in the Fund's prospectus.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be
obtained by contacting Scudder Investor Services, Inc., Two
International Place , Boston, Massachusetts 02110- 4103 or by
calling toll free, 1-800-225-2470. It is advisable for an investor
considering the funding of the investment plans described below to consult
with an attorney or other investment or tax adviser with respect to the
suitability requirements and tax aspects thereof.
Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of
the Plan which includes a cash-or-deferred feature) or a Scudder Money
Purchase Pension Plan (jointly referred to as the Scudder Retirement Plans)
adopted by a corporation, a self-employed individual or a group of
self-employed individuals (including sole proprietorships and
partnerships), or other qualifying organization. Each of these forms was
approved by the IRS as a prototype. The IRS's approval of an employer's
plan under Section 401(a) of the Internal Revenue Code will be greatly
facilitated if it is in such approved form. Under certain circumstances,
the IRS will assume that a plan, adopted in this form, after special notice
to any employees, meets the requirements of Section 401(a) of the Internal
Revenue Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including
sole proprietors and partnerships), or other qualifying organization. This
plan has been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for
an Individual Retirement Account which meets the requirements of Section
408(a) of the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or
a tax-deferred annuity program (a "qualified plan"), and a married
individual who is not an active participant in a qualified plan and whose
spouse is also not an active participant in a qualified plan, are eligible
to make tax deductible contributions of up to $2,000 to an IRA prior to the
year such individual attains age 70 1/2. In addition, certain individuals
who are active participants in qualified plans (or who have spouses who are
active participants) are also eligible to make tax-deductible contributions
to an IRA; the annual amount, if any, of the contribution which such an
individual will be eligible to deduct will be determined by the amount of
his, her, or their adjusted gross income for the year. Whenever the
adjusted gross income limitation prohibits an individual from contributing
what would otherwise be the maximum tax-deductible contribution he or she
could make, the individual will be eligible to contribute the difference to
an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA
each year (up to $2,250 for married couples if one spouse has earned income
of no more than $250). All income and capital gains derived from IRA
investments are reinvested and compound tax-deferred until distributed.
Such tax-deferred compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5,
10, and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
<TABLE>
<CAPTION>
Starting
Age of Annual Rate
of Return
Contributions 5% 10% 15%
- ------------- ---- ---- ----
<S> <C> <C> <C>
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming
average annual returns of 5, 10 and 15%. (At withdrawal, a portion of the
accumulation in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
<TABLE>
<CAPTION>
Starting
Age of Annual Rate
of Return
Contributions 5% 10% 15%
- ------------- ---- ---- ----
<S> <C> <C> <C>
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7)
of the Internal Revenue Code. In general, employees of tax-exempt
organizations described in Section 501(c)(3) of the Internal Revenue Code
(such as hospitals, churches, religious, scientific, or literary
organizations and educational institutions) or a public school system are
eligible to participate in a 403(b) plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders who currently own or purchase $10,000
or more of shares of the Fund may establish an Automatic Withdrawal Plan.
The investor can then receive monthly, quarterly or periodic redemptions
from his or her account for any designated amount of $50 or more. Payments
are mailed at the end of each month. The check amounts may be based on the
redemption of a fixed dollar amount, fixed share amount, percent of account
value or declining balance. The Plan provides for income dividends and
capital gains distributions, if any, to be reinvested in additional shares.
Shares are then liquidated as necessary to provide for withdrawal payments.
Since the withdrawals are in amounts selected by the investor and have no
relationship to yield or income, payments received cannot be considered as
yield or income on the investment and the resulting liquidations may
deplete or possibly extinguish the initial investment. Requests for
increases in withdrawal amounts or to change payee must be submitted in
writing, signed exactly as the account is registered and contain signature
guarantee(s) as described under "Transaction information--Redeeming shares-
- -Signature guarantees" in the Fund's prospectus. Any such requests must be
received by the Fund's transfer agent by the 15th of the month in which
such change is to take effect. An Automatic Withdrawal Plan may be
terminated at any time by the shareholder, the Corporation or its agent on
written notice, and will be terminated when all shares of the Fund under
the Plan have been liquidated or upon receipt by the Corporation of notice
of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling 1-
800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services,
Inc. for forwarding regular investments through a single source. The
minimum annual investment is $240 per investor which may be made in
monthly, quarterly, semiannual or annual payments. The minimum monthly
deposit per investor is $20. Except for trustees or custodian fees for
certain retirement plans, at present there is no separate charge for
maintaining group or salary deduction plans; however, the Corporation and
its agents reserve the right to establish a maintenance charge in the
future depending on the services required by the investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that
the shareholder ceases participating in the group plan prior to investment
of $1,000 per individual or in the event of a redemption which occurs prior
to the accumulation of that amount or which reduces the account value to
less than $1,000 and the account value is not increased to $1,000 within a
reasonable time after notification. An investor in a plan who has not
purchased shares for six months shall be presumed to have stopped making
payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through
automatic deductions from checking accounts by completing the appropriate
form and providing the necessary documentation to establish this service.
The minimum investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing
whereby a specific dollar amount is invested at regular intervals. By
investing the same dollar amount each period, when shares are priced low
the investor will purchase more shares than when the share price is higher.
Over a period of time this investment approach may allow the investor to
reduce the average price of the shares purchased. However, this investment
approach does not assure a profit or protect against loss. This type of
regular investment program may be suitable for various investment goals
such as, but not limited to, college planning or saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts
for minors. The minimum initial investment is $1,000 unless the donor
agrees to continue to make regular share purchases for the account through
Scudder's Automatic Investment Plan (AIP). In this case, the minimum
initial investment is $500.
The Corporation reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in
the event that regular investments to the account cease before the $1,000
minimum is reached.
Scudder Trust Company
Annual service fees are paid by the Fund to Scudder Trust Company, an
affiliate of the Adviser, for certain retirement plan accounts and are
included in the fees paid to the Transfer Agent.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends and
capital gains distributions" in the Fund's prospectus.)
The Fund intends to follow the practice of distributing substantially
all of its investment company taxable income, which includes any excess of
net realized short-term capital gains over net realized long-term capital
losses. The Fund may follow the practice of distributing the entire excess
of net realized long-term capital gains over net realized short-term
capital losses. However, the Fund may retain all or part of such gain for
reinvestment, after paying the related federal taxes for which shareholders
may then be able to claim a credit against their federal tax liability. If
the Fund does not distribute the amount of capital gain and/or ordinary
income required to be distributed by an excise tax provision of the
Internal Revenue Code, the Fund may be subject to that excise tax. In
certain circumstances, the Fund may determine that it is in the interest of
shareholders to distribute less than the required amount. (See "TAXES.")
The Fund intends to distribute investment company taxable income
(exclusive of net short-term capital gains in excess of net long-term
capital losses) quarterly in April, July, October, and December each year.
Distributions of capital net income gains realized during each fiscal year
will be made annually in December. Additional distributions may be made if
necessary.
Both types of distributions will be made in shares of the Fund and
confirmation will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance information" in
the Fund's prospectus.)
From time to time, quotations of the Fund's performance may be
included in advertisements, sales literature or reports to shareholders or
prospective investors. These performance figures are calculated in the
following manners:
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for periods of one year and the life of the Fund, all ended on the
last day of a recent calendar quarter. Average annual total return
quotations reflect changes in the price of the Fund's shares and assume
that all dividends and capital gains distributions during the respective
periods were reinvested in Fund shares. Average annual total return is
calculated by finding the average annual compound rates of return of a
hypothetical investment over such periods according to the following
formula (average annual total return is then expressed as a percentage):
T = (ERV/P)^(1/n) - 1
Where:
P = a hypothetical initial investment of
$1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Average Annual Total Return for period ended October 31, 1994
Life of Fund (1)
-3.54%
(1) For the period beginning December 31, 1993
(commencement of operations)
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period.
Cumulative total return quotations reflect changes in the price of the
Fund's shares and assume that all dividends and capital gains distributions
during the period were reinvested in Fund shares. Cumulative total return
is calculated by finding the cumulative rates of return of a hypothetical
investment over such periods according to the following formula (cumulative
total return is then expressed as a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return.
P = a hypothetical initial investment of
$1,000.
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return for the period ended October 31, 1994
Life of Fund(1)
-3.54%
(1) For the period beginning December 31, 1993 (commencement of
operations)
Total Return
Total return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total return.
Capital Change
Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include
the reinvestment of income dividends.
Yield
Yield is the net annualized yield based on a specified 30-day (or one
month) period assuming semiannual compounding of income. Yield is
calculated by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period according to the following formula:
YIELD = 2 [((a-b)/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the
last day of the period.
The yield for the 30-day period ended October 31, 1994 was 9.13%.
Quotations of the Fund's performance are based on historical earnings,
show the performance of a hypothetical investment, and are not intended to
indicate future performance of the Fund. An investor's shares when
redeemed may be worth more or less than their original cost. Performance
of the Fund will vary based on changes in market conditions and the level
of the Fund's expenses. In periods of declining interest rates the Fund's
quoted yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the Fund's quoted yield will tend
to be somewhat lower.
Comparison of Fund Performance
A c omparison of the quoted non-standard performance
offered for various investments is valid only if performance is
calculated in the same manner. Since there are different methods of
calculating performance, investors should consider the effects of the
methods used to calculate performance when comparing performance of the
Fund with performance quoted with respect to other investment companies or
types of investments.
In connection with communicating its performance to current or
prospective shareholders, the Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends
or interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500
Composite Stock Price Index (S&P 500), the NASDAQ OTC Composite Index, the
NASDAQ Industrials Index, the Russell 2000 Index, and statistics published
by the Small Business Administration.
Because some or all of the Fund's investments are denominated in
foreign currencies, the strength or weakness of the U.S. dollar as against
these currencies may account for part of the Fund's investment performance.
Historical information on the value of the dollar versus foreign currencies
may be used from time to time in advertisements concerning the Fund. Such
historical information is not indicative of future fluctuations in the
value of the U.S. dollar against these currencies. In addition, marketing
materials may cite country and economic statistics and historical stock
market performance for any of the countries in which the Fund invests,
including, but not limited to, the following: population growth, gross
domestic product, inflation rate, average stock market price-earnings
ratios and the total value of stock markets. Sources for such statistics
may include official publications of various foreign governments and
exchanges.
From time to time, in advertising and marketing literature, this
Fund's performance may be compared to the performance of broad groups of
mutual funds with similar investment goals, as tracked by independent
organizations such as, Investment Company Data, Inc. ("ICD"), Lipper
Analytical Services, Inc. ("Lipper"), CDA Investment Technologies, Inc.
("CDA"), Morningstar, Inc., Value Line Mutual Fund Survey and other
independent organizations. When these organizations' tracking results are
used, the Fund will be compared to the appropriate fund category, that is,
by fund objective and portfolio holdings, or to the appropriate volatility
grouping, where volatility is a measure of a fund's risk. For instance, a
Scudder growth fund will be compared to funds in the growth fund category;
a Scudder income fund will be compared to funds in the income fund
category; and so on. Scudder funds (except for money market funds) may
also be compared to funds with similar volatility, as measured
statistically by independent organizations. In addition, the Fund's
performance may also be compared to the performance of broad groups of
comparable mutual funds. Indices with which the Funds performance may be
compared include, but are not limited to, the following:
The Europe/Australia/Far East (EAFE) Index
Morgan Stanley Capital International World Index
J.P. Morgan Global Traded Bond Index
Salomon Brothers World Government Bond Index
NASDAQ Composite Index
Wilshire 5000 Stock Index
The following graph illustrates the historical risks and returns of
selected indices which track the performance of various combinations of
United States and international securities for the ten year period ended
December 31, 1994; results for other periods may vary. The graph uses ten
year annualized international returns represented by the Morgan Stanley
Capital International Europe, Australia and Far East (EAFE) Index and ten
year annualized United States returns represented by the S&P 500 Index.
Risk is measured by the standard deviation in overall portfolio performance
within each index. Performance of an index is historical, and does not
represent the performance of the Fund, and is not a guarantee of future
results.
(X-Y CHART TITLE) EFFICIENT FRONTIER
MSCI EAFE vs. S&P 500 (12/31/84-12/31/94)
(CHART DATA)
<TABLE>
<CAPTION>
Data Point Labels X-Axis Y-Axis
Standard Deviation Total Return
<S> <C> <C>
100% Int'l MSCI EAFE 19.35 17.55
10 US/90 Int'l 18.13 17.23
20/80 17.03 16.91
30 U.S./70 Int'l 16.07 16.59
40/60 15.29 16.27
50 U.S./50Int'l 14.70 15.96
60/40 14.34 15.64
70 U.S./30 Int'l 14.21 15.32
80/20 14.33 15.00
90 U.S./10 Int'l 14.69 14.68
100% U.S. S&P 500 15.27 14.36
</TABLE>
Source: Lipper Analytical Services, Inc. (Data as of 12/31/94)
From time to time, in marketing and other Fund literature,
(Trustees)(Directors) and officers of the Fund, the Fund's portfolio
manager, or members of the portfolio management team may be depicted and
quoted to give prospective and current shareholders a better sense of the
outlook and approach of those who manage the Fund. In addition, the
amount of assets that the Adviser has under management in various
geographical areas may be quoted in advertising and marketing
materials.
The Fund may be advertised as an investment choice in Scudder's
college planning program. The description may contain illustrations of
projected future college costs based on assumed rates of inflation and
examples of hypothetical fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund
to other Scudder funds or broad categories of funds, such as money market,
bond or equity funds, in terms of potential risks and returns. Money
market funds are designed to maintain a constant $1.00 share price and have
a fluctuating yield. Share price, yield and total return of a bond fund
will fluctuate. The share price and return of an equity fund also will
fluctuate. The description may also compare the Fund to bank products,
such as certificates of deposit. Unlike mutual funds, certificates of
deposit are insured up to $100,000 by the U.S. government and offer a fixed
rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity
funds, which may involve the loss of principal. However, all long-term
investments, including investments in bank products, may be subject to
inflation risk, which is the risk of erosion of the value of an investment
as prices increase over a long time period. The risks/returns associated
with an investment in bond or equity funds depend upon many factors. For
bond funds these factors include, but are not limited to, a fund's overall
investment objective, the average portfolio maturity, credit quality of the
securities held, and interest rate movements. For equity funds, factors
include a fund's overall investment objective, the types of equity
securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in
international bond or equity funds also will depend upon currency exchange
rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond
funds and equity funds. Shorter-term bond funds generally are considered
less risky and offer the potential for less return than longer-term bond
funds. The same is true of domestic bond funds relative to international
bond funds, and bond funds that purchase higher quality securities relative
to bond funds that purchase lower quality securities. Growth and income
equity funds are generally considered to be less risky and offer the
potential for less return than growth funds. In addition, international
equity funds usually are considered more risky than domestic equity funds
but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity
securities.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials
or articles about this Fund. Sources for Fund performance information and
articles about the Fund may include the following:
American Association of Individual Investors' Journal, a monthly
publication of the AAII that includes articles on investment analysis
techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market
and bank CD interest rates, published on a weekly basis by Masterfund, Inc.
of Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
CDA Investment Technologies, Inc., an organization which provides
performance and ranking information through examining the dollar results of
hypothetical mutual fund investments and comparing these results against
appropriate market indices.
Consumer Digest, a monthly business/financial magazine that includes a
"Money Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to
time articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a
"Market Watch" department reporting on activities in the mutual fund
industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign
equity market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market
fund activity and including certain averages as performance benchmarks,
specifically "Donoghue's Money Fund Average," and "Donoghue's Government
Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research
and data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly
covers financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon
Jacobs, that includes mutual fund performance data and recommendations for
the mutual fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company,
Inc., that reports on mutual fund performance, rates funds and discusses
investment strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes
a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published
monthly by Dow Jones and Company, Inc. and The Hearst
Corporation. Focus is placed on ideas for investing, spending and
saving .
Success, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter,
published by Babson United Investment Advisors, that includes mutual fund
performance data and reviews of mutual fund portfolios and investment
strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient
features, management results, income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital
Publishing Company, a subsidiary of Fidelity Investments. Focus is
placed on personal financial journalism .
FUND ORGANIZATION
(See "Fund organization" in the Fund's prospectus.)
The Fund is a separate series of Scudder Global Fund, Inc., a Maryland
corporation. The other series of the Corporation are Scudder Short Term
Global Income Fund, Scudder Global Fund, Scudder International Bond Fund,
and Scudder Global Small Company Fund.
The authorized capital stock of the Corporation consists of 800
million shares with $0.01 par value. Each share of each series of the
Corporation has equal voting rights as to each other share of that series
as to voting for directors, redemption, dividends and liquidation.
Shareholders have one vote for each share held. The Directors have the
authority to issue additional series of shares and to designate the
relative rights and preferences as between the different series. If a
series were unable to meet its obligations, the remaining series should not
have to assume the unsatisfied obligation of that series. All shares
issued and outstanding are fully paid and non-assessable, transferable, and
redeemable at net asset value at the option of the shareholder. Shares
have no pre-emptive or conversion rights.
Shares of the Corporation entitle their holders to one vote per share;
however, separate votes are taken by each series on matters affecting an
individual series. For example, a change in investment policy for a series
would be voted upon only by shareholders of the series involved.
Additionally, approval of the investment advisory agreement is a matter to
be determined separately by each series. Approval by the shareholders of
one series is effective as to that series whether or not enough votes are
received from the shareholders of the other series to approve such
agreement as to the other series.
The shares of the Corporation have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the directors if they choose to do
so, and, in such event, the holders of the remaining less than 50% of the
shares voting for the election of Directors will not be able to elect any
person or persons to the Board of Directors.
The Directors, in their discretion, may authorize the division of
shares of the Funds (or shares of either series) into different classes
permitting shares of different classes to be distributed by different
methods. Although shareholders of different classes of a series would have
an interest in the same portfolio of assets, shareholders of different
classes may bear different expenses in connection with different methods of
distribution. The Directors have no current intention of taking the action
necessary to effect the division of shares into separate classes (which
under present regulations would require a Fund first to obtain an exemptive
order of the Commission), nor of changing the method of distribution of
shares of a Fund.
Maryland corporate law provides that a Director of the Corporation
shall not be liable for actions taken in good faith, in a manner he or she
reasonably believes to be in the best interests of the Corporation and with
the care that an ordinarily prudent person in a like position would use
under similar circumstances. In so acting, a Director shall be fully
protected in relying in good faith upon the records of the Corporation and
upon reports made to the Corporation by persons selected in good faith by
the Directors as qualified to make such reports. The By-Laws provide that
the Corporation will indemnify Directors and officers of the Corporation
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their positions with
the Corporation, to the fullest extent permitted by Maryland corporate law
as amended from time to time. However, nothing in the Articles of
Incorporation or the By-Laws protects or indemnifies a Director or officer
against any liability to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
No series of the Corporation shall be liable for the obligation of any
other series.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Fund's prospectus.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to the Fund. This organization is one of the most
experienced investment management firms in the U.S. It was established in
1919 and pioneered the practice of providing investment counsel to
individual clients on a fee basis. In 1928 it introduced the first no-load
mutual fund to the public. In 1953 Scudder introduced Scudder
International Fund, Inc., the first mutual fund available in the U.S.
investing internationally in securities of issuers in several foreign
countries. The firm reorganized from a partnership to a corporation on
June 28, 1985.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives
no income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including
insurance companies, colleges, industrial corporations, and financial and
banking organizations. In addition, it manages Montgomery Street Income
Securities, Inc., Scudder California Tax Free Trust, Scudder Cash
Investment Trust, Scudder Development Fund, Scudder Equity Trust, Scudder
Fund, Inc., Scudder Funds Trust, Scudder Global Fund, Inc., Scudder GNMA
Fund, Scudder Portfolio Trust, Scudder Institutional Fund, Inc., Scudder
International Fund, Inc., Scudder Investment Trust, Scudder Municipal
Trust, Scudder Mutual Funds, Inc., Scudder New Asia Fund, Inc., Scudder New
Europe Fund, Inc., Scudder State Tax Free Trust, Scudder Tax Free Money
Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund, Scudder
Variable Life Investment Fund, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The First
Iberian Fund, Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The
Latin America Dollar Income Fund, Inc. Some of the foregoing companies or
trusts have two or more series.
The Adviser also provides investment advisory services to the
mutual funds which comprise the AARP Investment Program from Scudder .
The AARP Investment Program from Scudder has assets of over $11
billion and includes the AARP Growth Trust, AARP Income Trust, AARP Tax
Free Income Trust and AARP Cash Investment Funds.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. In this work, the Adviser
utilizes certain reports and statistics from a wide variety of sources,
including brokers and dealers who may execute portfolio transactions for
the Fund and other clients of the Adviser, but conclusions are based
primarily on investigations and critical analyses by the Adviser's own
research specialists.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and
other clients are made with a view to achieving their respective investment
objectives and after consideration of such factors as their current
holdings, availability of cash for investment, and the size of their
investments generally. Frequently, a particular security may be bought or
sold for only one client or in different amounts and at different times for
more than one but less than all clients. Likewise, a particular security
may be bought for one or more clients when one or more other clients are
selling the security. In addition, purchases or sales of the same security
may be made for two or more clients on the same date. In such events, such
transactions will be allocated among the clients in a manner believed by
the Adviser to be equitable to each. In some cases, this procedure could
have an adverse effect on the price or amount of the securities purchased
or sold by the Fund. Purchase and sale orders for the Fund may be combined
with those of other clients of the Adviser in the interest of achieving the
most favorable net results to the Fund.
The Investment Management Agreement with the Adviser (the "Agreement")
was approved by the Directors of the Corporation on October 13, 1993 and by
the initial shareholder of the Fund on December 29, 1993. The Agreement
will continue in effect until September 30, 1995 and from year to year
thereafter only if its continuance is approved annually by the vote of a
majority of those Directors who are not parties to such Agreement or
interested persons of the Adviser or the Fund, cast in person at a meeting
called for the purpose of voting on such approval, and either by vote of a
majority of the Fund's Directors or of the outstanding voting securities of
the Fund. The Agreement may be terminated at any time, without payment of
penalty by either party, on sixty days' written notice, and automatically
terminates in the event of its assignment.
Under the Agreement, the Adviser provides the Fund with continuing
investment management for the Fund's portfolio consistent with the Fund's
investment objectives, policies and restrictions, and determines what
securities will be purchased for the portfolio of the Fund, what portfolio
securities will be held or sold by the Fund, and what portion of the Fund's
assets will be held uninvested, subject always to the provisions of the
Fund's Articles of Incorporation, By-Laws, the 1940 Act, Internal Revenue
Code of 1986, and to the Fund's investment objective, policies, and
restrictions, and subject, further, to such policies and instructions as
the Directors of the Fund may from time to time establish. The Adviser
also advises and assists the officers of the Fund in taking such steps as
are necessary or appropriate to carry out the decisions of its Directors
and the appropriate committees of the Directors regarding the conduct of
the business of the Fund.
Under the Agreement, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for the Fund's
operations as an open-end investment company including, but not limited to
preparing reports and notices to the Directors and shareholders;
supervising, negotiating contractual arrangements with, and monitoring
various third-party service providers to the Fund (such as the Fund's
transfer agent, pricing agents, custodian, accountants, and others);
preparing and making filings with the SEC and other regulatory agencies;
assisting in the preparation and filing of the Fund's federal, state, and
local tax returns; preparing and filing the Fund's federal excise tax
returns; assisting with investor and public relations matters; monitoring
the valuation of securities and the calculation of net asset value;
monitoring the registration of shares of the Fund under applicable federal
and state securities laws; maintaining the Fund's books and records to the
extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting
and legal issues; establishing and monitoring the Fund's operating budget;
processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends; and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Directors.
The Adviser pays the compensation and expenses (except those of
attending Board and committee meetings outside New York, New York and
Boston, Massachusetts) of all Directors, officers, and executive employees
of the Corporation affiliated with the Adviser, and makes available,
without expense to the Fund, the services of such Directors, officers, and
employees of the Adviser as may duly be elected officers or Directors of
the Corporation, subject to their individual consent to serve, and to any
limitations imposed by law, and provides the Fund's office space and
facilities. For these services the Fund pays the Adviser a fee equal to
1.00% of the Fund's average daily net assets. The fee is payable monthly,
provided the Fund will make such interim payments as may be requested by
the Adviser not to exceed 75% of the fee then accrued on the books of the
Fund and unpaid. The Adviser has voluntarily agreed to maintain the
total annualized management fees and other expenses of the
Fund at not more than 1.50% of the average daily net assets of the Fund
until _______________. The Adviser retains the ability to be repaid by the
Fund if expenses fall below the specified limit prior to the end of the
fiscal year. These expense limitation arrangements can decrease the Fund's
expenses and increase its performance. During the fiscal period ended
October 31, 1994, these arrangements resulted in a reduction of management
fees paid by the Fund of $364,316.
Under the Agreement the Fund is responsible for all of its other
expenses including organizational expenses, fees and expenses incurred in
connection with membership in investment company organizations; brokers'
commissions; legal, auditing and accounting expenses; taxes and
governmental fees; the fees and expenses of the transfer agent; the cost of
preparing share certificates and any other expenses including clerical
expenses of issue, redemption or repurchase of shares of capital stock; the
expenses of and the fees for registering or qualifying securities for sale;
the fees and expenses of the Directors, officers and employees of the
Corporation who are not affiliated with the Adviser; the cost of printing
and distributing reports and notices to shareholders; and the fees and
disbursements of custodians. The Corporation may arrange to have third
parties assume all or part of the expenses of sale, underwriting and
distribution of shares of the Fund. The Fund is also responsible for its
expenses incurred in connection with litigation, proceedings and claims and
the legal obligation it may have to indemnify its officers and Directors
with respect thereto. The Custodian Agreement provides that the Custodian
will compute the net asset value. The Agreement expressly provides that
the Adviser shall not be required to pay a pricing agent of the Fund for
portfolio pricing services, if any.
The Adviser has agreed in the Agreement to reimburse the Fund for
annual expenses to the extent required by the most restrictive expense
limitation imposed by any state in which the Corporation is at the time
offering its shares for sale, although no payments are required to be made
by the Adviser pursuant to this reimbursement provision in excess of the
annual fee paid by the Fund to the Adviser. Management has been advised
that the lowest such limitation is presently 2 1/2% of average net assets
up to $30 million, 2% of the next $70 million of such net assets and 1 1/2%
of such net assets in excess of that amount. Certain expenses such as
brokerage commissions, taxes, extraordinary expenses and interest are
excluded from such limitations. If reimbursement is required, it will be
made as promptly as practicable after the end of the Fund's fiscal year.
However, no fee payment will be made to the Adviser during any fiscal year
which will cause year to date expenses to exceed the cumulative pro-rata
expense limitation at the time of such payment.
The Agreement also provides that the Fund and the Corporation may use
any name derived from the name "Scudder, Stevens & Clark" only as long as
the Agreement or any extension, renewal or amendment thereof remains in
effect.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Directors of the Corporation who are
not "interested persons" of the Corporation have been represented by
independent counsel at the Fund's expense.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless
disregard by the Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It
is the Adviser's opinion that the terms and conditions of those
transactions which have occurred were not influenced by existing or
potential custodial or other Fund relationships.
None of the officers or Directors of the Fund may have dealings with
the Fund as principals in the purchase or sale of securities, except as
individual subscribers or holders of shares of the Fund.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
Position with
Underwriter,
Position Principal Scudder Investor
Name and Address with Corporation Occupation** Services, Inc.
- ---------------- ---------------- ------------ ------------------
<C> <C> <C> <C>
Edmond D. Villani++*# Chairman of President and --
the Board Managing
and Director Director of
Scudder,
Stevens & Clark,
Inc.
Nicholas Bratt++*#@ President, Managing Director --
Scudder Emerging of Scudder,
Markets Income Stevens & Clark,
Fund, Scudder Inc.
Short Term
Global Income
Fund, Scudder
International
Bond Fund and
Scudder Global
Small Company
Fund; and
Director
Paul Bancroft III Director Venture Capitalist --
1120 Cheston and Consultant;
Lane Retired,
Queenstown, MD 21658 President, Chief
Executive Officer
and Director,
Bessemer
Securities
Corporation
Thomas J. Devine Director Consultant --
641 Lexington Ave.
New York, NY 10022
William H. Gleysteen, Director President, The --
Jr. Japan Society,
333 East 47th Street Inc. (1989 until
New York, NY 10017 present); Vice
President of
Studies, Council
on Foreign
Relations (until
1989)
William H. Luers Director President, --
993 Fifth Avenue The
New York, NY 10028 Metropolitan
Museum of Art
(1986 until
present)
Daniel Pierce+* Director and Chairman of the Vice President,
Vice President Board and Managing Director and
Director of Assistant
Scudder Stevens & Treasurer
Clark, Inc.
Robert G. Stone, Jr. Director Chairman of the --
405 Lexington Avenue Board & Director,
New York, NY 10174 Kirby Corporation
(marine
transportation,
diesel repair and
property and
casualty insurance
in Puerto Rico)
Robert W. Lear Honorary Executive-in-Resid --
429 Silvermine Road Director ence and Visiting
New Canaan, CT 06840 Professor Columbia
University
Graduate School of
Business
Jerard K. Hartman++ Vice President Managing Director --
of Scudder,
Stevens & Clark,
Inc.
William E. Holzer++ @ President, Managing Director --
Scudder Global of Scudder,
Fund Stevens & Clark,
Inc.
Thomas W. Joseph+ Vice President Principal of Vice President,
Scudder, Stevens & Director,
Clark, Inc. Treasurer &
Assistant Clerk
David S. Lee+ Vice President Managing Director President,
and Assistant of Scudder, Assistant
Treasurer Stevens & Clark, Treasurer and
Inc. Director
Douglas M. Loudon++ Vice President Managing Director Senior Vice
of Scudder, President
Stevens, & Clark,
Inc.
Thomas F. McDonough+ Vice President Principal of Clerk
and Secretary Scudder, Stevens &
Clark, Inc.
Pamela A. McGrath+ Vice President Principal of --
and Treasurer Scudder, Stevens &
Clark, Inc.
Gerald J. Moran++ Vice President Principal of --
Scudder, Stevens &
Clark, Inc.
Edward J. O'Connell++ Vice President Principal of Assistant
and Assistant Scudder, Stevens & Treasurer
Treasurer Clark, Inc.
Juris Padegs++ Vice President Managing Director Vice President and
and Assistant of Scudder, Director
Secretary Stevens & Clark,
Inc.
Kathryn L. Quirk++ Vice President Managing Director Vice President
and Assistant of Scudder,
Secretary Stevens & Clark,
Inc.
Cornelia M. Small++ Vice President Managing Director --
of Scudder,
Stevens & Clark,
Inc.
Lawrence Vice President Principal of --
Teitelbaum+ Scudder, Scudder,
Stevens & Clark,
Inc.; Senior
Portfolio Manager,
Merrill Lynch
Asset Management,
from 1986 to 1993
Coleen Downs Assistant Vice President of Assistant Clerk
Dinneen + Secretary Scudder, Stevens &
Clark, Inc.
* Messrs. Villani, Bratt and Pierce are considered by the
Corporation and its counsel to be persons who are
"interested persons" of the Adviser or of the
Corporation (within the meaning of the 1940 Act, as
amended).
** Unless otherwise stated, all the Directors and officers
have been associated with their respective companies for
more than five years, but not necessarily in the same
capacity.
# Messrs. Villani and Bratt are members of the Executive
Committee, which may exercise the powers of the
Directors when they are not in session.
+ Address: Two International Place , Boston,
Massachusetts
< Address: 345 Park Avenue, New York, New York
/R>+
+
@ The President of a series shall have the status of Vice
President of the Corporation.
</TABLE>
As of October 31, 1994, all Directors and officers as a group owned
beneficially (as the term is defined in Section 13(d) under the
Securities Exchange Act of 1934) ________% of the Fund's outstanding
shares at such date .
To the best of the Fund's knowledge, as of October 31, 1994, no person
owned more than 5% of the Fund's outstanding shares.
The Directors and officers also serve in similar capacities with other
Scudder funds.
REMUNERATION
Several of the officers and Directors of the Corporation may be
officers or employees of the Adviser, Scudder Investor Services, Inc.,
Scudder Service Corporation or Scudder Trust Company and participate in the
fees paid by a Fund. The Funds pay no direct remuneration to any officer
of the Corporation. However, each of the Directors who is not affiliated
with the Adviser will be paid by the Corporation on behalf of a Fund. Each
of these unaffiliated Directors receives an annual Director's fee of $4,000
from the series and fees of $400 for attending each Directors' meeting,
audit committee meeting or meeting held for the purpose of considering
arrangements between the Corporation on behalf of a Fund and the Adviser or
any of its affiliates. Each unaffiliated Director also receives $150 per
committee meeting attended other than those set forth above. For the
fiscal period ended October 31, 1994, such fees imposed totaled
$40,174.
The following Compensation Table provides in tabular form the following
data.
Column (1) All Directors who receive compensation from the Corporation.
Column (2) Aggregate compensation received by a Director from all series of
the Corporation- Scudder Global Fund, Inc., which is comprised of Scudder
Global Fund, Scudder International Bond Fund, Scudder Short Term Global
Income Fund, Scudder Global Small Company Fund and Scudder Emerging Markets
Income Fund.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to
be paid by the Corporation. Scudder Global Fund, Inc. does not pay its
Directors such benefits.
Column (5) Total compensation received by a Director from Scudder Global
Fund, Scudder International Bond Fund, Scudder Short Term Global Income
Fund, Scudder Global Small Company Fund and Scudder Emerging Markets Income
Fund, plus compensation received from all funds managed by Scudder for
which a Director serves. The total number of funds from which a Director
receives such compensation is also provided in column (5).
TO BE UPDATED
Compensation Table
for the year ended December 31, 1994
(1) (2) (3) (4) (5)
Aggregate
Compensation from
Scudder Global Fund,
Inc. (consisting of
five funds: Scudder
Global Fund, Scudder Total
International Bond Pension or Compensation
Fund, Scudder Short Retirement From Scudder
Term Global Income Benefits Estimated Global Fund,
Fund, Scudder Global Accrued As Annual Inc. and
Name of Small Company Fund Part of Benefits Fund Complex
Person, and Scudder Emerging Fund Upon Paid to
Position Markets Income Fund) Expenses Retirement Director
-------- -------------------- ---------- ---------- ------------
Paul Bancroft $45,663 N/A N/A $ 120,238
III, (14 funds)
Director
Thomas J. $45,663 N/A N/A $ 115,656
Devine, (16 funds)
Director
William H. $45,313 N/A N/A
Gleysteen,
Jr.,
Director
William H. $45,313 N/A N/A $ 83,713
Luers, (10 funds)
Director
Robert G. $45,663 N/A N/A
Stone, Jr.,
Director
DISTRIBUTOR
The Corporation has an underwriting agreement with Scudder Investor
Services, Inc., a Massachusetts corporation, which is a wholly-owned
subsidiary of Scudder, Stevens & Clark, Inc., a Delaware corporation. The
Corporation's underwriting agreement dated July 24, 1986 will remain in
effect until September 30, 1995 and from year to year thereafter only if
its continuance is approved annually by a majority of the Directors who are
not parties to such agreement or interested persons of any such party and
either by vote of a majority of the Board of Directors or a majority of the
outstanding voting securities of the Corporation. The underwriting
agreement was most recently approved by the Directors on September 8,
1994 .
Under the principal underwriting agreement, the Corporation is
responsible for: the payment of all fees and expenses in connection with
the preparation and filing with the SEC of the Funds' registration
statement and prospectuses and any amendments and supplements thereto, the
registration and qualification of shares for sale in the various states,
including registering the Corporation as a broker/dealer in various states;
the fees and expenses of preparing, printing and mailing prospectuses
annually to existing shareholders (see below for expenses relating to
prospectuses paid by the Distributor), notices, proxy statements, reports
or other communications to shareholders of a Fund; the cost of printing and
mailing confirmations of purchases of shares and any prospectuses
accompanying such confirmations; any issue taxes or any initial transfer
taxes; a portion of shareholder toll-free telephone charges and expenses of
shareholder service representatives, the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes;
and a portion of the cost of computer terminals used by both the
Corporation and the Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Funds'
shares to the public and preparing, printing and mailing any other
literature or advertising in connection with the offering of shares of a
Fund to the public. The Distributor will pay all fees and expenses in
connection with its qualification and registration as a broker or dealer
under federal and state laws, a portion of the cost of toll-free telephone
service and expenses of service representatives, a portion of the cost of
computer terminals, and of any activity which is primarily intended to
result in the sale of shares issued by the Corporation unless a Rule 12b-1
Plan is in effect which provides that a Fund shall bear some or all of such
expenses.
NOTE: Although neither Fund has a 12b-1 Plan and the
Directors have no current intention of adopting one, the Funds
would also pay those fees and expenses permitted to be paid or
assumed by a Fund pursuant to a 12b-1 Plan, if any, adopted by a
Fund, notwithstanding any other provision to the contrary in the
underwriting agreement.
As agent, the Distributor currently offers the Funds' shares on a
continuous basis to investors in all states. The underwriting agreement
provides that the Distributor accepts orders for shares at net asset value
as no sales commission or load is charged the investor. The Distributor
has made no firm commitment to acquire shares of the Corporation.
TAXES
(See "Distribution and performance information--Dividends and capital gains
distributions" and "Transactions information--Tax information, and Tax
identification number" in the Fund's prospectus.)
The Fund will elect to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), or a predecessor statute, and has qualified as such since its
inception. Such qualification does not involve governmental supervision or
management of investment practices or policy.
As a regulated investment company qualifying under Subchapter M of the
Code, the Fund is required to distribute to its shareholders at least 90%
of its investment company taxable income (including net short-term capital
gains over net long term capital losses) and generally is not subject to
federal income tax to the extent that it distributes annually its
investment company taxable income and net realized capital gains in the
manner required under the Code.
The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires the Fund to distribute to shareholders during a calendar year an
amount equal to at least 98% of the Fund's ordinary income for the calendar
year, at least 98% of the excess of its capital gains over capital losses
(adjusted for certain ordinary losses) realized during the one-year period
ending October 31 during such year, and all ordinary income and capital
gains for prior years that were not previously distributed.
The Fund's investment company taxable income includes dividends,
interest and net short-term capital gains in excess of net long-term
capital losses, less expenses. Net realized capital gains for a fiscal
year are computed by taking into account any capital loss carryforward of
the Fund.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment,
requiring federal income taxes to be paid thereon by the Fund, the Fund
intends to elect to treat such capital gains as having been distributed to
shareholders. As a result, each shareholder will report such capital gains
as long-term capital gains, will be able to claim a relative share of
federal income taxes paid by the Fund on such gains as a credit against
personal federal income tax liability, and will be entitled to increase the
adjusted tax basis on Fund shares by the difference between a pro rata
share of such gains owned and the individual tax credit. If the Fund makes
such an election, it may not be treated as having met the excise tax
distribution requirement.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Distributions of the excess of net long-term capital gains over net
short-term capital losses are taxable to shareholders as long-term capital
gains, regardless of the length of time the shares of the Fund have been
held by such shareholders. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in
shares or in cash. Shareholders electing to receive distributions in the
form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share
on the reinvestment date.
All distributions of investment company taxable income and net
realized capital gains, whether received in shares or in cash, must be
reported by each shareholder on his or her federal income tax return.
Dividends and capital gains distributions declared in October, November, or
December and payable to shareholders of record in such a month will be
deemed to have been received by shareholders on December 31 if paid during
January of the following year. Redemptions of shares, including exchanges
for shares of another Scudder fund, may result in tax consequences (gain or
loss) to the shareholder and are also subject to these reporting
requirements.
An individual may make a deductible IRA contribution of up to $2,000
or, if less, the amount of the individuals earned income for any taxable
year only if (i) neither the individual nor his or her spouse (unless
filing separate returns) is an active participant in an employer's
retirement plan, or (ii) the individual (and his or her spouse, if
applicable) has an adjusted gross income below a certain level
($40, 05 0 for married individuals filing a joint return, with a
phase-out of the deduction for adjusted gross income between $40, 05 0
and $50,000; $25, 05 0 for a single individual, with a phase-out for
adjusted gross income between $25, 05 0 and $35,000). However, an
individual not permitted to make a deductible contribution to an IRA for
any such taxable year may nonetheless make nondeductible contributions up
to $2,000 to an IRA (up to $2,250 to IRAs for an individual and his or her
nonearning spouse) for that year. There are special rules for determining
how withdrawals are to be taxed if an IRA contains both deductible and
nondeductible amounts. In general, a proportionate amount of each
withdrawal will be deemed to be made from nondeductible contributions;
amounts treated as a return of nondeductible contributions will not be
taxable. Also, annual contributions may be made to a spousal IRA even if
the spouse has earnings in a given year, if the spouse elects to be treated
as having no earnings (for IRA contribution purposes) for the year.
Distributions by the Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value
below a shareholder's cost basis, such distribution would nevertheless be
taxable to the shareholder as ordinary income or capital gain as described
above, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, investors should consider the
tax implications of buying shares just prior to a distribution. The price
of shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then
receive a partial return of capital upon the distribution, which will
nevertheless be taxable to them.
Many futures and forward contracts entered into by the Fund and all
listed nonequity options written or purchased by the Fund (including
covered call options written on debt securities and options purchased or
written on futures contracts) will be governed by Section 1256 of the Code.
Absent a tax election to the contrary, gain or loss attributable to the
lapse, exercise or closing out of any such position will be treated as 60%
long-term and 40% short-term capital gain or loss, and on the last trading
day of the Fund's fiscal year, all outstanding Section 1256 positions will
be marked to market (i.e., treated as if such positions were closed out at
their closing price on such day), with any resulting gain or loss
recognized as 60% long-term and 40% short-term capital gain or loss. Under
Section 988 of the Code, discussed below, foreign currency gain or loss
from foreign currency-related forward contracts, certain futures and
options, and similar financial instruments entered into or acquired by the
Fund will be treated as ordinary income. Under certain circumstances,
entry into a futures contract to sell a security may constitute a short
sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security in
the Fund's portfolio.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues receivables or
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of
debt securities denominated in a foreign currency, and on disposition of
certain futures contracts, forward contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition
are also treated as ordinary gain or loss. These gains or losses, referred
to under the Code as "Section 988" gains or losses, may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders as ordinary income.
A portion of the difference between the issue price of zero coupon
securities and their face value ("original issue discount") is considered
to be income to the Fund each year, even though the Fund will not receive
cash interest payments from these securities. This original issue discount
(imputed income) will comprise a part of the investment company taxable
income of the Fund which must be distributed to shareholders in order to
maintain the qualification of the Fund as a regulated investment company
and to avoid federal income tax at the level of the Fund. Shareholders
will be subject to income tax on such original issue discount, whether or
not they elect to receive their distributions in cash.
Subchapter M requires that the Fund realize less than 30% of its
annual gross income from the sale or other disposition of stock, securities
and certain options, futures and forward contracts held for less than three
months. Options, futures and forward activities of the Fund may increase
the amount of gains realized by the Fund that are subject to the 30%
limitation. Accordingly, the amount of such activities that the Fund may
engage in may be limited.
Positions of the Fund which consist of at least one stock and at least
one stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the
Code, the operation of which may cause deferral of losses, adjustments in
the holding periods of stock or securities and conversion of short-term
capital losses into long-term capital losses. An exception to these
straddle rules exists for any "qualified covered call options" on stock
written by the Fund.
Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one futures or forward contract or
nonequity option governed by Section 1256 which substantially diminishes
the Fund's risk of loss with respect to such other position will be treated
as a "mixed straddle." Although mixed straddles are subject to the straddle
rules of Section 1092 of the Code, certain tax elections exist for them
which reduce or eliminate the operation of these rules. The Fund will
monitor its transactions in options and futures and may make certain tax
elections in connection with these investments.
If the Fund invests in stock of certain passive foreign investment
companies, that Fund may be subject to U.S. federal income taxation on a
portion of any "excess distribution" with respect to, or gain from the
disposition of, such stock. The tax would be determined by allocating such
distribution or gain ratably to each day of the Fund's holding period for
the stock. The distribution or gain so allocated to any taxable year of
the Fund, other than the taxable year of the excess distribution or
disposition, would be taxed to the Fund at the highest ordinary income rate
in effect for such year, and the tax would be further increased by an
interest charge to reflect the value of the tax deferral deemed to have
resulted from the ownership of the foreign company's stock. Any amount of
distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable
income and, accordingly, would not be taxable to the Fund to the extent
distributed by the Fund as a dividend to its shareholders.
Proposed regulations have been issued which may allow the Fund to make
an election to mark to market its shares of these foreign investment
companies in lieu of being subject to U.S. federal income taxation. At the
end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign company's stock exceeds the Fund's adjusted basis in these shares.
No mark to market losses may be recognized. The effect of the election
would be to treat excess distributions and gain on dispositions as ordinary
income which is not subject to a fund level tax when distributed to
shareholders as a dividend. Alternatively, the Fund may elect to include
as income and gain its share of the ordinary earnings and net capital gain
of certain foreign investment companies in lieu of being taxed in the
manner described above.
The Fund will be required to report to the Internal Revenue Service
all distributions of taxable income and capital gains as well as gross
proceeds from the redemption or exchange of Fund shares, except in the case
of certain exempt shareholders. Under the backup withholding provisions of
Section 3406 of the Code, distributions of taxable income and capital gains
and proceeds from the redemption or exchange of the shares of a regulated
investment company may be subject to withholding of federal income tax at
the rate of 31% in the case of non-exempt shareholders who fail to furnish
the investment company with their taxpayer identification numbers and with
required certifications regarding their status under the federal income tax
law. Withholding may also be required if the Fund is notified by the IRS
or a broker that the taxpayer identification number furnished by the
shareholder is incorrect or that the shareholder has previously failed to
report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to
be withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's
shares.
Each distribution is accompanied by a brief explanation of the form
and character of the distribution. In January of each year, the Fund
issues to each shareholder a statement of the federal income tax status of
all distributions.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign
tax consequences of ownership of shares of the Fund, including the
possibility that such a shareholder may be subject to a U.S. withholding
tax at a rate of 30% (or at a lower rate under an applicable income tax
treaty) on amounts constituting ordinary income received by him or her,
where such amounts are treated as income from U.S. sources under the Code.
Dividend and interest income received by the Fund from sources outside
the U.S. may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
U.S. may reduce or eliminate these foreign taxes, however, and foreign
countries generally do not impose taxes on capital gains respecting
investments by foreign investors.
Shareholders should consult their tax advisers about the application
of the provisions of tax law in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage
To the maximum extent feasible the Adviser places orders for portfolio
transactions through the Distributor which in turn places orders on behalf
of the Fund with other broker/dealers. The Distributor receives no
commissions, fees or other remuneration from the Fund for this service.
Allocation of brokerage is supervised by the Adviser.
The Fund's purchases and sales of fixed-income securities are
generally placed by the Adviser with primary market makers for these
securities on a net basis, without any brokerage commission being paid by
the Fund. Trading does, however, involve transaction costs. Transactions
with dealers serving as primary market makers reflect the spread between
the bid and asked prices. Purchases of underwritten issues may be made
which will include an underwriting fee paid to the underwriter. Portfolio
transactions in debt securities may also be placed on an agency basis, with
a commission being charged.
The primary objective of the Adviser in placing orders for the
purchase and sale of securities for the Fund's portfolio is to obtain the
most favorable net results taking into account such factors as price,
commission (negotiable in the case of U.S. national securities exchange
transactions but generally fixed in case of foreign exchange transactions)
size of order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the
familiarity of the Distributor with commissions charged on comparable
transactions, as well as by comparing commissions paid by the Fund to
reported commissions paid by others. The Adviser reviews on a routine
basis commission rates, execution and settlement services performed, making
internal and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders
with broker/dealers who supply market quotations to the custodian of the
Fund for appraisal purposes, or who supply research, market and statistical
information to the Fund or the Adviser. The term "research, market and
statistical information" includes advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the
availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is not authorized when placing portfolio transactions for the Fund
to pay a brokerage commission (to the extent applicable) in excess of that
which another broker might charge for executing the same transaction solely
on account of the receipt of research, market or statistical information.
The Adviser does not place orders with brokers or dealers on the basis that
the broker or dealer has or has not sold shares of the Fund. In effecting
transactions in over-the-counter securities, orders are placed with the
principal market makers for the security being traded unless, after
exercising care, it appears that more favorable results are available
elsewhere.
Although certain research, market and statistical information from
broker/dealers may be useful to the Fund and to the Adviser, it is the
opinion of the Adviser that such information only supplements its own
research effort since the information must still be analyzed, weighed and
reviewed by the Adviser's staff. Such information may be useful to the
Adviser in providing services to clients other than the Fund and not all
such information is used by the Adviser in connection with the Fund.
Conversely, such information provided to the Adviser by broker/dealers
through whom other clients of the Adviser effect securities transactions
may be useful to the Adviser in providing services to the Fund.
The Directors of the Fund review from time to time whether the
recapture for the benefit of the Fund of some portion of the brokerage
commissions or similar fees paid by the Fund on portfolio transactions is
legally permissible and advisable.
Portfolio Turnover
The Fund's portfolio turnover rate (defined by the SEC as the ratio of
the lesser of sales or purchases of securities to the monthly average value
of the portfolio, excluding all securities with remaining maturities at the
time of a requisition of one year or less) for the fiscal period ended
October 31, 1994 was 181%.
Economic and market conditions have necessitated active trading,
resulting in a high portfolio turnover rate for the Fund. A high rate
involves transaction costs to the Fund and may result in the realization of
net capital gains, which would be taxable to the shareholders when
distributed.
NET ASSET VALUE
The net asset value of shares of the Fund is computed as
of the close of regular trading on the Exchange on each day the
Exchange is open for trading . The Exchange is scheduled to be closed
on the following holidays: New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. Net
asset value per share is determined by dividing the value of the total
assets of the Fund, less all liabilities, by the total number of
shares outstanding.
An exchange-traded equity security is valued at its most recent
sale price . Lacking any sales, the security is valued at the
calculated mean between the most recent bid quotation and the most
recent asked quotation (the "Calculated Mean"). Lacking a Calculated
Mean, the security is valued at the most recent bid quotation. An equity
security which is traded on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system is valued at its most recent sale
price. Lacking any sales, the security is valued at the high or "inside"
bid quotation. The value of an equity security not quoted on the NASDAQ
System, but traded in another over-the-counter market, is its most recent
sale price. Lacking any sales, the security is valued at the Calculated
Mean. Lacking a Calculated Mean, the security is valued at the most recent
bid quotation.
Debt securities, other than short-term securities, are valued at
prices supplied by the Fund's pricing agent(s) which reflect broker/dealer
supplied valuations and electronic data processing techniques. Short-term
securities with remaining maturities of sixty days or less are valued by
the amortized cost method, which the Board believes approximates market
value. If it is not possible to value a particular debt security pursuant
to these valuation methods, the value of such security is the most recent
bid quotation supplied by a bona fide marketmaker . If it is not
possible to value a particular debt security pursuant to the above methods,
the Adviser may calculate the price of that debt security, subject to
limitations established by the Board.
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on
such exchange. Lacking any sales, the options contract is valued at the
Calculated Mean. Lacking any Calculated Mean, the options contract is
valued at the most recent bid quotation in the case of a purchased options
contract, or the most recent asked quotation in the case of a written
options contract. An options contract on securities, currencies and other
financial instruments traded over-the-counter is valued at the most recent
bid quotation in the case of a purchased options contract and at the most
recent asked quotation in the case of a written options contract. Futures
contracts are valued at the most recent settlement price. Foreign currency
exchange forward contracts are valued at the value of the underlying
currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or
more exchanges and in the over-the-counter market, quotations
are taken from the market in which the security is traded most
extensively.
If, in the opinion of the Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all
available information. The value of other portfolio holdings owned by the
Fund is determined in a manner which, in the discretion of the Valuation
Committee most fairly reflects fair market value of the property on the
valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed
("Local Currency"), the value of these portfolio assets in terms of U.S.
dollars is calculated by converting the Local Currency into U.S. dollars at
the prevailing currency exchange rate on the valuation date .
ADDITIONAL INFORMATION
Experts
The Financial Highlights of the Fund included in the prospectus and
the Financial Statements incorporated by reference in this Statement of
Additional Information have been so included or incorporated by reference
in reliance on the report of Coopers & Lybrand L.L.P. , One Post
Office Square, Boston, MA 02109, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
Other Information
The CUSIP number of the Fund is 811150 50 7.
The Fund has a fiscal year ending October 31.
The law firm of Dechert Price & Rhoads is counsel to the Fund.
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a
regular report to shareholders of the Fund. These transactions will
reflect investment decisions made by the Adviser in light of its objectives
and policies, its other portfolio holdings and tax considerations, and
should not be construed as recommendations for similar action by other
investors.
Portfolio securities of the Fund are held separately pursuant to a
custodian agreement by the Fund's custodian, Brown Brothers Harriman &
Co. , 40 Water Street, Boston, Massachusetts 02109.
Costs of $76,595.28 incurred by the Fund in conjunction with
its organization are amortized over five years beginning December 31, 1993.
Scudder Service Corporation (the "Service Corporation"), P.O. Box
2291, Boston, Massachusetts 02107-2291, a wholly-owned subsidiary of the
Adviser, is the transfer, dividend-paying and shareholder service agent for
the Fund . Service Corporation also provides subaccounting and
recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. The Fund pays Service Corporation an annual fee of
$20.40 for each account maintained for a participant. For the
fiscal period ended October 31, 1994, Service Corporation charged the Fund
an aggregate fee of $188,557, of which $21,986 is unpaid as of October 31,
1994.
The Fund's prospectus and this Statement of Additional Information
omit certain information contained in the Registration Statement and its
amendments which the Fund has filed with the SEC under the 1933 Act and
reference is hereby made to the Registration Statement for further
information with respect to the Fund and the securities offered hereby.
This Registration Statement and its amendments are available for inspection
by the public at the SEC in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the Investment Portfolio of the
Fund, together with the Report of Independent Accountants, and Financial
Highlights, are incorporated by reference and attached hereto on pages 11
through 24, inclusive, in the Annual Report to Shareholders of the Fund
dated October 31, 1994, and deemed to be a part of this Statement of
Additional Information.
APPENDIX
The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds.
Ratings of Municipal and Corporate Bonds
S&P:
Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. Debt
rated AA has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in small degree. Debt rated A
has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighted by large uncertainties or major
exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating. Debt rated B has a
greater vulnerability to default but currently has the capacity to meet
interest payments and principal repayments. Adverse business, financial,
or economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating. The rating CC typically
is applied to debt subordinated to senior debt that is assigned an actual
or implied CCC rating. The rating C typically is applied to debt
subordinated to senior debt which is assigned an actual or implied CCC-
debt rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are
continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category
is used when interest payments or principal payments are not made on the
date due even if the applicable grace period had not expired, unless S&P
believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty
of position characterizes bonds in this class. Bonds which are rated B
generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest. Bonds which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in default
or have other marked shortcomings. Bonds which are rated C are the lowest
rated class of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder Emerging Markets Income Fund
Annual Report
October 31, 1994
* For investors seeking high current income and, secondarily, long-term
capital appreciation from a professionally managed portfolio
consisting primarily of high-yielding debt securities issued in
emerging markets.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
11 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
24 Report of Independent Accountants
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
HIGHLIGHTS
* Interest rates rose substantially in the United States and abroad
during 1994, driving down global bond prices. Emerging debt markets
felt the additional pressure of heavy selling by speculative investors
and returned -12.23% from December 31, 1993, through October 31, 1994.
* Scudder Emerging Markets Income Fund outperformed emerging debt
markets overall, but still felt the effects of the market's decline,
posting a -3.54% return from its inception on December 31 through
October 31.
* The Fund's yield increased as its cash position was invested and
interest rates rose. The Fund closed the annual period with a 30-day
net annualized yield of 9.13%, despite cash holdings totaling 16% of
the portfolio.
* Latin American holdings continue to comprise the bulk of the
portfolio, but where possible, your portfolio management team worked
to diversify Fund holdings in areas like Eastern Europe and Africa. By
October 31, 21 countries were represented in the portfolio.
LETTER FROM THE FUND'S CHAIRMAN
Dear Shareholders,
Interest rates continued to rise in the third quarter of 1994 but at a
slower rate than in the first half of the year. Even so, investors' fear of
higher inflation remains a problem for the bond market. Throughout the
year, investors have reacted swiftly to reports of robust economic growth
in the United States, pushing bond prices lower and yields on long-term
securities higher as a result.
In the months ahead, interest rates may move higher in the face of
continued monetary tightening by the Federal Reserve. In addition, with
finite savings around the world, capital to invest in financial markets and
growing economies is increasingly in short supply, adding upward pressure
to interest rates as countries compete for savings by offering attractive
lending rates.
What does this mean for fixed-income investors? In the near term,
current yields will likely make up most of your Fund's total return. On the
plus side, because interest rates are now higher, investors are currently
receiving more income. Because rising interest rates could detract from
bond price performance (since bond prices move in the opposite direction of
interest rates), our investment strategy will focus on providing a
competitive level of income, while balancing changing bond prices with an
emphasis on capital preservation. Your Fund's investment team also plans to
seek out potential opportunities in anticipation of an expected 1995 peak
in inflation and an eventual turnaround in the trend of bond prices.
Please call Scudder Investor Information at 1-800-225-2470 if you have
questions about your Fund or other Scudder investments. Page 27 contains
more information on how to contact Scudder. Thank you for choosing Scudder
Emerging Markets Income Fund to help meet your investment needs.
Sincerely
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Emerging Markets Income Fund
<PAGE>
Scudder Emerging Markets Income Fund
Performance Update as of October 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- ------------------------------------------------------------------
Scudder Emerging Markets Income Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
Life of
Fund* $ 9,646 -3.54% -%
JP Morgan Composite Emerging Markets
Bond/Latin Eurobond Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
Life of
Fund* $ 8,777 -12.23% -%
*The Fund commenced operations on December 31, 1993.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Emerging Markets Income Fund
Year Amount
- --------------------------------------
12/31/93* 10000
1/94 10058
2/94 9767
3/94 9050
4/94 8962
5/94 9416
6/94 8945
7/94 9067
8/94 9614
9/94 9768
10/94 9646
JP Morgan Composite Emerging
Markets Bond/Latin Eurobond Index
Year Amount
- ----------------------------------------
12/31/93* 10000
1/94 10041
2/94 9284
3/94 8358
4/94 8314
5/94 8824
6/94 8217
7/94 8397
8/94 8942
9/94 9006
10/94 8777
The JP Morgan Composite Emerging Markets Bond/Latin
Eurobond Index (EMBI/LEI) tracks the performance of
U.S. dollar-denominated sovereign restructured bonds
(mostly Brady bonds) and Latin-issued Eurobonds.
The composite includes debt issues from seven
countries in Latin America, plus Nigeria and the
Philippines. Index returns assume reinvested
dividends and, unlike Fund returns, do not reflect
any fees or expenses.
- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Periods ended October 31
- ----------------------------------
<TABLE>
<S> <C>
1994*
-----------
Net Asset Value... $ 11.05
Income Dividends.. $ .51
Fund Total
Return (%)........ -3.54
Index Total
Return (%)........ -12.23
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Total return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. If the
Adviser had not maintained the Fund's expenses, the total return
would have been approximately -4.05%.
Emerging Markets Income Fund
Portfolio Summary as of October 31, 1994
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Debt Obligations 81% We kept a relatively high
Convertible Bonds 3% level of cash equivalents
Cash Equivalents 16% throughout the year to
---- help reduce the impact of
100% market volatility on the
==== Fund's share price.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Market Exposure (Excludes 16% Cash Equivalents)
- --------------------------------------------------------------------------
Geographical Currency
- ----------------- -----------------------------------------
Brazil 28% United States 91%
Argentina 25% Argentina 3%
Morocco 8% Chile 2%
Panama 5% Czech Republic 1%
Venezuela 5% France 1%
Mexico 5% Indonesia 1%
United States 4% Mexico 1%
Other 20% ----
---- 100%
100% ====
====
During the year, we diversified assets
away from Latin America, making modest
investments in the emerging markets
of Eastern Europe and Africa.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Average Life (Excludes 16% Cash Equivalents)
- --------------------------------------------------------------------------
0 - 3 years 15% We emphasized shorter-maturity investments
3 - 5 years 24% throughout the year to help provide a
5 - 10 years 42% buffer against volatile markets worldwide.
Greater than 10 years 19%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's Investment Portfolio,
see page 11.
A monthly Investment Portfolio Summary is available upon request.
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The world's emerging markets have traditionally offered investors the
potential for attractive returns in exchange for certain investment risks
characteristic of these regions, namely relatively undeveloped and often
illiquid securities markets, political uncertainty, and currency
fluctuation. This year, however, these markets have been affected more by
events taking place in the world's developed markets, specifically the
United States.
In February, the U.S. Federal Reserve began a series of interest-rate
hikes (there have been six to date) to help contain inflation and moderate
the pace of economic growth, which had picked up at the end of 1993.
Nervous investors, fearing inflation would rise despite the Fed's efforts,
sold bonds and stocks, sending the prices of these securities lower
throughout the world.
Emerging-market debt suffered during the spring months as hedge funds
and other leveraged accounts took the opportunity to lock in the strong
gains they had made in 1993 by selling their ample holdings of
emerging-market debt to cover losses in U.S. Treasury and foreign currency
positions. Demand for emerging-market bonds weakened further as dealers
received securities back from leveraged investors unable to satisfy rising
margin requirements and as a debt restructuring in Brazil added
approximately $40 billion in new bonds to the market.
After the rapid succession of interest-rate increases in the first few
months of the year, the U.S. Federal Reserve raised rates at a more
moderate pace in the summer and autumn. And although the world's
fixed-income markets remain volatile, the forced selling that exacerbated
the negative market activity in March and April has subsided.
Scudder Emerging Markets Income Fund managed to outperform the broad
market in this volatile environment by concentrating on defensive
investment strategies. For its abbreviated fiscal year, the ten months
ended October 31, 1994, the Fund's total return was -3.54%, reflecting a
decline in net asset value to $11.05 at the end of October, from $12.00 on
December 31, 1993, and $0.51 per share of income distributions. The Fund's
30-day net annualized yield on October 31 was 9.13%. Although negative,
your Fund's overall performance compares favorably to the J.P. Morgan
Composite Emerging Market Bond/Latin Eurobond Index, which fell 12.23%
during the same period.
Investors Focus on Emerging-Market Fundamentals
In recent months, calmer markets have allowed investors to focus
again on the market fundamentals of developing countries, where the news
remains positive and values remain attractive. Developing countries,
notably in Latin America, are undertaking the bold steps necessary to
participate in a global economy and to compete successfully for global
capital. Governments of once-state-run economies are now privatizing key
businesses to reduce inflation, stimulate economic growth, improve
operating efficiencies in important industries, and encourage greater
domestic savings.
Despite these fundamentally positive developments, emerging market
debt_indeed, bond markets around the world_remain vulnerable to rising
interest rates and the threat of inflation. As a result, we took several
steps during the year to construct a defensive portfolio.
Building a Defensive Portfolio
To lessen the impact of rising interest rates, we invested principally
in floating-rate bonds (62% on October 31), maintained a large cash
position (roughly 16%), and made select investments in securities
denominated in foreign currencies. Floating-rate securities adjust the rate
of interest they pay periodically to mirror the changing level of interest
rates. Since investors are less inclined to sell "floaters" when rates are
rising, they tend to be less susceptible to price volatility.
Our investment strategy has included investing primarily in
dollar-denominated securities to reduce the impact of the currency
fluctuation common to emerging markets. By charter, no more than 35% of the
Fund can be invested in foreign currencies, and fully 91% of portfolio
assets was invested in dollar-denominated securities at the end of October.
But most foreign currencies have been relatively stable next to the
declining U.S. dollar this year, and we made select investments during the
period using the local currencies of the Czech Republic, Indonesia,
Thailand, Argentina, and Chile. Although intended as a defensive strategy,
these investments performed well as the local currencies strengthened,
helping to support the Fund's share price throughout the year.
During the period, we also allowed our U.S. high-yield corporate bond
position to diminish as a percentage of total fund assets. Earlier in the
year, the Fund's U.S. high-yield bond position accounted for nearly 10% of
the portfolio. These bonds served the Fund well during the year, generally
outperforming emerging-market holdings. The strong performance of U.S.
high-yield corporate bonds was a direct result of the healthy U.S. economy,
which, based on reports of gross domestic product, grew 3.7% on average
during the first three quarters of the year.
However, U.S. high-yield corporate bonds have outperformed other asset
classes for the past three years, and we believe they are now fully valued.
Like stocks, high-yield corporate bonds are also vulnerable to economic
downturns, which affect the issuer's earnings and ability to make payments
of interest and principal. In light of the high valuations of these bonds,
we concluded it was best to trim our holdings and invest elsewhere. By the
end of October, U.S. high-yield corporate bonds accounted for just 3.3% of
portfolio holdings.
Although the Fund is capable of investing as much as 50% of its assets
in corporate debt worldwide, we have chosen to invest predominantly in
government-issued securities (currently 82% of portfolio holdings).
Corporations are generally considered less creditworthy than governments
and thus have traditionally paid higher coupons to attract investors to
their bonds. This is true in emerging and developed economies, although
some corporations are more creditworthy than others. In our view, the
premium paid by Latin American corporations in recent months has not been
sufficient to merit consideration in all but a few cases. During the
period, we carefully researched and selected bonds we believed would
provide the best risk-adjusted returns within the emerging markets,
investing heavily in the government debt of countries like Brazil and
Argentina, where governments are increasingly democratic and favor serious
economic reform.
(BAR CHART TITLE) Geographic Diversification of Bond Holdings
(CHART DATA)
4/30/94 10/31/94
-------- --------
Argentina 32.3 25.0
Brazil 15.7 28.0
Venezuela 17.3 5.0
Mexico 10.5 5.0
United States 8.9 4.0
Morocco 3.8 8.0
(END CHART)
Greater Diversification Ahead
Since the Fund's inception on December 31, 1993, we have invested
primarily in Latin American countries. Of the developing countries, those
in Latin America have offered the best values and boast the largest and
most liquid debt markets. Mexico, Argentina, and Brazil, for example, have
made demonstrable progress with economic and political reforms and yet
still issue bonds with yields significantly higher than U.S. Treasuries of
equivalent maturity.
Although still wide, the difference in yields has narrowed from that
of recent years as investors increasingly participate in Latin American
debt markets, pushing bond prices higher. During the period, we observed
this change in market valuations and began to look elsewhere for investment
opportunities. By period-end, we had diversified portfolio holdings away
from Latin America by making greater investments in the newly emerging
markets of Eastern Europe and Africa. In our view, countries like Poland,
Morocco, and the Czech Republic are undertaking the same steps as Latin
American countries to achieve market-based economic reforms. These markets
currently offer bonds at attractive valuations and the potential for
capital appreciation as more investors respond to those opportunities.
Scudder Emerging Markets Income Fund:
A Team Approach to Investing
Scudder Emerging Markets Income Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are
supported by Scudder's large staff of economists, research analysts,
traders, and other investment specialists who work in Scudder's offices
across the United States and abroad. We believe our team approach benefits
Fund investors by bringing together many disciplines and leveraging
Scudder's extensive resources.
Lead Portfolio Manager Lincoln Y. Rathnam has responsibility for the
Fund's investment strategies. Lincoln, who joined Scudder in 1984, has 15
years of experience in international investing. M. Isabel Saltzman,
Portfolio Manager, is responsible for the Fund's day-to-day management.
Isabel, who joined Scudder in 1990, has been involved in foreign finance
and investing since 1979 and contributes special expertise in Latin
America. Susan E. Gray, Portfolio Manager, has responsibility for
developing the Fund's trading strategies. Susan, who has over four years of
investment trading experience, has worked at Scudder since 1987.
In the coming months, in anticipation of a peak in U.S. interest
rates, and as demand for dollar-denominated assets increases, we expect to
decrease the Fund's large cash position and further diversify portfolio
assets away from Latin America. In keeping with the Fund's objectives, we
will continue to look for opportunities to provide high current income and
long-term capital appreciation for our shareholders.
Sincerely,
Your Portfolio Management Team
/s/Lincoln Y. Rathnam /s/Susan E. Gray
Lincoln Y. Rathnam Susan E. Gray
/s/M. Isabel Saltzman
M. Isabel Saltzman
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of October 31, 1994
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16.4% COMMERCIAL PAPER
--------------------------------------------------------------------------
5,300,000 Associates Corp. of North America,
4.8%, 11/1/94 . . . . . . . . . . . . . . . . 5,300,000
5,301,000 Dow Chemical Company, 4.8%, 11/1/94 . . . . . . . 5,301,000
5,289,000 Household Finance Corp., 4.75%, 11/1/94. . . . . . 5,289,000
----------
TOTAL COMMERCIAL PAPER
(Cost $15,890,000) . . . . . . . . . . . . . . 15,890,000
----------
80.9% DEBT OBLIGATIONS
--------------------------------------------------------------------------
ARGENTINA 21.2% 1,250,000 Acindar Industries Floating Rate Note,
11%, 11/12/98 . . . . . . . . . . . . . . . . . 1,107,813
400,000 Banco de Galicia y Buenos Aires, 9%, 11/1/03 . . . 322,940
3,850,000 Bonos del Tesoro, Conea II,
Floating Rate Bond, Libor, (5%), 9/1/97. . . . . 3,685,470
300,000 Banco Rio de la Plata Medium Term Note,
8.5%, 7/15/98 . . . . . . . . . . . . . . . . . 275,550
270,000 Bridas Sapic, 11.75%, 2/24/97 . . . . . . . . . . 271,350
2,000,000 Cedulas Hipotecarias, Floating Rate Bond,
(7.9%), 9/1/00 . . . . . . . . . . . . . . . . 1,800,000
450,000 Gascart S.A., 9%, 1/20/99 . . . . . . . . . . . . 421,875
ARP 2,005,500 Republic of Argentina BIC5 Floating Rate
Note, (18.81%), 5/1/01 . . . . . . . . . . . . 2,213,467
1,000,000 Republic of Argentina Collateralized Discount
Bond, Libor plus .8125%, (5.8125%), 3/31/23. . . 683,750
11,300,000 Republic of Argentina Floating Rate Bond,
Libor plus .8125%, (6.5%), 3/31/05 . . . . . . 8,178,375
3,350,000 Republic of Argentina Collateralized Par Bond,
Series L, Step-Up Coupon, 4.25%, 3/31/23 . . . . 1,566,125
----------
20,526,715
----------
BRAZIL 23.0% 1,000,000 Companhia Brasileira de Petroleo Ipiranga,
8.625%, 2/25/02 . . . . . . . . . . . . . . . . 942,500
1,500,000 Companhia Energetica de Minas Gerais,
Series A, 7.875%, 2/10/99 . . . . . . . . . . . 1,226,250
4,550,000 Companhia Energetica de Minas Gerais,
Series B, 8.25%, 2/10/00 . . . . . . . . . . . 3,674,125
6,630,000 Federative Republic of Brazil C Bond,
Front-Loaded Interest Reduction with Interest
Capitalization Bonds, 8%, 4/15/14 . . . . . . . 3,331,575
11,074,000 Federative Republic of Brazil, IDU Bond,
Libor plus .8125%, (6.0625%), 1/1/01 . . . . . . 9,039,153
714,285 Federative Republic of Brazil
New Money Bond, Floating Rate Note,
Libor plus .8125%, (6.6875%), 10/15/99 . . . . . 646,428
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER EMERGING MARKETS INCOME FUND
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4,000,000 Federative Republic of Brazil Floating Rate
Debt Conversion Bond, Series L,
Libor plus .875%, (6.75%), 4/15/12 . . . . . 2,465,000
2,000,000 Federative Republic of Brazil Investment Bond,
6%, 9/15/13 . . . . . . . . . . . . . . . . 1,015,000
----------
22,340,031
----------
BULGARIA 1.0% 1,000,000 Republic of Bulgaria, Collateralized
Discount Bond A, Floating Rate Note,
Libor plus .8125%, (6.0625%), 7/28/24. . . . 497,500
1,000,000 Republic of Bulgaria Floating Rate Note,
6.0625%, 7/28/11 . . . . . . . . . . . . . 441,250
----------
938,750
----------
CHILE 1.6% CLP 87,320,000 Citibank time deposit, 16.3%, 1/10/95 (b) . . . 210,257
CLP 43,820,000 Citibank time deposit, 16.5%, 1/10/95 (b) . . . 105,514
CLP 523,200,000 Citibank time deposit, 16.3%, 2/21/95 (b) . . . 1,259,812
----------
1,575,583
----------
COLOMBIA 0.5% 500,000 Banco de Colombia, 7.5%, 10/21/98 . . . . . . . 462,500
----------
COSTA RICA 0.4% 500,000 Banco Central de Costa Rica, Principal A,
6.25%, 5/21/10 . . . . . . . . . . . . . . . 307,500
200,000 Banco Central de Costa Rica, Principal B,
6.25%, 5/21/15 . . . . . . . . . . . . . . 111,000
----------
418,500
----------
CZECH REPUBLIC 0.9% 700,000 Bankers Trust Company Note, linked to
Koruna-Denominated Domestic Corporate
Bond, 14.375%, 1/27/95 . . . . . . . . . . . 832,720
----------
GUATEMALA 1.9% 1,800,000 Asociacion Nacional del Cafe, 11%, 8/31/98 . . 1,829,250
----------
HUNGARY 2.0% 2,500,000 National Bank of Hungary, 8.875%, 11/1/13 . . . 1,925,000
----------
INDONESIA 2.8% 500,000 Indah Kiat Pulp and Paper Corp.,
8.875%, 11/1/00 . . . . . . . . . . . . . . 425,000
1,000,000 SE Banken Indonesia Medium Term Note,
linked to Indonesian Rupiah, 14%, 10/16/95 . 997,000
1,250,000 Tjiwi Kimia International Finance Co. BV,
13.25%, 8/1/01 . . . . . . . . . . . . . . 1,287,500
----------
2,709,500
----------
IVORY COAST 0.8% FRF 20,000,000 Republic of the Ivory Coast Loan
Participation Note* (d) . . . . . . . . . . 747,645
----------
JAMAICA 1.1% 1,500,000 Government of Jamaica Refinancing
Agreement, Tranche B, Libor plus .8125%,
(5.688%), 11/15/04 (d) . . . . . . . . . . . 1,035,000
----------
MEXICO 3.5% 3,000,000 Banco Nacional de Comercio Exterior SNC,
7.25%, 2/2/04 . . . . . . . . . . . . . . . 2,439,420
MXN 3,554,488 Nacional Financiera Pagares Note, 1/24/95 . . . 995,680
----------
3,435,100
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MOROCCO 6.5% 9,000,000 Kingdom of Morocco Tranche A
Restructuring and Consolidation Agreement,
Libor plus .8125 (5.81375%), 1/1/09 (d). . . 6,333,750
----------
PANAMA 4.4% 5,250,000 Republic of Panama Floating Rate Bond,
Libor plus 1%, (5.9375%), 5/10/02 . . . . . 4,265,625
----------
POLAND 1.1% 1,500,000 Republic of Poland Collateralized
Discount Bond, 6.8125%, 12/29/29 . . . . . . 1,110,000
----------
TURKEY 0.9% 1,000,000 Republic of Turkey, 9%, 6/15/99 . . . . . . . 870,000
----------
UNITED STATES 3.3% 500,000 Alatief Freeport Financial Corp.,
9.75%, 4/15/01 . . . . . . . . . . . . . . . 485,000
500,000 Beazer Homes USA, 9%, 3/1/04 . . . . . . . . 425,000
500,000 Comcast Corp., 9.5%, 1/15/08 . . . . . . . . 455,625
500,000 Payless Cashways Inc., 9.125%, 4/15/03 . . . . 463,125
500,000 Penn Traffic Co., 9.625%, 4/15/05 . . . . . . 445,000
500,000 Seagull Energy Corp., 8.625%, 8/1/05 . . . . . 452,500
500,000 Westpoint Stevens Inc., 9.375%, 12/15/05 . . . 450,000
----------
3,176,250
----------
VENEZUELA 4.0% 4,500,000 Republic of Venezuela Floating Rate Debt
Conversion Bond, Series DL, Libor
plus .875%, (5.75%), 12/18/07 . . . . . . . 2,188,125
2,500,000 Republic of Venezuela Front Loaded Interest
Reduction Bond, Series A, 7%, 3/31/07. . . . 1,240,625
1,000,000 Republic of Venezuela Front Loaded Interest
Reduction Bond, Series B, 7%, 3/31/07. . . . 496,250
----------
3,925,000
----------
TOTAL DEBT OBLIGATIONS (Cost $79,835,168) . . 78,456,919
----------
2.6% CONVERTIBLE BONDS
--------------------------------------------------------------------------
INDIA 0.9% 950,000 Industrial Credit & Investment Corp. of
India, Ltd., 2.5%, 4/3/00 . . . . . . . . . 812,250
----------
MEXICO 0.7% 675,000 Empresa ICA Sociedad Controladora S.A.,
5%, 3/15/04 . . . . . . . . . . . . . . . . 688,500
----------
PERU 1.0% 1,000,000 Tele 2000 SA, 9.75%, 4/14/97 . . . . . . . . 965,000
----------
TOTAL CONVERTIBLE BONDS (Cost $2,527,035) . . 2,465,750
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER EMERGING MARKETS INCOME FUND
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.1% PREFERRED STOCKS
-----------------------------------------------------------------------
ARGENTINA 13,400 Nortel Inversora "A" (ADR)
(Telecommunication services) (Cost $129,980) . . 119,930
----------
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $98,382,183) (a) . . . . . . . . . . . . 96,932,599
==========
<FN>
* Nonincome producing security.
(a) The cost for federal income tax purposes was $99,469,852. At October 31, 1994, net
unrealized depreciation for all securities based on tax cost was $2,537,253. This
consisted of aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of $1,182,352 and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $3,719,605.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities was $1,500,000 (Note A).
(c) Principal amount is stated in U.S. dollars unless otherwise noted.
(d) These securities represent loan participations which are arranged through private
negotiations between the Fund and a lender. Due to the nature of these securities
they typically have a longer settlement period than standard security transactions.
During the period between purchase and settlement, no payment is made by the Fund to
the lender and no applicable interest accrues to the Fund.
</TABLE>
<TABLE>
Transactions in written call options on currencies during the year ended October 31, 1994 were:
<CAPTION>
PRINCIPAL PRINCIPAL PREMIUMS
AMOUNT Y. AMOUNT ($) RECEIVED ($)
---------------------------------------------------
<S> <C> <C> <C>
Outstanding at
December 31, 1993 ... -- -- --
Contracts written ... 50,000,000 15,000,000 338,175
Contracts closed ... (50,000,000) (7,500,000) (180,675)
Contracts exercised.. -- (7,500,000) (157,500)
---------------------------------------------------
Outstanding at
October 31, 1994 ... -- -- --
=========== ========== ========
</TABLE>
<TABLE>
CURRENCY ABBREVIATIONS
--------------------------
<S> <C>
ARP Argentinean Peso
CLP Chilean Peso
FRF French Franc
MXN Mexican Peso
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $98,382,183) (Note A) . . $ 96,932,599
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
Receivables:
Investments sold . . . . . . . . . . . . . . . . . . . . . . . 4,577,927
Loan participations sold . . . . . . . . . . . . . . . . . . . 1,940,625
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,771,866
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . 448,064
Deferred organization expenses (Note A) . . . . . . . . . . . . 63,927
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 105,735,236
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . $3,247,558
Loan participations purchased . . . . . . . . . . . . . . . . . 7,265,402
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . 193,871
Accrued management fee (Note C) . . . . . . . . . . . . . . . . 130,294
Other accrued expenses (Note C) . . . . . . . . . . . . . . . . 146,165
----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 10,983,290
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . $ 94,751,946
============
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . $ 743,590
Unrealized depreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . (1,449,584)
Foreign currency related transactions . . . . . . . . . . . . (23,577)
Accumulated net realized loss . . . . . . . . . . . . . . . . . (2,698,606)
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . 85,778
Additional paid-in capital . . . . . . . . . . . . . . . . . . 98,094,345
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . $ 94,751,946
============
NET ASSET VALUE, offering and redemption price per share
($94,751,946 -:- 8,577,789 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares authorized). . . $11.05
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER EMERGING MARKETS INCOME FUND
- -----------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 31, 1993 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,993
Interest (net of withholding taxes of $1,697) . . . . . . . . 5,307,471
-----------
5,319,464
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . . . $ 130,294
Services to shareholders (Note C) . . . . . . . . . . . . . 234,972
Directors' fees and expenses (Note C) . . . . . . . . . . . . 40,174
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . 134,113
Reports to shareholders . . . . . . . . . . . . . . . . . . . 61,501
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . 40,600
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,301
State registration fees . . . . . . . . . . . . . . . . . . . 40,392
Federal registration fees . . . . . . . . . . . . . . . . . . 31,687
Amortization of organization expenses (Note A) . . . . . . . 12,669
5,355 748,058
--------------------------
OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . 4,571,406
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . $(2,861,595)
Options . . . . . . . . . . . . . . . . . . . . . . . . . . 61,825
Foreign currency related transactions . . . . . . . . . . . 15,645 (2,784,125)
-----------
Net unrealized depreciation during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . (1,449,584)
Foreign currency related transactions . . . . . . . . . . . (23,577) (1,473,161)
--------------------------
Net loss on investment transactions . . . . . . . . . . . . . (4,257,286)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . $ 314,120
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1993
(COMMENCEMENT OF
OPERATIONS) TO
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31, 1994
- ---------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 4,571,406
Net realized loss from investment transactions. . . . . . . . . . . . (2,784,125)
Net unrealized depreciation of investment
transactions during the period . . . . . . . . . . . . . . . . . . . (1,473,161)
------------
Net increase in net assets resulting from operations. . . . . . . . . 314,120
------------
Distributions from net investment income ($.51 per share) . . . . . . (3,742,297)
------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . 126,227,847
Net asset value of shares issued to
shareholders in reinvestment of distributions. . . . . . . . . . . . 3,183,825
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . (31,232,749)
------------
Net increase in net assets from Fund share transactions . . . . . . . 98,178,923
------------
INCREASE IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 94,750,746
Net assets at beginning of period . . . . . . . . . . . . . . . . . . 1,200
------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $743,590). . . . . . . . . . . . . . . . . . . . . . . . . $ 94,751,946
============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . 100
------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,083,394
Shares issued to shareholders in reinvestment of distributions. . . . 294,323
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,800,028)
------------
Net increase in Fund shares . . . . . . . . . . . . . . . . . . . . . 8,577,689
------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . 8,577,789
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER EMERGING MARKETS INCOME FUND
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
For the Period
December 31, 1993
(commencement
of operations) to
October 31, 1994
-----------------
<S> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . $12.00
------
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60
Net realized and unrealized loss on investment transactions . . . . . . . . . . . . (1.04)
------
Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . (.44)
------
Less distributions from net investment income . . . . . . . . . . . . . . . . . . . . . (.51)
------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.05
======
TOTAL RETURN (%) (B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.54)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . . . . . . . . . . . . . . . . . 95
Ratio of operating expenses, net to average daily net assets (%) (a) . . . . . . . . . 1.50*
Ratio of net investment income to average daily net assets (%) . . . . . . . . . . . . 9.17*
Portfolio turnover rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180.6*
<FN>
(a) Reflects a per share amount of management fee not imposed by the Adviser . . . . . $ .05
Operating expense ratio including management fee not imposed (%) . . . . . . . . . 2.23*
(b) Total return is higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Emerging Markets Income Fund (the "Fund") is a non-diversified series
of Scudder Global Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The policies described below are followed consistently by
the Fund in the preparation of its financial statements in conformity with
generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the Officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost.
Securities for which market quotations are not available are valued as
determined in good faith by or under the direction of the Board of Directors
of the Fund. Securities valued in good faith by the Valuation Committee of the
Board of Directors at fair value amounted to $1,575,583 (1.7% of net assets) and
have been noted in the investment portfolio as of October 31, 1994.
OPTIONS. The Fund may write (sell) exchange-listed and over-the-counter call
and put options on securities, currencies and other financial instruments. When
the Fund writes a call, it gives the purchaser of the call option the right to
buy the underlying security or currency at the price specified in the option
(the "exercise price") at any time during the option period, generally ranging
up to nine months. When the Fund writes a put option, it gives the purchaser of
the put option the right to sell the underlying security or currency to the
Fund at the exercise price at any time during the option period, generally
ranging up to nine months. If the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the option is exercised, a decision
over which the Fund has no control, the Fund must sell the underlying security
or currency to the option holder or purchase the underlying security or
currency from the option holder at the exercise price.
<PAGE>
SCUDDER EMERGING MARKETS INCOME FUND
- --------------------------------------------------------------------------------
Certain options, including options on indices will require cash settlement by
the Fund if the option is exercised. By writing a call option, the Fund
foregoes, in exchange for the premium less the commission ("net premium"), the
opportunity to profit during the option period from an increase in the market
value of the underlying security or currency above the exercise price. By
writing a put option, the Fund, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security or
currency below the exercise price.
The liability representing the Fund's obligation under an exchange traded
written options are valued at the last sale price or, in the absence of a sale,
the mean between the closing bid and asked quotations or at the most recent
asked quotation if no bid and asked quotations are available. Over the counter
written options are valued at the most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, call and put
options on securities, currencies and other financial instruments. Exchange
traded purchased options are valued at the last sales price or, in the absence
of a sale, the mean between the closing bid and asked quotations or at the most
recent bid quotation if no bid and asked quotations are available.
Over-the-counter purchased options are valued at the most recent bid quotation.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and
certain expenses at the rates of exchange prevailing on the respective
dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
WHEN-ISSUED AND FORWARD DELIVERY SECURITIES. The Fund may purchase securities
on a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued basis or forward delivery basis, it will
record the transaction and reflect the value of the security in determining its
net asset value. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund. At the
time of settlement, the market value of the security may be more or less than
the purchase price. The Fund will establish a segregated account in which it
will maintain cash and/or liquid debt securities equal in value to commitments
for when-issued or forward delivery securities.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code 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, 1994, the Fund had a net tax basis capital loss carryforward of
approximately $1,611,000, which may be applied against any net realized capital
gains of each succeeding year until fully utilized or until October 31, 2002.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
<PAGE>
SCUDDER EMERGING MARKETS INCOME FUND
- --------------------------------------------------------------------------------
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences relate primarily to foreign denominated investments and
certain securities sold at a loss. As a result, net investment income (loss)
and net realized gain (loss) on investment transactions for a reporting period
may differ significantly from distributions during such period. Accordingly,
the Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
The Fund uses the specific identified cost method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade date
basis. Distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. All discounts are
amortized/accreted for both tax and financial reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the period December 31, 1993 (commencement of operations) to October 31,
1994, purchases and sales of investment securities (excluding short-term
investments) aggregated $162,818,575 and $76,999,381, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the investments of
the Fund in accordance with its investment objectives, policies, and
restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Agreement. The
management fee payable under the Agreement is equal to an annual rate of 1.00%
of the Fund's average daily nets assets, computed and accrued daily and payable
monthly. The Agreement also provides that if the Fund's expenses exceed
specified limits, such excess, up to the amount of the management fee, will be
paid by the Adviser. In addition, the Adviser agreed not to impose all or a
portion of its management fee until February 28, 1995, and during such period
to maintain the annualized expenses of the Fund at not more than 1.50% of
average daily net assets. For the period December 31, 1993 (commencement of
operations) to October 31, 1994, the Adviser did not impose a portion of its
fee amounting to $364,316, and the portion imposed amounted to $130,294.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the period December 31, 1993 (commencement of operations) to October 31,
1994, the amount charged by SSC aggregated $188,557, of which $21,986 is unpaid
at October 31, 1994.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the
period December 31, 1993 (commencement of operations) to October 31, 1994,
Directors' fees aggregated $40,174.
D. INVESTING IN EMERGING MARKETS
- --------------------------------------------------------------------------------
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid
and their prices more volatile than those of comparable securities in the
United States.
<PAGE>
SCUDDER EMERGING MARKETS INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE
SHAREHOLDERS OF SCUDDER EMERGING MARKETS INCOME FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Emerging Markets Income Fund, including the investment portfolio, as of October
31, 1994, and the related statement of operations, statement of changes in net
assets and the financial highlights for the period December 31, 1993
(commencement of operations) to October 31, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Emerging Markets Income Fund as of October 31, 1994, the results of its
operations, the changes in its net assets and the financial highlights for the
period December 31, 1993 (commencement of operations) to October 31, 1994 in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 12, 1994
<PAGE>
OFFICERS AND DIRECTORS
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President
Paul Bancroft III
Director
Thomas J. Devine
Director
William H. Gleysteen, Jr.
Director
William H. Luers
Director
Daniel Pierce*
Director and Vice President
Robert G. Stone, Jr.
Director
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia Graduate School of
Business
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Douglas M. Loudon*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Gerald J. Moran*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Juris Padegs*
Vice President and Assistant Secretary
Kathryn L. Quirk*
Vice President and Assistant Secretary
Cornelia Small*
Vice President
Lawrence Teitelbaum*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER SERVICE CORPORATION
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR INFORMATION
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
SCUDDER GROUP RETIREMENT SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Information and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
Celebrating 75 Years of Serving Investors
This year marks the 75th anniversary of the founding of Scudder,
Stevens & Clark, Inc., investment adviser for the Scudder Funds.
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder was the first independent investment counsel firm in the
United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load
mutual fund. Today we offer 36 pure no load(tm) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped Scudder
become one of the largest and most respected investment managers in the
world. Though times have changed since our beginnings, we remain committed
to our longstanding principles: managing money with integrity and
distinction, keeping the interests of our clients first; providing access
to investments and markets that may not be easily available to individuals;
and making investing as simple and convenient as possible through friendly,
comprehensive service.
<PAGE>
SCUDDER GLOBAL FUND, INC.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement:
For Scudder Global Fund:
Financial Highlights for the period July 23, 1986
(commencement of operations) to June 30, 1987 and for
the seven fiscal years ended June 30, 1994.
(Incorporated by reference to Post-Effective Amendment
No. 22 to the Registration Statement.)
For Scudder International Bond Fund:
Financial Highlights for the period July 6, 1988
(commencement of operations) to June 30, 1989 and for
the five fiscal years ended June 30, 1994.
(Incorporated by reference to Post-Effective Amendment
No. 22 to the Registration Statement.)
For Scudder Global Small Company Fund:
Financial Highlights for the period September 10, 1991
(commencement of operations) to October 31, 1991 and
for the three fiscal years ended October 31, 1994.
For Scudder Short Term Global Income Fund:
Financial Highlights for the period March 1, 1991
(commencement of operations) to October 31, 1991 and
for the three fiscal years ended October 31, 1994.
For Scudder Emerging Markets Income Fund:
Financial Highlights for the period December 31, 1993
(commencement of operations) to October 31, 1994.
Included in Part B of this Registration Statement:
For Scudder Global Fund:
Investment Portfolio as of June 30, 1994
Statement of Assets and Liabilities as of June 30, 1994
Statement of Operations for the fiscal year ended June
30, 1994
Statements of Changes in Net Assets for the two fiscal
years ended June 30, 1994
Financial Highlights for the period July 23, 1986
(commencement of operations) to June 30, 1987 and for
the seven fiscal years ended June 30, 1994
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment
No. 22 to the Registration Statement.)
For Scudder International Bond Fund:
Investment Portfolio as of June 30, 1994
Statement of Assets and Liabilities as of June 30, 1994
Statement of Operations for the fiscal year ended June
30, 1994
Statements of Changes in Net Assets for the two fiscal
years ended June 30, 1994
Financial Highlights for the period July 6, 1988
(commencement of operations) to June 30, 1989 and for
the five fiscal years ended June 30, 1994
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment
No. 22 to the Registration Statement.)
For Scudder Global Small Company Fund:
Investment Portfolio as of October 31, 1994
Statement of Assets and Liabilities as of October 31,
1994
Statement of Operations for the fiscal year ended
October 31, 1994
Statements of Changes in Net Assets for the two fiscal
years ended October 31, 1994
Financial Highlights for the period September 10, 1991
(commencement of operations) to October 31, 1991 and
for the three fiscal years ended October 31, 1994
Notes to Financial Statements
Report of Independent Accountants
For Scudder Short Term Global Income Fund:
Investment Portfolio as of October 31, 1994
Statement of Assets and Liabilities as of October 31,
1994
Statement of Operations for the fiscal year ended
October 31, 1994
Statements of Changes in Net Assets for the two fiscal
years ended October 31, 1994
Financial Highlights for the period March 1, 1991
(commencement of operations) to October 31, 1991 and
for the three fiscal years ended October 31, 1994
Notes to Financial Statements
Report of Independent Accountants
For Scudder Emerging Markets Income Fund:
Investment Portfolio as of October 31, 1994
Statement of Assets and Liabilities as of October 31,
1994
Statement of Operations for the period December 31,
1993
(commencement of operations) to October 31, 1994
Statement of Changes in Net Assets for the period
December 31, 1993
(commencement of operations) to October 31, 1994
Financial Highlights for the period December 31, 1993
(commencement of operations) to October 31, 1994
Notes to Financial Statements
Report of Independent Accountants
Statements, schedules and historical information other than
those listed above have been omitted since they are either
not applicable or are not required.
b. Exhibits:
1. (a) Articles of Amendment and Restatement dated
December 13, 1990.
(Incorporated by reference to Exhibit 1(a) to
Post-Effective Amendment No. 8 to the
Registration Statement.)
(b) Articles Supplementary dated February 14, 1991.
(Incorporated by reference to Exhibit 1(b) to
Post-Effective Amendment No. 9 to the
Registration Statement.)
(c) Articles Supplementary dated July 11, 1991.
(Incorporated by reference to Exhibit No. 1(c)
to Post-Effective Amendment No. 12 to the
Registration Statement.)
(d) Articles Supplementary dated November 24, 1992.
(Incorporated by reference to Exhibit 1(d) to
Post-Effective Amendment No. 18 to the
Registration Statement.)
(e) Articles Supplementary dated October 22, 1993.
(Incorporated by reference to Exhibit 1(e) to
Post-Effective Amendment No. 19 to the
Registration Statement.)
2. (a) By-Laws dated May 15, 1986.
(Incorporated by reference to Exhibit 2 to
original Registration Statement.)
(b) Amendment dated May 4, 1987 to the By-Laws.
(Incorporated by reference to Exhibit 2(b) to
Post-Effective Amendment No. 2 to the
Registration Statement.)
(c) Amendment dated September 14, 1987 to the
By-Laws.
(Incorporated by reference to Exhibit 2(c) to
Post-Effective Amendment No. 5 to the
Registration Statement.)
(d) Amendment dated July 27, 1988 to the By-Laws.
(Incorporated by reference to Exhibit 2(d) to
Post-Effective Amendment No. 5 to the
Registration Statement.)
(e) Amendment dated September 15, 1989 to the
By-laws.
(Incorporated by reference to Exhibit 2(e) to
Post-Effective Amendment No. 7 to the
Registration Statement.)
(f) Amended and Restated By-Laws dated March 4,
1991.
(Incorporated by reference to Exhibit 1(c) to
Post-Effective Amendment No. 12 to the
Registration Statement.)
(g) Amendment dated September 20, 1991 to the By-
Laws.
(Incorporated by reference to Exhibit No. 2(g)
to Post-Effective Amendment 15 to the
Registration Statement.)
(h) Amendment dated December 12, 1991 to the By-Laws
is filed herein.
3. Inapplicable.
4. (a) Specimen Share Certificate representing shares
of capital stock of $.01 par value of Scudder
Global Fund.
(Incorporated by reference to Exhibit 4(a) to
Post-Effective Amendment No. 6 to the
Registration Statement.)
(b) Specimen Share Certificate representing shares
of capital stock of $.01 par value of Scudder
International Bond Fund.
(Incorporated by reference to Exhibit 4(b) to
Post-Effective Amendment No. 6 to the
Registration Statement.)
5. (a) Investment Management Agreement between the
Registrant (on behalf of Scudder Global Fund)
and Scudder, Stevens & Clark, Inc. dated
December 14, 1990.
(Incorporated by reference to Exhibit 5(a) to
Post-Effective Amendment No. 12 to the
Registration Statement.)
(b) Investment Management Agreement between the
Registrant (on behalf of Scudder International
Bond Fund) and Scudder, Stevens & Clark, Inc.
dated December 14, 1990.
(Incorporated by reference to Exhibit 5(a) to
Post-Effective Amendment No. 12 to the
Registration Statement.)
(c) Investment Management Agreement between the
Registrant (on behalf of Scudder Short Term
Global Income Fund) and Scudder, Stevens &
Clark, Inc. dated September 7, 1993.
(Incorporated by reference to Exhibit 5(c) to
Post-Effective Amendment No. 20 to the
Registration Statement.)
(d) Investment Management Agreement between the
Registrant (on behalf of Scudder Global Small
Company Fund) and Scudder, Stevens & Clark, Inc.
dated September 3, 1991.
(Incorporated by reference to Exhibit 5(d) to
Post-Effective Amendment No. 15 to the
Registration Statement.)
(e) Investment Management Agreement between the
Registrant (on behalf of Scudder Emerging
Markets Income Fund) and Scudder, Stevens &
Clark, Inc. dated December 29, 1993.
(Incorporated by reference to Post-Effective
Amendment No. 21 to the Registration Statement.)
(f) Investment Management Agreement between the
Registrant (on behalf of Scudder International
Bond Fund) and Scudder, Stevens & Clark, Inc.
dated September 8, 1994.
(Incorporated by reference to Post-Effective
Amendment No. 22 to the Registration Statement.)
6. Underwriting Agreement between the Registrant
and Scudder Investor Services, Inc. dated July
24, 1986.
(Incorporated by reference to Exhibit 6 to
Post-Effective Amendment No. 1 to the
Registration Statement.)
7. Inapplicable.
8. (a) Custodian Agreement between the Registrant and
State Street Bank and Trust Company dated July
24, 1986.
(Incorporated by reference to Exhibit 8(a) to
Post-Effective Amendment No. 1 to the
Registration Statement.)
(b) Fee schedule for Exhibit 8(a).
(Incorporated by reference to Exhibit 8(b) to
Post-Effective Amendment No. 4 to the
Registration Statement.)
(c) Custodian Agreement between the Registrant (on
behalf of Scudder International Bond Fund) and
Brown Brothers Harriman & Co. dated July 1,
1988.
(Incorporated by reference to Exhibit 8(c) to
Post-Effective Amendment No. 5 to the
Registration Statement.)
(d) Fee schedule for Exhibit 8(c).
(Incorporated by reference to Exhibit 8(d) to
Post-Effective Amendment No. 5 to the
Registration Statement.)
(e) Amendment dated September 16, 1988 to the
Custodian Contract between the Registrant and
State Street Bank and Trust Company dated July
24, 1986.
(Incorporated by reference to Exhibit 8(d) to
Post-Effective Amendment No. 6 to the
Registration Statement.)
(f) Amendment dated December 7, 1988 to the
Custodian Contract between the Registrant and
State Street Bank and Trust Company dated July
24, 1986.
(Incorporated by reference to Exhibit 8(e) to
Post-Effective Amendment No. 6 to the
Registration Statement.)
(g) Amendment dated November 30, 1990 to the
Custodian Contract between the Registrant and
State Street Bank and Trust Company dated July
24, 1986.
(Incorporated by reference to Exhibit 8(g) to
Post-Effective Amendment No. 9 to the
Registration Statement.
(h) Custodian Agreement between the Registrant (on
behalf of Scudder Short Term Global Income Fund)
and Brown Brothers Harriman & Co. dated February
28, 1991.
(Incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement.)
(i) Custodian Agreement between the Registrant (on
behalf of Scudder Global Small Company Fund) and
Brown Brothers Harriman & Co. dated August 30,
1991.
(Incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement.)
(j) Custodian Agreement between the Registrant (on
behalf of Scudder Emerging Markets Income Fund)
and Brown Brothers Harriman & Co. dated December
31, 1993 is filed herein.
9. (a)(1) Transfer Agency and Service Agreement between
the Registrant and Scudder Service Corporation
dated October 2, 1989.
(Incorporated by reference to Exhibit 9(a)(1) to
Post-Effective Amendment No. 7 to the
Registration Statement.)
(a)(2) Fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Exhibit 9(a)(2) to
Post-Effective Amendment No. 7 to the
Registration Statement.)
(b)(1) COMPASS Service Agreement with Scudder Trust
Company dated
January 1, 1990.
(Incorporated by reference to Exhibit 9(b)(1) to
Post-Effective Amendment No. 7 to the
Registration Statement.)
(b)(2) Fee schedule for Exhibit 9(b)(1).
(Incorporated by reference to Exhibit 9(b)(2) to
Post-Effective Amendment No. 7 to the
Registration Statement.)
(c) Shareholder Services Agreement with Charles
Schwab & Co., Inc. dated June 1, 1990.
(Incorporated by reference to Exhibit 9(c) to
Post-Effective Amendment No. 7 to the
Registration Statement.)
(d) Application is filed herein.
10. Consent of Counsel is filed herein.
11. Consent of Independent Accountants is filed
herein.
12. Article 6 Financial Data Schedules are filed
herein.
13. (a) Letter of Investment Intent (on behalf of
Scudder Global Fund)
(Incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 2 to the
Registration Statement.)
(b) Letter of Investment Intent (on behalf of
Scudder International Bond Fund)
(Incorporated by reference to Exhibit 13(b) to
Post-Effective Amendment No. 4 to the
Registration Statement.)
(c) Letter of Investment Intent (on behalf of
Scudder Short Term Global Income Fund)
(Incorporated by reference to Exhibit 13(c) to
Post-Effective Amendment No. 9 to the
Registration Statement.)
14. (a) Scudder Flexi-Plan for Corporations and
Self-Employed Individuals.
(Incorporated by reference to Exhibit 14(a) to
Scudder Income Fund Post-Effective Amendment No.
46 to its Registration Statement on Form N-1A
[File Nos. 2-13627 and 811-42].)
(b) Scudder Individual Retirement Plan.
(Incorporated by reference to Exhibit 14(b) to
Scudder Income Fund Post-Effective Amendment No.
46 to its Registration Statement on Form N-1A
[File Nos. 2-13627 and 811-42].)
(c) Scudder Funds 403(b) Plan.
(Incorporated by reference to Exhibit 14(c) to
Scudder Income Fund Post-Effective Amendment No.
46 to its Registration Statement on Form N-1A
[File Nos. 2-13627 and 811-42].)
(d) Scudder Employer-Select 403(b) Plan.
(Incorporated by reference to Exhibit 14(e)(2)
to Scudder Income Fund, Inc. Post-Effective
Amendment No. 43 to its Registration Statement
on Form N-1A [File Nos. 2-13627 and 811-42].)
(e) Scudder Cash or Deferred Profit Sharing Plan
under Section 401(k).
(Incorporated by reference to Exhibit 14(f) to
Scudder Income Fund, Inc. Post-Effective
Amendment No. 43 to its Registration Statement
on Form N-1A [File Nos. 2-13627 and 811-42].)
15. Inapplicable.
16. Schedule for Computation of Performance
Quotation.
(Incorporated by reference to Exhibit 16 to
Post-Effective Amendment No. 6 to the
Registration Statement.)
Power of Attorney for Edmond D. Villani, Paul
Bancroft, III, Nicholas Bratt, Thomas J. Devine,
William H. Gleysteen, Jr., William H. Luers and
Robert G. Stone, Jr.
(Incorporated by reference to the Signature Page
to Post-Effective Amendment No. 10 to the
Registration Statement.)
Power of Attorney for William E. Holzer.
(Incorporated by reference to the Signature Page
to Post-Effective Amendment No. 18 to the
Registration Statement.)
Power of Attorney for Daniel Pierce.
(Incorporated by reference to the Signature Page
to Post-Effective Amendment No. 19 to the
Registration Statement.)
Item 25. Persons Controlled by or under Common Control with Registrant
None
Item 26. Number of Holders of Securities (as of January 27, 1995).
<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Shareholders
Shares of capital stock
($.01 par value)
<S> <C>
Scudder Global Fund 95,076
Scudder International 47,120
Bond Fund
Scudder Short Term 28,062
Global Income Fund
Scudder Global Small 27,245
Company Fund
Scudder Emerging Markets 10,021
Income Fund
</TABLE>
Item 27. Indemnification.
A policy of insurance covering Scudder, Stevens & Clark Inc., its
subsidiaries including Scudder Investor Services, Inc., and all
of the registered investment companies advised by Scudder,
Stevens & Clark Inc. insures the Registrant's Directors and
officers and others against liability arising by reason of an
alleged breach of duty caused by any negligent error or
accidental omission in the scope of their duties.
Article Tenth of Registrant's Articles of Incorporation state as
follows:
TENTH: Liability and Indemnification
To the fullest extent permitted by the Maryland General Corporation
Law and the Investment Company Act of 1940, no director or officer of the
Corporation shall be liable to the Corporation or to its stockholders for
damages. This limitation on liability applies to events occurring at the
time a person serves as a director or officer of the Corporation, whether
or not such person is a director or officer at the time of any proceeding
in which liability is asserted. No amendment to these Articles of
Amendment and Restatement or repeal of any of its provisions shall limit or
eliminate the benefits provided to directors and officers under this
provision with respect to any act or omission which occurred prior to such
amendment or repeal.
The Corporation, including its successors and assigns, shall indemnify
its directors and officers and make advance payment of related expenses to
the fullest extent permitted, and in accordance with the procedures
required by Maryland law, including Section 2-418 of the Maryland General
Corporation Law, as may be amended from time to time, and the Investment
Company Act of 1940. The By-laws may provide that the Corporation shall
indemnify its employees and/or agents in any manner and within such limits
as permitted by applicable law. Such indemnification shall be in addition
to any other right or claim to which any director, officer, employee or
agent may otherwise be entitled.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other
enterprise or employee benefit plan against any liability asserted against
and incurred by such person in any such capacity or arising out of such
person's position, whether or not the Corporation would have had the power
to indemnify against such liability.
The rights provided to any person by this Article shall be enforceable
against the Corporation by such person who shall be presumed to have relied
upon such rights in serving or continuing to serve in the capacities
indicated herein. No amendment of these Articles of Amendment and
Restatement shall impair the rights of any person arising at any time with
respect to events occurring prior to such amendment.
Nothing in these Articles of Amendment and Restatement shall be deemed
to (i) require a waiver of compliance with any provision of the Securities
Act of 1933, as amended, or the Investment Company Act of 1940, as amended,
or of any valid rule, regulation or order of the Securities and Exchange
Commission under those Acts or (ii) protect any director or officer of the
Corporation against any liability to the Corporation or its stockholders to
which he would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of his or her duties or by
reason of his or her reckless disregard of his or her obligations and
duties hereunder.
Item 28. Business or Other Connections of Investment Adviser
The Adviser has stockholders and employees who are denominated
officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for
the purpose of this Item 28.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
Step Director, Scudder, Stevens & Clark, Inc.
hen (investment adviser)**
R.
Beck
with
Lynn Director, Scudder, Stevens & Clark, Inc.
S. (investment adviser)**
Bird
song
Supervisory Director, The Latin America Income
and Appreciation Fund N.V. (investment
company) +
Supervisory Director, The Venezuela High Income
Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund
(investment company) +
Supervisory Director, Scudder Floating Rate
Funds for Fannie Mae Mortgage Securities I &
II (investment company) +
Director, Scudder, Stevens & Clark (Luxembourg)
S.A. (investment manager) #
Trustee, Scudder Funds Trust (investment
company)*
President & Director, The Latin America Dollar
Income Fund, Inc. (investment company)**
President & Director, Scudder World Income
Opportunities Fund, Inc. (investment
company)**
Nich Director, Scudder, Stevens & Clark, Inc.
olas (investment adviser)**
Brat
t
President & Director, Scudder New Europe Fund,
Inc. (investment company)**
President & Director, The Brazil Fund, Inc.
(investment company)**
President & Director, The First Iberian Fund,
Inc. (investment company)**
President & Director, Scudder International
Fund, Inc. (investment company)**
Director, Scudder Global Fund, Inc. (investment
company)**
President & Director, The Korea Fund, Inc.
(investment company)**
President & Director, Scudder New Asia Fund,
Inc. (investment company)**
President, The Argentina Fund, Inc. (investment
company)**
Vice President, Scudder, Stevens & Clark
Corporation
Vice President, Scudder, Stevens & Clark Japan,
Inc.
Vice President, Scudder, Stevens & Clark of
Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Lind Director, Scudder, Stevens & Clark, Inc.
a C. (investment adviser)**
Coug
hlin
Director, Scudder Investor Services, Inc.
(broker/dealer)**
President & Trustee, AARP Cash Investment Funds
(investment company)**
President & Trustee, AARP Growth Trust
(investment company)**
President & Trustee, AARP Income Trust
(investment company)**
President & Trustee, AARP Tax Free Income Trust
(investment company)**
Director, SFA, Inc. (advertising agency)*
Marg Director, Scudder, Stevens & Clark, Inc.
aret (investment adviser)*
D.
Hadz
ima
Jera Director, Scudder, Stevens & Clark, Inc.
rd (investment adviser)**
K.
Hart
man
Vice President, Scudder California Tax Free
Trust (investment company)*
Vice President, Scudder Equity Trust (investment
company)*
Vice President, Scudder Cash Investment Trust
(investment company)*
Vice President, Scudder Development Fund
(investment company)*
Vice President, Scudder Global Fund, Inc.
(investment company)**
Vice President, Scudder GNMA Fund (investment
company)*
Vice President, Scudder Portfolio Trust
(investment company)*
Vice President, Scudder International Fund, Inc.
(investment company)**
Vice President, Scudder Investment Trust
(investment company)*
Vice President, Scudder Municipal Trust
(investment company)*
Vice President, Scudder Mutual Funds, Inc.
(investment company)**
Vice President, Scudder New Asia Fund, Inc.
(investment company)**
Vice President, Scudder New Europe Fund, Inc.
(investment company)**
Vice President, Scudder State Tax Free Trust
(investment company)*
Vice President, Scudder Funds Trust (investment
company)*
Vice President, Scudder Tax Free Money Fund
(investment company)*
Vice President, Scudder Tax Free Trust
(investment company)*
Vice President, Scudder U.S. Treasury Money Fund
(investment company)*
Vice President, Scudder Variable Life Investment
Fund (investment company)*
Vice President, Scudder Treasurers Trust (until
10/30/90) (investment company)*
Vice President, The Brazil Fund, Inc.
(investment company)**
Vice President, The Korea Fund, Inc. (investment
company)**
Vice President, The Argentina Fund, Inc.
(investment company)**
Vice President and Director, Scudder, Stevens &
Clark of Canada, Ltd. (Canadian investment
adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc.
(investment company)**
Vice President, The Latin America Dollar Income
Fund, Inc. (investment company)**
Rich Director, Scudder, Stevens & Clark, Inc.
ard (investment adviser)++
A.
Holt
Vice President, Scudder Variable Life Investment
Fund (investment company)*
Dudl Director, Scudder, Stevens & Clark, Inc.
ey (investment adviser)**
H.
Ladd
Director, Scudder Investor Services, Inc.
(broker/dealer)*
Vice President & Trustee, Scudder Cash
Investment Trust (investment company)*
Trustee, Scudder Investment Trust (investment
company)*
Trustee, Scudder Portfolio Trust (investment
company)*
Trustee, Scudder Municipal Trust (investment
company)*
Trustee, Scudder State Tax Free Trust
(investment company)*
Vice President, Scudder U.S. Treasury Money Fund
(investment company)*
Vice President & Treasurer, SFA, Inc.
(advertising agency)*
Doug Director, Scudder, Stevens & Clark, Inc.
las (investment adviser)**
M.
Loud
on
Vice President & Trustee, Scudder Development
Fund (investment company)*
Vice President & Trustee, Scudder Equity Trust
(investment company)*
Vice President, Scudder Global Fund, Inc.
(investment company)**
Vice President, Scudder Investment Trust
(investment company)*
Vice President & Director, Scudder Mutual Funds,
Inc. (investment company)**
Vice President, AARP Cash Investment Funds
(investment company)**
Vice President, AARP Growth Trust (investment
company)**
Vice President, AARP Income Trust (investment
company)**
Vice President, AARP Tax Free Income Trust
(investment company)**
Vice President, Scudder, Stevens & Clark
Corporation (Delaware) (investment adviser)**
Senior Vice President, Scudder Investor
Services, Inc. (broker/dealer)*
Vice President, Scudder, Stevens & Clark of
Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Chairman, World Capital Fund (investment
company) Luxembourg ##
Managing Director, NKK - Scudder Capital Asset
Management Corporation (investment adviser)**
Chairman & Director, Scudder, Stevens & Clark
Japan, Inc.
President, The Japan Fund, Inc. (investment
company)**
Trustee, Scudder, Stevens & Clark Supplemental
Retirement Income Plan
Trustee, Scudder, Stevens & Clark Profit Sharing
Plan **
Chairman & Director, Scudder, Stevens & Clark
(Luxembourg), S.A., Luxembourg#
Director, Berkshire Farm & Services for Youth
Board of Governors, Investment Counsel
Association of America
Chairman, Canadian High Income Fund (investment
company) #
Chairman, Hot Growth Companies Fund (investment
company) #
John Director, Scudder, Stevens & Clark, Inc.
T. (investment adviser)**
Pack
ard
President, Montgomery Street Income Securities,
Inc. (investment company) oo
Director, Scudder Realty Advisors, Inc. (realty
investment adviser) x
Director, PSI Star Corporation (manufacturer of
chemical process for etching circuit boards)
Juri Secretary & Director, Scudder, Stevens & Clark,
s Inc. (investment adviser)**
Pade
gs
Chairman of the Board & Director, The Brazil
Fund, Inc. (investment company)**
Trustee, Scudder Development Fund (investment
company)*
Trustee & Vice President, Scudder Equity Trust
(investment company)*
Chairman of the Board & Director, The First
Iberian Fund, Inc. (investment company)**
Trustee (Vice President & Assistant Secretary
until 3/91), Scudder Funds Trust (investment
company)*
Vice President & Assistant Secretary, Scudder
Global Fund, Inc. (investment company)**
Trustee, Scudder Investment Trust (investment
company)*
Vice President, Assistant Secretary & Director,
Scudder International Fund, Inc. (investment
company)**
Vice President, The Latin America Dollar Income
Fund, Inc. (investment company)**
Trustee, Scudder Municipal Trust (investment
company)*
Vice President & Assistant Secretary, Scudder
Mutual Funds, Inc. (investment company)**
Vice President & Director, Scudder New Europe
Fund, Inc. (investment company)**
Trustee, Scudder State Tax Free Trust
(investment company)*
Vice President, Assistant Secretary & Director,
Scudder New Asia Fund, Inc. (investment
company)**
Vice President & Trustee, Scudder Tax Free Money
Fund (investment company)*
Trustee, Scudder Tax Free Trust (investment
company)*
Chairman of the Board and Director (Vice
President until 4/91), The Korea Fund, Inc.
(investment company)**
Vice President & Director, The Argentina Fund,
Inc. (investment company)**
Secretary, Scudder, Stevens & Clark of Canada
Ltd. (Canadian investment adviser), Toronto,
Ontario, Canada
Vice President, Scudder Realty Advisors, Inc.
(realty investment adviser) x
Assistant Secretary, SFA, Inc. (advertising
agency)*
Vice President & Director, Scudder Investor
Services, Inc. (broker/dealer)**
Assistant Treasurer, NKK-Scudder Capital Asset
Management (investment adviser)**
Director and Chairman of the Board, Scudder,
Stevens & Clark Japan, Inc.
President & Director, Scudder, Stevens & Clark
Corporation
Supervisory Director, Sovereign High Yield
Investment Company N.V. (investment company)
+
Director, President Investment Trust Corporation
(Joint Venture)***
Dani Chairman of the Board and Director, Scudder New
el Europe Fund, Inc. (investment company)**
Pier
ce
Trustee, California Tax Free Trust (investment
company)*
President & Trustee, Scudder Development Fund
(investment company)**
President & Trustee, Scudder Equity Trust
(investment company)**
Director, The First Iberian Fund, Inc.
(investment company)**
President & Trustee, Scudder GNMA Fund
(investment company)*
President & Trustee, Scudder Portfolio Trust
(investment company)*
President & Trustee, Scudder Funds Trust
(investment company)*
President & Director, Scudder Institutional
Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc.
(investment company)**
Director, Scudder International Fund, Inc.
(investment company)**
President & Trustee, Scudder Investment Trust
(investment company)*
Vice President & Trustee, Scudder Municipal
Trust (investment company)*
President & Director, Scudder Mutual Funds, Inc.
(investment company)**
Director, Scudder New Asia Fund, Inc.
(investment company)**
Trustee, Scudder State Tax Free Trust
(investment company)*
President & Trustee, Scudder Treasurers Trust
(until 10/90) (investment company)*
Vice President & Trustee, Scudder Variable Life
Investment Fund (investment company)*
Director, The Brazil Fund, Inc. (investment
company)**
Vice President & Assistant Treasurer, Montgomery
Street Income Securities, Inc. (investment
company) oo
Vice President and Director, Scudder Global
Fund, Inc. (investment company)**
Vice President, Director & Assistant Treasurer,
Scudder Investor Services, Inc.
(broker/dealer)*
Vice President & Director, Scudder Service
Corporation (in-house transfer agent)*
Chairman of the Board & President, Scudder,
Stevens & Clark of Canada, Ltd. (Canadian
investment adviser), Toronto, Ontario, Canada
Chairman of the Board, Assistant Treasurer &
Director, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Director, Scudder, Stevens & Clark, Ltd.
Trustee, Brigham and Women's Hospital (hospital)
Boston, MA
Director, Fiduciary Trust Company (banking &
trust company) Boston, MA
Director, Fiduciary Company Incorporated
(banking & trust company) Boston, MA
Corn Director, Scudder, Stevens & Clark, Inc.
elia (investment adviser)**
M.
Smal
l
Vice President, Scudder Global Fund, Inc.
(investment company)**
Vice President, AARP Cash Investment Funds
(investment company)*
Vice President, AARP Growth Trust (investment
company)*
Vice President, AARP Income Trust (investment
company)*
Vice President, AARP Tax Free Income Trust
(investment company)*
Edmo President & Director, Scudder, Stevens & Clark,
nd Inc. (investment adviser)**
D.
Vill
ani
Trustee, Scudder Development Fund (investment
company)*
Chairman of the Board & Director, Scudder Global
Fund, Inc. (investment company)**
Chairman of the Board & Director, Scudder
International Fund, Inc. (investment
company)**
Chairman of the Board & Director, Scudder New
Asia Fund, Inc. (investment company)**
Chairman of the Board & Director, The Argentina
Fund, Inc. (investment company)**
Director, Scudder Realty Advisors, Inc. (realty
investment adviser) x
Supervisory Director, Scudder Mortgage Fund
(investment company) +
Chairman of the Board & Director, The Latin
America Dollar Income Fund, Inc. (investment
company)**
Director, Scudder, Stevens & Clark Japan, Inc.
Chairman of the Board & Director, Scudder World
Income Opportunities Fund, Inc. (investment
company)**
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ 111 East Wacker Drive, Chicago, IL
o Rodney Square North, Wilmington, DE
oo 101 California Street, San Francisco, CA
# 11, rue Aldringen, L-1118 Luxembourg, Grand-Duchy
of Luxembourg
+ John B. Gorsiraweg 6, Willemstad Curacao,
Netherland Antilles
xx DeRuyterkade 62, P.O. Box 812, Willemstad Curacao,
Netherland Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei,
Taiwan
Item 29. Principal Underwriters.
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Development Fund
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder Portfolio Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment
Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
The Japan Fund, Inc.
(b)
(1) (2) (3)
Name and Position and Offices Positions and
Principal with Offices with
Business Scudder Investor Registrant
Address Services, Inc.
Charles S. Boit Assistant Treasurer None
Two International
Place
Boston, MA 02110
E. Michael Brown Assistant Treasurer None
Two International
Place
Boston, MA 02110
Linda Coughlin Director None
345 Park Avenue
New York, NY
10154
Richard W. Vice President None
Desmond
345 Park Avenue
New York, NY
10154
Coleen Downs Assistant Clerk Assistant
Dinneen Secretary
Two International
Place
Boston, MA 02110
Paul J. Elmlinger Vice President None
345 Park Avenue
New York, NY
10154
Cuyler W. Findlay Senior Vice President None
345 Park Avenue and
New York, NY Director
10154
Thomas W. Joseph Vice President, Vice
Two International Director, President
Place Treasurer and
Boston, MA 02110 Assistant Clerk
Dudley H. Ladd Senior Vice President None
Two International and
Place Director
Boston, MA 02110
David S. Lee President, Assistant Vice
Two International Treasurer and President and
Place Director Assistant
Boston, MA 02110 Treasurer
Douglas M. Loudon Senior Vice President Vice
345 Park Avenue President
New York, NY
10154
Thomas F. Clerk Vice
McDonough President and
Two International Secretary
Place
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY
10154
Edward J. Assistant Treasurer Vice
O'Connell President and
345 Park Avenue Assistant
New York, NY Treasurer
10154
Juris Padegs Vice President and Vice
345 Park Avenue Director President and
New York, NY Assistant
10154 Secretary
Daniel Pierce Vice President, Director and
Two International Director Vice
Place and Assistant President
Boston, MA 02110 Treasurer
Robert E. Pruyne Assistant Treasurer None
Two International
Place
Boston, MA 02110
Kathryn L. Quirk Vice President Vice
345 Park Avenue President and
New York, NY Assistant
10154 Secretary
Ronald H. Ransch Vice President None
345 Park Avenue
New York, NY
10154
David B. Watts Assistant Treasurer None
Two International
Place
Boston, MA 02110
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 29.
(c)
(1) (2) (3) (4) (5)
Net Compensation
Underwriting on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Commissions Compensation
----------------- ------------- Repurchases ----------- ------------
------------ - -
-
[S] [C] [C] [C] [C]
Scudder Investor None None None None
Services, Inc.
Item 30. Location of Accounts and Records.
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens &
Clark, Inc., 345 Park Avenue, New York, NY 10154. Records
relating to the duties of the Registrant's custodian (on behalf
of Scudder Global Fund) are maintained by State Street Bank and
Trust Company, Heritage Drive, North Quincy, Massachusetts.
Records relating to the duties of the Registrant's custodian (on
behalf of Scudder International Bond Fund, Scudder Short Term
Global Income Fund, Scudder Global Small Company Fund and Scudder
Emerging Markets Income Fund) are maintained by Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and the Commonwealth of Massachusetts, on the day of
February, 1995.
SCUDDER GLOBAL FUND, INC.
By /s/Thomas F. McDonough
Thomas F. McDonough
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Edmond D. Villani
Edmond D. Villani* Chairman of the Board February 13, 1995
and Director
/s/Nicholas Bratt
Nicholas Bratt* President, Scudder February 13, 1995
Short Term Global
Income Fund, Scudder
International Bond
Fund, Scudder Global
Small Company Fund and
Scudder Emerging
Markets Income Fund
(Principal Executive
Officer of these
Series) and Director
/s/William E. Holzer
William E. Holzer* President, Scudder February 13, 1995
Global Fund (Principal
Executive Officer of
this Series)
/s/Paul Bancroft, III
Paul Bancroft, III* Director February 13, 1995
/s/Thomas J. Devine
Thomas J. Devine* Director February 13, 1995
/s/William H. Gleysteen, Jr.
William H. Gleysteen, Jr.* Director February 13, 1995
/s/William H. Luers
William H. Luers* Director February 13, 1995
/s/Daniel Pierce
Daniel Pierce* Director and Vice February 13, 1995
President
/s/Robert G. Stone, Jr.
Robert G. Stone, Jr.* Director February 13, 1995
/s/Pamela A. McGrath
Pamela A. McGrath Vice President and February 13, 1995
Treasurer (Principal
Financial and
Accounting Officer)
</TABLE>
*By: /s/Thomas F. McDonough
Thomas F. McDonough
Attorney-in-fact pursuant to powers of attorney included with the
signature pages of Post-Effective Amendment No. 10 to the Registration
Statement filed July 1, 1991, Post-Effective Amendment No. 18 to the
Registration Statement filed September 2, 1993 and Post-Effective
Amendment No. 19 to the Registration Statement filed November 1, 1993.
<PAGE>
File No. 33-5724
File No. 811-4670
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 23
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 26
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER GLOBAL FUND, INC.
<PAGE>
SCUDDER GLOBAL FUND, INC.
Exhibit Index
Exhibit 2(h)
Exhibit 8(j)
Exhibit 9(d)
Exhibit 10
Exhibit 11
Exhibit 12
Exhibit 2(h)
SCUDDER GLOBAL FUND, INC.
On December 12, 1991, the Directors of the Fund adopted the following
amending the By-Laws of the Fund:
RESOLVED, that pursuant to the provisions of Article VII of the
Fund's By-Laws, Section 10 of Article II of the Fund's By-Laws is
hereby amended to read in its entirety as follows (additions have
been underlined):
ARTICLE II
BOARD OF DIRECTORS
SECTION 10. Notice of Special Meetings. Notice of each
special meeting of the Board of Directors shall be given by the
Secretary as hereinafter provided. Each notice shall state the
date, time and place of the meeting and shall be delivered to
each Director, either personally or by telephone or other
standard form of telecommunication, at least 24 (twenty-four)
hours before the time at which the meeting is to be held, or by
first-class mail, postage prepaid, addressed to the Director at
his residence or usual place of business, and mailed at least 2
(two) days before the day on which the meeting is to be held, or
delivered to him personally or transmitted by telegraph, cable or
other communication leaving a visual record at least one day
before the meeting.
EXHIBIT 8(j)
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
SCUDDER EMERGING MARKETS INCOME FUND
TABLE OF CONTENTS
1. Employment of Custodian 1
2. Powers and Duties of the Custodian with respect to 2
Property of the Fund held by the Custodian in the U. S.
A. Safekeeping 2
B. Manner of Holding Securities 2
C. Registered Name; Nominee 2
D. Purchases 2
E. Exchanges 3
F. Sale of Securities 4
G. Depositary Receipts 4
H. Exercise of Rights; Tender Offers 5
I. Stock Dividends, Rights, Etc 5
J. Options 5
K. Futures Contracts 6
L. Borrowings 7
M. Demand Deposit Bank Accounts 7
N. Interest Bearing Call or Time Deposits 8
O. Foreign Exchange Transactions 9
P. Stock Loans 9
Q. Collections 10
R. Dividends, Distributions and Redemptions 10
S. Proxies, Notices, etc 11
T. Bills 12
U. Nondiscretionary Details 12
V. Deposit of Fund Assets in Securities Systems 12
W. Other Transfers 15
X. Investment Limitations 16
Y. Proper Instructions 16
Z. Segregated Account 17
3. Powers and Duties of the Custodian with Respect to the 18
Appointment of Subcustodians Outside the U. S.
4. Assistance by Custodian as to Certain Matters 23
5. Powers and Duties of the Custodian with Respect to its 23
Role as Financial Agent
A. Records 23
B. Accounts 24
C. Access to Record 24
D. Calculation of Net Asset Value 24
E. Disbursements 29
6. Standard of Care and Related Matters 29
A. Liability of the Custodian with Respect to Proper 29
Instructions; Evidence of Authority; Etc
B. Liability of the Custodian with Respect to Use of 30
Securities System
C. Standard of Care; Liability; Indemnification 31
D. Reimbursement of Advances 32
E. Appointment of Agents 33
F. Powers of Attorney 33
7. Compensation of the Custodian 33
8. Termination; Successor Custodian 34
9. Amendment 34
10. Governing Law 35
11. Notices 35
12. Binding Effect 35
13. Counterparts 35
CUSTODIAN AGREEMENT
AGREEMENT made this 31st day of December , 1993, between SCUDDER
EMERGING MARKETS INCOME FUND (the "Fund") and Brown Brothers Harriman & Co.
(the "Custodian").
WITNESSETH: That in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. The Fund hereby employs and appoints the Custodian as a custodian
for the term and subject to the provisions of this Agreement. The Fund
agrees to deliver to the Custodian all securities and cash owned by it, and
all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time
to time, and the cash consideration received by it for such new or treasury
shares of capital stock of the Fund as may be issued or sold from time to
time.
The Custodian shall not be under any duty or obligation to require the
Fund to deliver to it any securities or funds owned by the Fund and shall
have no responsibility or liability for or on account of securities or
funds not so delivered. The Fund will deposit with the Custodian copies of
the Certificate of Incorporation and By-Laws (or comparable documents) of
the Fund and all amendments thereto, and copies of such votes and other
proceedings of the Fund as may be necessary for or convenient to the
Custodian in the performance of its duties.
It is understood that as used in this Agreement, the term "securities"
shall include futures contracts and options.
2. Except for securities and funds held by subcustodians appointed
pursuant to the provisions of Section 3 hereof, the Custodian shall have
and perform the following powers and duties:
A. Safekeeping - To keep safely the securities of the Fund that have
been delivered to the Custodian and from time to time to receive delivery
of securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1)
by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form or of the
broker's receipts or confirmations for futures contracts, options and
similar securities, or (2) in book-entry form by a Securities System (as
said term is defined in Section 2V).
C. Registered Name; Nominee - To hold registered securities of the
Fund (1) in the name or any nominee name of the Custodian or the Fund, or
in the name or any nominee name of any agent appointed pursuant to Section
6E, or (2) in street certificate form, so-called, and in any case with or
without any indication of fiduciary capacity.
D. Purchases - Upon receipt of proper instructions, as defined in
Section 2Y, insofar as funds are available for the purpose, to pay for and
receive securities purchased for the account of the Fund, payment being
made only upon receipt of the securities; provided, however, that the
Custodian may make payment, which may be prior to receipt of securities,
and may accept delivery of securities, including the form of securities
received, in accordance with governmental regulations, the rules of
Securities Systems or other U.S. securities depositories and clearing
agencies, or generally accepted trade practice in the applicable U.S.
market. Receipt of securities on behalf of the Fund shall be by the
Custodian or a Subcustodian or by credit to an account which one of them
may have with a bank, Securities System, other U.S. securities depositary
or clearing agency, or other financial institution approved by the Fund.
E. Exchanges - Upon receipt of proper instructions, to exchange
securities held by it for the account of the Fund for other securities in
connection with any reorganization, recapitalization, split-up of shares,
change of par value, conversion or other event, and to deposit any such
securities in accordance with the terms of any reorganization or protective
plan. Without such instructions, the Custodian may surrender securities in
temporary form for definitive securities, may surrender securities for
transfer into a name or nominee name as permitted in Section 2C, and may
surrender securities for a different number of certificates or instruments
representing the same number of shares or same principal amount of
indebtedness, provided the securities to be issued are to be delivered to
the Custodian.
F. Sales of Securities - Upon receipt of proper instructions, to make
delivery of securities which have been sold for the account of the Fund but
only against payment therefor; provided, however, that the Custodian may
make delivery, which may be prior to receipt of payment, and may accept
payment, including the form of payment received, in accordance with
governmental regulations, the rules of Securities Systems or other U.S.
securities depositories and clearing agencies, or generally accepted trade
practice in the applicable U.S. market. Receipt of payment on behalf of
the Fund shall be by the Custodian or a Subcustodian or by credit to an
account which one of them may have with a bank, Securities System, other
U.S. securities depositary or clearing agency, or other financial
institution approved by the Fund.
G. Depositary Receipts - Upon receipt of proper instructions, to
instruct a subcustodian appointed pursuant to Section 3 hereof (a
"Subcustodian") or an agent of the Custodian appointed pursuant to Section
6E hereof (an "Agent") to surrender securities to the depositary used by an
issuer of American Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such securities
against a written receipt therefor adequately describing such securities
and written evidence satisfactory to the Subcustodian or Agent that the
depositary has acknowledged receipt of instructions to issue with respect
to such securities ADRs in the name of the Custodian, or a nominee of the
Custodian, for delivery to the Custodian in Boston, Massachusetts, or at
such other place as the Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender ADRs to the issuer
thereof against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the
issuer of the ADRs has acknowledged receipt of instructions to cause its
depositary to deliver the securities underlying such ADRs to a Subcustodian
or an Agent.
H. Exercise of Rights; Tender Offers - Upon receipt of proper
instructions, to deliver to the issuer or Director thereof, or to the agent
of either, warrants, puts, calls, futures contracts, options, rights or
similar securities for the purpose of being exercised or sold, provided
that the new securities and cash, if any, acquired by such action are to be
delivered to the Custodian, and, upon receipt of proper instructions, to
deposit securities upon invitations for tenders of securities, provided
that the consideration is to be paid or delivered or the tendered
securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Options - Upon receipt of proper instructions, to receive and
retain confirmations or other documents evidencing the purchase or writing
of an option on a security or securities index by the Fund; to deposit and
maintain in a segregated account, either physically or by book-entry in a
Securities System, securities subject to a covered call option written by
the Fund; and to release and/or transfer such securities or other assets
only in accordance with a notice or other communication evidencing the
expiration, termination or exercise of such covered option furnished by The
Options Clearing Corporation, the securities or options exchange on which
such covered option is traded or such other organization as may be
responsible for handling such options transactions.
K. Futures Contracts - Upon receipt of proper instructions, to
receive and retain confirmations evidencing the purchase or sale of a
futures contract or an option on a futures contract by the Fund; to deposit
and maintain in a segregated account, for the benefit of any futures
commission merchant, assets designated by the Fund as initial, maintenance
or variation "margin" deposits intended to secure the Fund's performance of
its obligations under any futures contracts purchased or sold or any
options on futures contracts written by the Fund, in accordance with the
provisions of any agreement or agreements among any of the Fund, the
Custodian and such futures commission merchant, designed to comply with the
rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding such margin
deposits; and to release and/or transfer assets in such margin accounts
only in accordance with any such agreements or rules.
L. Borrowings - Upon receipt of proper instructions, to deliver
securities of the Fund to lenders or their agents as collateral for
borrowings effected by the Fund, but only against receipt of the amounts
borrowed, provided that if such collateral is held in book-entry form by a
Securities System (as defined in Section 2V), such collateral may be
transferred by book-entry to such lender or its agent against receipt by
the Custodian of an undertaking by such lender to pay such borrowed money
to or upon the Custodian's order on the next business day following such
transfer of collateral.
M. Demand Deposit Bank Accounts - To open and operate an account or
accounts in the name of the Fund on the Custodian's books subject only to
draft or order by the Custodian. All funds received by the Custodian from
or for the account of the Fund shall be deposited in said account(s). The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open
and operate an additional account(s) in such other banks or trust companies
as may be designated by the Fund in such instructions (any such bank or
trust company so designated by the Fund being referred to hereafter as a
"Banking Institution"), provided that such account(s) shall be in the name
of the Custodian for account of the Fund and subject only to the
Custodian's draft or order. Such accounts may be opened with Banking
Institutions in the United States and in other countries and may be
denominated in either U. S. Dollars or other currencies as the Fund may
determine. All such deposits shall be deemed to be portfolio securities of
the Fund and accordingly the responsibility of the Custodian therefor shall
be the same as and no greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund.
N. Interest Bearing Call or Time Deposits - To place interest bearing
fixed term and call deposits with such banks and in such amounts as the
Fund may authorize pursuant to proper instructions. Such deposits may be
placed with the Custodian or with Subcustodians or other Banking
Institutions as the Fund may determine. Deposits may be denominated in U.
S. Dollars or other currencies and need not be evidenced by the issuance or
delivery of a certificate to the Custodian, provided that the Custodian
shall include in its records with respect to the assets of the Fund,
appropriate notation as to the amount and currency of each such deposit,
the accepting Banking Institution, and other appropriate details. Such
deposits, other than those placed with the Custodian, shall be deemed
portfolio securities of the Fund and the responsibilities of the Custodian
therefor shall be the same as those for demand deposit bank accounts placed
with other banks, as described in the second paragraph of Section 2M of
this Agreement. The responsibility of the Custodian for such deposits
accepted on the Custodian's books shall be that of a U. S. bank for a
similar deposit.
O. Foreign Exchange Transactions - Pursuant to proper instructions,
to enter into foreign exchange contracts to purchase and sell foreign
currencies for spot and future delivery on behalf and for the account of
the Fund, and in connection therewith to receive and retain receipts,
confirmations or other documents evidencing such contracts and to deposit
and maintain cash or designated securities in a segregated account and to
release and/or transfer assets held in such account only in accordance with
such proper instructions. Such transactions may be undertaken by the
Custodian with such Banking Institutions, including the Custodian and
Subcustodian(s) as principals, as approved and authorized by the Fund.
Foreign exchange contracts, other than those executed with the Custodian,
shall be deemed to be portfolio securities of the Fund and the
responsibilities of the Custodian therefor shall be the same as those for
demand deposit bank accounts placed with other banks as described in the
second paragraph of Section 2M of this Agreement.
P. Stock Loans - Upon receipt of proper instructions, to deliver
securities of the Fund, in connection with loans of securities by the Fund,
to the borrower thereof but only against receipt of such collateral as the
Fund shall instruct; except that in connection with any loans for which
collateral is to be credited to the Custodian's Account in a book-entry
system referred to in Section 2V(ii) hereof, the Custodian may deliver
securities prior to the credit of such collateral, provided that the
Custodian shall promptly notify the Fund if such collateral is not
credited.
Q. Collections - (i) To collect and receive all income, payments of
principal and other payments with respect to the securities held hereunder,
and in connection therewith to deliver the certificates or other
instruments representing the securities to the issuer thereof or its agent
when securities are called, redeemed, retired, mature or otherwise become
payable; provided that the payment is to be made in such form and at such
time as is in accordance with the terms of the agreement relating to the
security, or such proper instructions as the Custodian may receive, or
governmental regulations, the rules of Securities Systems or other U.S.
securities depositories and clearing agencies, or generally accepted trade
practice in the applicable U.S. market; (ii) to execute ownership and other
certificates and affidavits for all federal and state tax purposes in
connection with receipt of income, principal or other payments with respect
to securities of the Fund or in connection with transfer of securities; and
(iii) pursuant to proper instructions to take such other actions with
respect to the collection or receipt of funds or transfer of securities
which involve an investment decision.
R. Dividends, Distributions and Redemptions - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the
"Shareholder Servicing Agent") (given by such person or persons and in such
manner on behalf of the Shareholder Servicing Agent as the Fund shall have
authorized), the Custodian shall release funds or securities to the
Shareholder Servicing Agent or otherwise apply funds or securities, insofar
as available, for the payment of dividends or other distributions to Fund
shareholders. Upon receipt of proper instructions from the Fund, or upon
receipt of instructions from the Shareholder Servicing Agent (given by such
person or persons and in such manner on behalf of the Shareholder Servicing
Agent as the Fund shall have authorized), the Custodian shall release funds
or securities, insofar as available, to the Shareholder Servicing Agent or
as such Agent shall otherwise instruct for payment to the Fund shareholders
who have delivered to such Agent a request for repurchase or redemption of
their shares of capital stock of the Fund.
S. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund
all forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that
are received by the Custodian, and upon receipt of proper instructions, to
execute and deliver or cause its nominee to execute and deliver such
proxies or other authorizations as may be required. Neither the Custodian
nor its nominee shall vote upon any of such securities or execute any proxy
to vote thereon or give any consent or take any other action with respect
thereto (except as otherwise herein provided) unless ordered to do so by
proper instructions.
T. Bills - Upon receipt of proper instructions, to pay or cause to be
paid, insofar as funds are available for the purpose, bills, statements, or
other obligations of the Fund.
U. Nondiscretionary Details - Without the necessity of express
authorization from the Fund (1) to attend to all nondiscretionary details
in connection with the sale, exchange, substitution, purchase, transfer or
other dealings with securities, funds or other property of the Fund held by
the Custodian except as otherwise directed from time to time by the Board
of Directors of the Fund, and (2) to make payments to itself or others for
minor expenses of handling securities or other similar items relating to
the Custodian's duties under this Agreement, provided that all such
payments shall be accounted for to the Fund.
V. Deposit of Fund Assets in Securities Systems - The Custodian may
deposit and/or maintain securities owned by the Fund in (i) The Depository
Trust Company, (ii) any book-entry system as provided in Subpart O of
Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CRF Part 350, or the
book-entry regulations of federal agencies substantially in the form of
Subpart O, or (iii) any other domestic clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and whose use
the Fund has previously approved in writing (each of the foregoing being
referred to in this Agreement as a "Securities System"). Utilization of a
Securities System shall be in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and regulations, if any,
and subject to the following provisions:
(1) The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian
(provided that any such Agent shall be qualified to act as a
custodian of the Fund pursuant to the Investment Company Act of
1940 and the rules and regulations thereunder), in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian or such Agent in the
Securities System which shall not include any assets of the
Custodian or Agent other than assets held as a fiduciary,
custodian, or otherwise for customers;
(2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund;
(3) The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian or
an Agent as referred to above, and be provided to the Fund at its
request. The Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund in the form of a
written advice or notice and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's transactions in
the Securities System for the account of the Fund on the next
business day;
(4) The Custodian shall provide the Fund with any report obtained by
the Custodian or any Agent as referred to above on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System; and the Custodian and such Agents shall send
to the Fund such reports on their own systems of internal
accounting control as the Fund may reasonably request from time
to time.
(5) At the written request of the Fund, the Custodian will terminate
the use of any such Securities System on behalf of the Fund as
promptly as practicable.
W. Other Transfers - To deliver securities, funds and other property
of the Fund to a Subcustodian or another custodian of the Fund; and, upon
receipt of proper instructions, to make such other disposition of
securities, funds or other property of the Fund in a manner other than or
for purposes other than as enumerated elsewhere in this Agreement, provided
that the instructions relating to such disposition shall include a
statement of the purpose for which the delivery is to be made, the amount
of securities to be delivered and the name of the person or persons to whom
delivery is to be made.
X. Investment Limitations - In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
securities made by or for the Fund, the Custodian may assume unless and
until notified in writing to the contrary that proper instructions received
by it are not in conflict with or in any way contrary to any provisions of
the Fund's Certificate of Incorporation or By-Laws (or comparable
documents) or votes or proceedings of the shareholders or Directors of the
Fund. The Custodian shall in no event be liable to the Fund and shall be
indemnified by the Fund for any violation of any investment limitations to
which the Fund is subject or other limitations with respect to the Fund's
powers to make expenditures, encumber securities, borrow or take similar
actions affecting its portfolio.
Y. Proper Instructions - Proper instructions shall mean a tested
telex from the Fund or a written request, direction, instruction or
certification signed or initialled on behalf of the Fund by one or more
person or persons as the Board of Directors of the Fund shall have from
time to time authorized, provided, however, that no such instructions
directing the delivery of securities or the payment of funds to an
authorized signatory of the Fund shall be signed by such person. Those
persons authorized to give proper instructions may be identified by the
Board of Directors by name, title or position and will include at least one
officer empowered by the Board to name other individuals who are authorized
to give proper instructions on behalf of the Fund. Telephonic or other oral
instructions given by any one of the above persons will be considered
proper instructions if the Custodian reasonably believes them to have been
given by a person authorized to give such instructions with respect to the
transaction involved. Oral instructions will be confirmed by tested telex
or in writing in the manner set forth above but the lack of such
confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral instructions. Proper instructions may relate to
specific transactions or to types or classes of transactions, and may be in
the form of standing instructions.
Proper instructions may include communications effected directly
between electro-mechanical or electronic devices or systems, in addition to
tested telex, provided that the Fund and the Custodian agree in writing to
the use of such device or system.
Z. Segregated Account - The custodian shall upon receipt of Proper
Instructions establish and maintain on its books a segregated account or
accounts for and on behalf of the Fund, into which account or accounts may
be transferred cash and/or securities of the Fund, including securities
maintained by the Custodian pursuant to Section 2V hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers,
Inc. (or any futures commission merchant registered under the Commodity
Exchange Act) relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes
of segregating cash or securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options
thereon purchased or sold by the Fund, (iii) for the purposes of compliance
by the Fund with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies, and (iv) as mutually agreed from time to
time between the Fund and the Custodian.
3. Securities, funds and other property of the Fund may be held by
subcustodians appointed pursuant to the provisions of this Section 3 (a
"Subcustodian"). The Custodian may, at any time and from time to time,
appoint any bank or trust company (meeting the requirements of a custodian
or a foreign custodian under the Investment Company Act of 1940 and the
rules and regulations thereunder) to act as a Subcustodian for the Fund,
provided that the Fund shall have approved in writing (1) any such bank or
trust company and the subcustodian agreement to be entered into between
such bank or trust company and the Custodian, and (2) the Subcustodian's
offices or branches at which the Subcustodian is authorized to hold
securities, cash and other property of the Fund. Upon such approval by the
Fund, the Custodian is authorized on behalf of the Fund to notify each
Subcustodian of its appointment as such. The Custodian may, at any time in
its discretion, remove any bank or trust company that has been appointed as
a Subcustodian.
Those Subcustodians, their offices or branches which the Fund has
approved to date are set forth on Appendix A hereto. Such Appendix shall
be amended from time to time as Subcustodians, branches or offices are
changed, added or deleted. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to be
held at a location not listed on Appendix A, in order that there shall be
sufficient time for the Fund to give the approval required by the preceding
paragraph and for the Custodian to put the appropriate arrangements in
place with such Subcustodian pursuant to such subcustodian agreement.
If the Fund shall have invested in a security to be held in a location
before the foregoing procedures have been completed, such security shall be
held by such agent as the Custodian may appoint unless and until the Fund
shall instruct the Custodian to move the security into the possessiosn of
the Custodian or a Subcustodian. In any event, the Custodian shall be
liable to the Fund for the actions of such agent if and only to the extent
the Custodian shall have recovered from such agent for any damages caused
the Fund by such agent.
With respect to the securities and funds held by a Subcustodian,
either directly or indirectly, including demand and interest bearing
deposits, currencies or other deposits and foreign exchange contracts as
referred to in Sections 2M, 2N or 2O, the Custodian shall be liable to the
Fund if and only to the extent that such Subcustodian is liable to the
Custodian and the Custodian recovers under the applicable subcustodian
agreement. The Custodian shall nevertheless be liable to the Fund for its
own negligence in transmitting any instructions received by it from the
Fund and for its own negligence in connection with the delivery of any
securities or funds held by it to any such Subcustodian.
In the event that any Subcustodian appointed pursuant to the
provisions of this Section 3 fails to perform any of its obligations under
the terms and conditions of the applicable subcustodian agreement, the
Custodian shall use its best efforts to cause such Subcustodian to perform
such obligations. In the event that the Custodian is unable to cause such
Subcustodian to perform fully its obligations thereunder, the Custodian
shall forthwith upon the Fund's request terminate such Subcustodian and, if
necessary or desirable, appoint another subcustodian in accordance with the
provisions of this Section 3. At the election of the Fund, it shall have
the right to enforce, to the extent permitted by the subcustodian agreement
and applicable law, the Custodian's rights against any such Subcustodian
for loss or damage caused the Fund by such Subcustodian.
At the written request of the Fund, the Custodian will terminate any
Subcustodian appointed pursuant to the provisions of this Section 3 in
accordance with the termination provisions under the applicable
subcustodian agreement. The Custodian will not amend any subcustodian
agreement or agree to change or permit any changes thereunder except upon
the prior written approval of the Fund.
In the event the Custodian intends to make any payment to a
Subcustodian under the indemnification provisions of any subcustodian
agreement, the Custodian shall give the Fund written notice of such
intention no less than thirty (30) days prior to the date such payment is
to be made. The Fund shall be obligated promptly to reimburse the
Custodian the amount of such payment, unless the Fund shall, within thirty
(30) days of receipt of the Custodian's notice, object in writing to such
payment to the Subcustodian or to reimbursement of the Custodian (i)
because the fund disputes the right of the Subcustodian to be so
indemnified or (ii) because the Fund believes that the Custodian was or
might have been responsible by reason of the Custodian's negligence or
misconduct for the event or occurance giving rise to the Subcustodian's
demand for indemnification. In the event the Fund, at the direction of its
Board of Directors or any Executive Committee thereof, shall give written
notice of such objection and the reasons therefor, the Custodian may
nevertheless make such payment to the Subcustodian, but without prejudice
to the Fund's right to refuse to reimburse the Custodian if the Fund's
objection under clause (i) or (ii) above shall be upheld in an appropriate
judicial or other proceeding; or in the alternative, the Custodian may
refuse to pay the indemnification demanded by the Subcustodian and the
Custodian shall in such event defend against any judicial or other
proceeding brought against the Custodian by the Subcustodian to obtain such
indemnification. Such defense shall be conducted by counsel reasonably
satisfactory to both the Fund and the Custodian. The Fund shall be
entitled to participate in any such proceeding with separate counsel of its
own choice if it believes its position might otherwise be compromised and,
if the Fund or the Custodian believes there may be a conflict in the
respective positions of the Fund and the Custodian, then each may retain
separate counsel of its own choice. The Fund shall bear the costs and
expenses of defending against the Subcustodian's claim, and the Fund shall
indemnify the Custodian and hold it harmless from all claims, liabilities,
judgments, costs and expenses (including counsel fees) and settlements of
such claim (provided that such settlement shall have been effected with the
Fund's written consent) incurred or assesssed against the Custodian.
Notwithstanding the foregoing, if it shall be determined in an appropriate
proceeding, including in a proceeding as aforesaid brought by the
Subcustodian, that, although the Subcustodian was entitled to
indemnification the Custodian was not entitled to reimbursement by the Fund
because the Custodian was responsible by reason of its negligence or
misconduct for the occurance or event giving rise to the Subcustodian's
right to indemnification, then in such event the Fund shall not be
obligated to indemnify the Custodian as aforesaid and the Custodian shall
reimburse the Fund for any amounts paid by the Fund to Custodian in respect
of the costs and expenses of defending against the Subcustodian's claim.
4. The Custodian may assist generally in the preparation of reports
to Fund shareholders, regulatory authorities and others, audits of
accounts, and other ministerial matters of like nature.
5. The Fund hereby also appoints the Custodian as its financial
agent. With respect to the appointment as financial agent, the Custodian
shall have and perform the following powers and duties:
A. Records - To create, maintain and retain such records relating to
its activities and obligations under this Agreement as are required under
the Investment Company Act of 1940 and the rules and regulations thereunder
(including Section 31 thereof and Rules 31a-1 and 31a-2 thereunder) and
under applicable Federal and State tax laws and administrative regulations.
All such records will be the property of the Fund and in the event of
termination of this Agreement shall be delivered to the successor
custodian.
B. Accounts - To keep books of account and render statements,
including interim monthly and complete quarterly financial statements, or
copies thereof, from time to time as reasonably requested by proper
instructions.
C. Access to Records - Subject to security requirements of the
Custodian applicable to its own employees having access to similar records
within the Custodian and such regulations as may be reasonably imposed by
the Custodian, the books and records maintained by the Custodian pursuant
to Sections 5A and 5B shall be open to inspection and audit at reasonable
times by officers of, attorneys for, and auditors employed by, the Fund.
D. Calculation of Net Asset Value - To compute and determine the net
asset value per share of capital stock of the Fund as of the close of
business on the New York Stock Exchange on each day on which such Exchange
is open, unless otherwise directed by proper instructions. Such
computation and determination shall be made in accordance with (1) the
provisions of the Fund's Certificate of Incorporation or By-Laws of the
Fund, as they may from time to time be amended and delivered to the
Custodian, (2) the votes of the Board of Directors of the Fund at the time
in force and applicable, as they may from time to time be delivered to the
Custodian, and (3) proper instructions from such officers of the Fund or
other persons as are from time to time authorized by the Board of Directors
of the Fund to give instructions with respect to computation and
determination of the net asset value. On each day that the Custodian shall
compute the net asset value per share of the Fund, the Custodian shall
provide the Fund with written reports which permit the Fund to verify that
portfolio transactions have been recorded in accordance with the Fund's
instructions.
In computing the net asset value, the Custodian may rely upon any
information furnished by proper instructions, including without limitation
any information (1) as to accrual of liabilities of the Fund and as to
liabilities of the Fund not appearing on the books of account kept by the
custodian, (2) as to the existence, status and proper treatment of
reserves, if any, authorized by the fund, (3) as to the sources of
quotations to be used in computing the net asset value, including those
listed in Appendix B, (4) as to the fair value to be assigned to any
securities or other property for which price quotations are not readily
avilable, and (5) as to the sources of information with respect to
"corporate actions" affecting portfolio securities of the fund, including
those listed in Appendix B. (Information as to "corporate actions" shall
include information as to dividends, distributions, stock splits, stock
dividends, rights offerings, conversions, exchanges, recapitalizations,
mergers, redemptions, calls, maturity dates and similar transactions,
including the ex- and record dates and the amounts or other terms thereof.)
In like manner, the Custodian shall compute and determine the net
asset value as of such other times as the Board of Directors of the Fund
from time to time may reasonably request.
Notwithstanding any other provisions of this Agreement, including
Section 6C, the following provisions shall apply with respect to the
Custodian's foregoing responsibilities in this Section 5D: The Custodian
shall be held to the exercise of reasonable care in computing and
determining net asset value as provided in this Section 5D, but shall not
be held accountable or liable for any losses, damages or expenses the Fund
or any shareholder or former shareholder of the Fund may suffer or incur
arising from or based upon errors or delays in the determination of such
net asset value unless such error or delay was due to the Custodian's
negligence, gross negligence or reckless or willful misconduct in
determination of such net asset value. (The parties hereto acknowledge,
however, that the Custodian's causing an error or delay in the
determination of net asset value may, but does not in and of itself,
constitute negligence, gross negligence or reckless or willful misconduct.)
In no event shall the Custodian be liable or responsible to the Fund, any
present or former shareholder of the fund or any other party for any error
or delay which continued or was undetected after the date of an audit
performed by the certified public accountants employed by the Fund if, in
the exercise of reasonable care in accordance with generally accepted
accounting standards, such accountants should have become aware of such
error or delay in the course of performing such audit. The Custodian's
liability for any such negligence, gross negligence or reckless or willful
misconduct which results in an error in determination of such net asset
value shall be limited to the direct, out-of-pocket loss the Fund,
shareholder or former shareholder shall actually incur, measured by the
difference between the actual and the erroneously computed net asset value,
and any expenses the fund shall incur in connection with correcting the
records of the Fund affected by such error (including charges made by the
Fund's registrar and transfer agent for making such corrections) or
communicating with shareholders or former shareholders of the Fund affected
by such error.
Without limiting the foregoing, the Custodian shall not be held
accountable or liable to the Fund, any shareholder or former shareholder
thereof or any other person for any delays or losses, damages or expenses
any of them may suffer or incur resulting from (1) the Custodian's failure
to receive timely and suitable notification concerning quotations or
corporate actions relating to or affecting portfolio securities of the fund
or (2) any errors in the computation of the net asset value based upon or
arising out of quotations or information as to corporate actions if
received by the Custodian either (i) from a source which the Custodian was
authorized pursuant to the second paragraph of this Section 5D to rely
upon, or (ii) from a source which in the Custodian's reasonable judgment
was as reliable a source for such quotations or information as the sources
authorized pursuant to that paragraph. Nevertheless, the Custodian will
use its best judgment in determining whether to verify through other
sources any information it has received as to quotations or corporate
actions if the Custodian has reason to believe that any such information
might be incorrect.
In the event of any error or delay in the determination of such net
asset value for which the Custodian may be liable, the Fund and the
Custodian will consult and make good faith efforts to reach agreement on
what actions should be taken in order to mitigate any loss suffered by the
Fund or its present or former shareholders, in order that the custodian's
exposure to liability shall be reduced to the extent possible after taking
into account all relevant factors and alternatives. Such actions might
include the Fund or the custodian taking reasonable steps to collect from
any shareholder or former shareholder who has received any overpayment upon
redemption of shares such overpaid amount or to collect from any
shareholder who has underpaid upon a purchase of shares the amount of such
underpayment or to reduce the number of shares issued to such shareholder.
It is understood that in attempting to reach agreement on the actions to be
taken or the amount of the loss which should appropriately be borne by the
Custodian, the Fund and the Custodian will consider such relevant factors
as the amount of the loss involved, the Fund's desire to avoid loss of
shareholder good will, the fact that other persons or entitles could have
been reasonably expected to have detected the error sooner than the time it
was actually discovered, the appropriateness of limiting or eliminating the
benefit which shareholders or former shareholders might have obtained by
reason of the error, and the possibility that other parties providing
services to the fund might be induced to absorb a portion of the loss
incurred.
E. Disbursements - Upon receipt of proper instructions, to pay or
cause to be paid, insofar as funds are avilable for the purpose, bills,
statements and other obligations of the Fund (including but not limited to
interest charges, taxes, advisory fees, compensation to Fund officers and
employees, and other operating expenses of the Fund).
6. A. The Custodian shall not be liable for any action taken or
omitted in reliance upon proper instructions reasonably believed by it to
be genuine or upon any other written notice, request, direction,
instruction, certificate or other instrument believed by it to be genuine
and signed by the proper party or parties.
The Secretary or Assistant Secretary of the Fund shall certify to the
custodian the names, signatures and scope of authority of all persons
authorized to give proper instructions or any other such notice, request,
direction, instructions, certificate or instrument on behalf of the Fund,
the names and signatures of the officers of the Fund, the name and address
of the Shareholder Servicing Agent, and any resolutions, votes,
instructions or directions of the Fund's Board of Directors or
shareholders. Such certificate may be accepted and relied upon by the
Custodian as conclusive evidence of the facts set forth therein and may be
considered in full force and effect until receipt of a similar certificate
to the contrary.
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement.
The Custodian shall be entitled, at the expense of the Fund, to
receive and act upon advice of counsel (who may be counsel for the Fund) on
all matters, and the Custodian shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
B. With respect to the portfolio securities, cash and other property
of the Fund held by a Securities System, the Custodian shall be liable to
the Fund for any loss or damage to the Fund resulting from use of the
Securities System if caused by any negligence, misfeasance or misconduct of
the Custodian or any of its agents or of any of its or their employees or
from any failure of the Custodian or any such agent to enforce effectively
such rights as it may have against the Securities System. At the election
of the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of any such loss
or damage if and to the extent that the Fund has not been made whole for
any such loss or damage. The Custodian shall be subject to the same
responsibility with respect to all securities of the Fund, and all cash,
stock dividends, rights and items of like nature to which the Fund is
entitlted, held or received by such Securities System, as if the same where
held or received by the Custodian at its own office.
C. Except as may otherwise be set forth in this Agreement with
respect to particular matters, the Custodian shall be held only to the
exercise of reasonable care and diligence in carrying out the provisions of
this Agreement, provided that the Custodian shall not thereby be required
to take any action which is in contravention of any applicable law. The
Fund agrees to indemnify and hold harmless the Custodian and its nominees
from all claims and liabilities (including counsel fees) incurred or
assessed against it or its nominees in connection with the performance of
this Agreement, except such as may arise from its or its nominee's breach
of the relevant standard of conduct set forth in this Agreement. Without
limiting the foregoing indemnification obligation of the Fund, the Fund
agrees to indemnify the Custodian and its nominees against any liability
the Custodian or such nominee may incur by reason of taxes assessed to the
Custodian or such nominee or other costs, liability or expense incurred by
the Custodian or such nominee resulting directly or indirectly from the
fact that portfolio securities or other property of the Fund are registered
in the name of the Custodian or such nominee.
It is also understood that the Custodian shall not be liable for any
loss involving any securities, currencies, deposits or other property of
the Fund, whether maintained by it, a Subcustodian, an agent of the
Custodian or a Subcustodian, a Securities System or a Banking Institution,
or a loss arising from a foreign currency transaction or contract,
resulting from a Sovereign Risk. A "Sovereign Risk" shall mean
nationalization, expropriation, devaluation, revaluation, confiscation,
seizure, cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition or
enforcement by any such governmental authority of currency restrictions,
exchange controls, taxes, levies or other charges affecting the Fund's
property; or acts of war, terrorism, insurrection or revolution; or any
other similar act or event beyond the Custodian's control.
D. The Custodian shall be entitled to receive reimbursement from the
Fund on demand, in the manner provided in Section 7, for its cash
disbursements, expenses and charges (including the fees and expenses of any
Subcustodian or any Agent) in connection with this Agreement, but excluding
salaries and usual overhead expenses.
E. The Custodian may at any time or times in its discretion appoint
(and may at any time remove) any other bank or trust company as its agent
(an "Agent") to carry out such of the provisions of this Agreement as the
Custodian may from time to time direct, provided, however, that the
appointment of such Agent (other than an Agent appointed pursuant to the
third paragraph of Section 3) shall not relieve the Custodian of any of its
responsibilities under this Agreement.
F. Upon request, the Fund shall deliver to the Custodian such
proxies, power of attorney or other instruments as may be reasonable and
necessary or desirable in connection with the performance by the Custodian
or any Subcustodian of their respective obligations under this Agreement or
any applicable subcustodian agreement.
7. The Fund shall pay the Custodian a custody fee based on such fee
schedule as may from time to time be agreed upon in writing by the
Custodian and the Fund. Such fee, together with all amounts for which the
Custodian is to be reimbursed in accordance with Section 6D, shall be
billed to the Fund in such a manner as to permit payment either by a direct
cash payment to the Custodian or by placing Fund portfolio transactions
with the Custodian resulting in an agreed-upon amount of commissions being
paid to the Custodian within an agreed-upon period of time.
8. This Agreement shall continue in full force and effect until
terminated by either party by an instrument in writing delivered or
mailed,' postage prepaid, to the other party, such termination to take
effect not sooner than sixty (60) days after the date of such delivery or
mailing. In the event of termination the Custodian shall be entitled to
receive prior to delivery of the securities, funds and other property held
by it all accrued fees and unreimbursed expenses the payment of which is
contemplated by Sections 6D and 7, upon receipt by the Fund of a statement
setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed
that the funds and securities owned by the Fund and held by the Custodian
or any Subcustodian shall be delivered to the successor custodian, and the
Custodian agrees to cooperate with the Fund in execution of documents and
performance of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
9. This Agreement constitutes the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof. No
provision of this Agreement may be amended or terminated except by a
statement in writing signed by the party against which enforcement of the
amendment or termination is sought.
In connection with the operation of this Agreement, the Custodian and
the Fund may agree in writing from time to time on such provisions
interpretative of or in addition to the provisions of this Agreement as may
in their joint opinion be consistent with the general tenor of this
Agreement. No interpretative or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this
Agreement.
10. This instrument is executed and delivered in The Commonwealth of
Massachusetts and shall be governed by and construed according to the laws
of said Commonwealth.
11. Notices and other writings delivered or mailed postage prepaid to
the fund addressed to the Fund at 175 Federal Street, Boston, Massachusetts
02110 or to such other address as the Fund may have designated to the
Custodian in writing, or to the Custodian at 40 Water Street, Boston,
Massachusetts 02109, Attention: Manager, Securities Department, or to such
other address as the Custodian may have designated to the Fund in writing,
shall be deemed to have been properly delivered or given hereunder to the
respective addressee.
12. This Agreement shall be binding on and shall inure to the benefit
of the Fund and the Custodian and their respective successors and assigns,
provided that neither party hereto may assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the
other party.
13. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original. This Agreement shall become
effective when one or more counterparts have been signed and delivered by
each of the parties.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and behalf on the day and year first above written.
SCUDDER EMERGING MARKETS BROWN BROTHERS HARRIMAN & CO.
INCOME FUND
By per pro
APPENDIX B
SCUDDER EMERGING MARKETS INCOME FUND
THE FOLLOWING AUTHORIZED SOURCES ARE TO BE USED FOR PRICING AND
FOREIGN EXCHANGE QUOTATIONS, CORPORATE ACTIONS, DIVIDENDS AND
RIGHTS OFFERINGS:
AUTHORIZED SOURCES
------------------
QUOTRON
REUTERS
INTERACTIVE DATA CORPORATION
VALORINFORM (GENEVA)
TELEKURS
SUBSCRIPTION BANKS
FUND MANAGERS
EXTEL (LONDON)
REPUTABLE FOREIGN BROKERS
APPROVED:
DATE
The Scudder Funds
Account Application
Mail this application to:
The Scudder Funds
P.O. Box 2291
Boston, MA 02107-2291
STEP 1 SELECT YOUR SCUDDER FUND
Invest in any Scudder Fund with an initial investment of $1,000 or
more per fund. Be sure to read the prospectus before you invest. You
may request an additional prospectus or an IRA application by calling
1-800-225-2470.
Name of Fund (See below for complete fund name.)
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Investment Amount
$__________________________
__________________________
__________________________
Total $___________________
___ By check (Payable to "The Scudder Funds")
or
___ By wire. Call 1-800-225-5163 for instructions.
___ Reinvest dividends
or
___ Mail dividends
or
___ Electronically transfer dividends to my bank, which is an
Automated Clearing House (ACH) member.
<TABLE>
<CAPTION>
FUND NAMES (Please check the box for the funds you selected above.)
Funds Funds Funds
- ----- ----- -----
<C> <C> <C>
Money Market Funds ___ Managed Municipal Bonds Growth Funds
___ Cash Investment Trust ___ Medium Term Tax Free Fund ___ Capital Growth Fund
___ U.S. Treasury Money Fund ___ Tax Free Money Fund ___ Development Fund
Income Funds ___ California Tax Free Fund ___ Global Fund
___ Emerging Markets Income Fund ___ California Tax Free Money Fund ___ Global Small Company Fund
___ GNMA Fund ___ Mass. Limited Term Tax Free Fund ___ Gold Fund
___ Income Fund ___ Massachusetts Tax Free Fund ___ International Fund
___ International Bond Fund ___ New York Tax Free Fund ___ Latin America Fund
___ Short Term Bond Fund ___ New York Tax Free Money Fund ___ Pacific Opportunities Fund
___ Short Term Global Income Fund ___ Ohio Tax Free Fund ___ Quality Growth Fund
___ Zero Coupon 2000 Fund ___ Pennsylvania Tax Free Fund ___ The Japan Fund
Tax Free Funds Growth & Income Funds ___ Value Fund
___ High Yield Tax Free Fund ___ Balanced Fund
___ Limited Term Tax Free Fund ___ Growth and Income Fund
</TABLE>
For Scudder use only.
This portion is used to expedite the processing of your application.
STEP 2 REGISTER YOUR ACCOUNT (Choose one)
___ Individual Account
Name
____________________________________________
Social Security Number-Required
____________________________________________
___ Joint Account
Joint ownership means joint tenants with rights of
survivorship, and not tenants in common, unless otherwise
specified.
Name
____________________________________________
____________________________________________
Social Security Number-Required
____________________________________________
___ Custodial Account (Gift to Minors)
One application is required for each minor.
Custodian's Name (only one)
____________________________________________
Minor's Name
____________________________________________
Minor's Social Security Number - Required
____________________________________________
Minor's State of Residence
____________________________________________
___ Trust, Corporation, Business, or Other
We require a corporate resolution form for corporations
requesting telephone redemption. Call 1-800-225-5163.
Trust/Corporation Name
____________________________________________
____________________________________________
Trustee's Name
____________________________________________
____________________________________________
Trust Date
____________________________________________
Tax ID Number - Required
____________________________________________
STEP 3 PROVIDE YOUR ADDRESS AND OTHER INFORMATION
Address
____________________________________________
____________________________________________
____________________________________________
___ U.S. Citizen
___ Resident Alien
___ Nonresident Alien
If nonresident alien, country of residence for tax purposes
____________________________________________
Occupation _________________________________
Employer ___________________________________
Daytime Phone (___)_________________________
STEP 4 SIGN YOUR NAME (Be sure to read the certification and
authorization section)
Please be sure to sign your name(s)exactly as in Step 2 above. Check
one:
___ Owner
___ Trustee
___ Custodian
___ Other
Signature ______________________________Date __________________
Signature ______________________________Date __________________
Joint Owner/Trustee
STEP 5 SIGN UP FOR CHECKWRITING (An optional service)
Complete the signature card to the right for our free, unlimited
checkwriting service. This service, which is available for the seven
funds listed, lets you write checks in amounts as low as $100 against
your fund holdings. Each check written continues to earn income in the
fund until it clears your account. Your checkbook will be mailed
promptly.
By completing the signature card, you agree to the pertinent rules and
regulations of the State Street Bank and Trust Company. These rules
may be amended from time to time.
Note: Every person registered on the account MUST sign the signature
card, even if only one person will be signing the checks.
STEP 6 ESTABLISH YOUR ACCOUNT FEATURES
You may choose one or all of the following options by checking the
appropriate box and providing the information requested.
Please attach a voided check below for these services.
A. ___ Automatic Investment Plan (AIP): Add to your Scudder Fund
automatically and regularly. Complete below and we'll deduct money
from your bank checking account to purchase additional shares for you.
This Plan involves continuous investment, regardless of share-price
levels, and does not assure a profit or protect against loss in down
markets. (Consider your ability to maintain this Plan during such
times.) Your bank must be an Automated Clearing House (ACH) member.
Investments are to be drawn in the amount of $______ (minimum $50)
around the _______ day of each month, beginning in ____ 199__. This
money should be invested in the Scudder _____________________ Fund.
B. ___ Telephone Redemption to Your Bank: You may call to redeem
Scudder Fund shares and have the proceeds sent to your bank account.
C. ___ AutoBuy/AutoSell: You may call to purchase ($250 min., $50,000
max.) or redeem shares of any Scudder Fund and have your checking
account debited or credited directly. Your bank must be an ACH member.
(GRAPHIC OF A CHECK IS LOCATED HERE TO INDICATE WHERE A VOIDED CHECK
IS SUPPOSED TO BE TAPED)
AUTOMATIC BENEFITS
A. Scudder Automated Information Line (SAIL(tm))
With SAIL you can access information on your Scudder Fund account
24 hours a day, including yields, prices, total returns, account
balances, and transaction information. You can also use SAIL to
make exchanges and redemptions. Call 1-800-343-2890 and follow
the instructions.
B. Telephone Exchange and Redemption
You may exchange among your Scudder Funds or have the proceeds
(up to $50,000) sent directly to your address of record (the
address on your account). Call 1-800-225-5163 from 8:00 a.m. to
6:00 p.m., Monday through Friday, and a Scudder service
representative will be happy to help you.
SIGNATURE CARD
Please indicate the fund(s) for which you are requesting checkwriting
service:
Scudder Cash Investment Trust Scudder Short Term Bond Fund
Scudder CA Tax Free Money Fund Scudder Medium Term Tax Free Fund
Scudder U.S. Treasury Money Fund Scudder Limited Term Tax Free Fund
Scudder NY Tax Free Money Fund Scudder Mass. Limited Term Tax Free Fund
Scudder Tax Free Money Fund
Account Owners (exactly as in Step 2)
Your Name(s)___________________________ ___________________________
Your Signatures (exactly as in Step 2)
1. ___________________________
2. ___________________________
How many signatures are required to sign each check?
___ One ___ All
DID YOU REMEMBER TO...
___ Select your fund and fill in the amount invested?
___ Enclose your check made out to the "Scudder Funds"?
___ Include your social security number in Step 2?
___ Sign the application in Step 4 exactly as registered?
___ Attach a voided check in Step 6?
___ Sign the checkwriting card, if applicable?
CERTIFICATION AND AUTHORIZATION
I certify that I have the authority and legal capacity to purchase
shares of the Scudder Funds and to establish and use any related
privileges. I have received and read the prospectus, and understand
the investment objectives and policies, of each Scudder Fund I have
selected. I agree to be bound by the terms of the prospectus and the
statement of additional information, as each may be amended from time
to time, of each Fund I have selected.
I authorize the Scudder Funds, Scudder Service Corporation or any
successor transfer agent (the "Transfer Agent"), or their affiliates,
to act on any instructions (including telephone instructions)
reasonably believed to be genuine for any of the services described in
this Application (both services that I have requested, such as the
Automatic Investment Plan, Telephone Redemption to Your Bank and
Deposit of Dividends and Capital Gains to Your Bank services, and, if
services are automatic, such as the Scudder Automated Information Line
(SAIL) and Telephone Exchange and Redemption services, services that I
have not declined by notifying the Transfer Agent in writing). The
Scudder Funds employ procedures that are designed to give reasonable
assurance that instructions communicated by telephone are genuine.
These procedures include verifying the identity of each telephone
caller, recording all telephone calls and sending written
confirmations of transactions initiated by telephone. To the extent
that a Scudder Fund does not follow these procedures, it may be held
liable for losses due to unauthorized or fraudulent telephone
instructions. I agree that neither any Scudder Fund, the Transfer
Agent, Scudder Investor Services, nor any of their affiliates or
agents will be held liable for acting on telephone instructions
reasonably believed to be genuine.
I understand that any of the telephone services described in this
Application may be modified, interrupted, suspended or terminated at
any time, without notice.
I certify under penalties of perjury that:
(1) the social security number or tax identification number shown
above in Step 2 is correct and may be used for an account opened for
me by the Scudder Family of Funds; and
(2) I am not subject to backup withholding either because (a) I am an
"exempt foreign person," as defined below, or, (b) if I am not an
"exempt foreign person," the Internal Revenue Service (the "IRS") has
not notified me that I am subject to backup withholding as a result of
failure to report all interest or dividends, or the IRS has notified
me that I am no longer subject to backup withholding.
Cross out item (2) if you are currently subject to backup withholding.
An "exempt foreign person" is a person who is not a citizen or
resident of the United States (or, if married to a U.S. citizen, has
not elected to be treated as a U.S. resident) nor a U.S. corporation,
partnership, estate or trust, and who is not and does not reasonably
expect to be engaged in a U.S. trade or business with respect to which
any gain derived during the calendar year by the account now
established is effectively connected and, in the case of an
individual, has not and reasonably expects not to be present in the
United States for 183 days or more during the current calendar year.
I understand that the terms of this Certifications and Authorizations
section apply to any Scudder Fund investment I make now or in the
future and supersede the terms contained in the same or similar
section of any prior application I have signed. The certifications and
authorizations contained in this section apply to each person who
signs this Application.
I understand that I may choose to receive capital gains distributions
by mail. (Please call 1-800-225-2470 for details.) If I do not choose
this option, any capital gains distribution will be used to purchase
additional shares in my Fund account.
When a check is presented on the authorized signer's(s') personal
checking account established by State Street Bank and Trust Company
("Bank") for payment, the Bank will present the check to the
designated Fund as authority to redeem a sufficient number of shares
in the authorized signer's(s') shareholder account to cover the amount
of the check. The Fund is hereby authorized and directed to accept and
act upon checks presented to it by the Bank and to redeem a sufficient
number of shares for which certificates have not been issued in the
authorized signer's(s') shareholder account and forward the proceeds
of such redemption to the Bank. The authorized signers understand and
agree that shares of the Fund that have been purchased by check and
have been on the books of the Fund for less than seven (7) days will
not be redeemed; checks written for amounts that include such shares
will be returned marked "Uncollected Funds." The authorized signers
further understand and agree that the designated Fund and/or its
agents will not be liable for any loss, expense, or cost arising out
of check redemption. The designated Fund and the Bank reserve the
right to change, modify, or terminate this checking account privilege
at any time.
February 8, 1995
Scudder Global Fund, Inc.
345 Park Avenue
New York, New York 10154
Re: Short Term Global Income Fund
Gentlemen:
Scudder Global Fund, Inc. ("Scudder") is a corporation organized under
the laws of the State of Maryland on May 15, 1986, having its principal
place of business in New York, New York. Scudder has five authorized
series of stock, the Global Fund series, the International Bond Fund
series, the Short Term Global Income Fund series, the Global Small Company
Fund series, and the Emerging Markets Income Fund series. The Short Term
Global Income Fund series consists of three hundred million (300,000,000)
authorized shares of capital stock, with a par value of One Cent ($0.01)
per share.
We further understand that, pursuant to the provisions of Rule 24e-2,
you are about to file with the Securities and Exchange Commission Post-
Effective Amendment No. 23 to your registration statement on Form N-1 for
the purpose of registering 41,186,200 shares of capital stock of Scudder's
Short Term Global Income Fund series (the "Shares") under the Securities
Act of 1933, as amended (the "Securities Act"). We further understand that
of the 300,000,000 shares in the Short Term Global Income Fund series, as
of October 31, 1994, 51,959,978 shares were outstanding and held by the
public and 41,158,185 shares had been issued, redeemed and were being held
for reinsurance.
We have examined original or copies, certified or otherwise identified
to our satisfaction, of the Charter, By-Laws, as amended, and records of
corporate proceedings of Scudder, and such affidavits and advices from
officers of Scudder or from public officials, as we have deemed necessary
or appropriate for the purpose of this opinion.
We are of the opinion that Scudder may legally and validly issue and
sell the Shares from time to time upon receipt by Scudder of cash
consideration for each Share in an amount not less than the net asset value
per share of Scudder's Short Term Global Income Fund series, determined in
accordance with the Charter, Bylaws and policies of the Board of Directors.
We are further of the opinion that when sold as herein provided, such
Shares will be legally issued, fully paid and non-assessable. In rendering
the foregoing opinions we have assumed that at no time prior to the date
when all of the Shares are issued will the existing corporate authorization
to issue the Shares be amended, repealed or revoked or the total number of
the issued shares of capital stock of the Short Term Global Income Fund
series exceed 300,000,000, and that at all times the net asset value per
share of the Short Term Global Income Fund series will exceed One Cent
($0.01).
We express no opinion as to compliance with the Securities Act, the
Investment Company Act of 1940 or the securities laws of any state with
respect to the issuance of the Shares.
We consent to your filing this opinion with the Securities and
Exchange Commission in connection with the Post-Effective Amendment No. 23
to the registration statement on Form N-1 which you are about to file
pursuant to the Securities Act.
Sincerely,
/s/Ober, Kaler, Grimes & Shriver
a professional corporation
GWW/TSS
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 23 to the Registration Statement of Scudder Global Fund, Inc. on Form N-
1A, of our reports dated December 12, 1994, December 21, 1994, and December
12, 1994, on our audits of the financial statements and financial
highlights of Scudder Global Small Company Fund, Scudder Short Term Global
Income Fund, and Scudder Emerging Markets Income Fund, respectively, which
reports are included in the respective October 31, 1994 Annual Reports to
Shareholders, which are incorporated by reference in the Registration
Statement.
We also consent to the reference to our Firm under the caption, "Experts."
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 13, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Scudder Global Small Company Fund Annual Report for the fiscal
year ended October 31, 1994 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> Scudder Global Small Company Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 231,130,827
<INVESTMENTS-AT-VALUE> 263,172,746
<RECEIVABLES> 1,479,264
<ASSETS-OTHER> 159,542
<OTHER-ITEMS-ASSETS> 25,589,877
<TOTAL-ASSETS> 290,401,429
<PAYABLE-FOR-SECURITIES> 5,267,567
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,139,752
<TOTAL-LIABILITIES> 34,407,319
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 226,900,147
<SHARES-COMMON-STOCK> 15,734,564
<SHARES-COMMON-PRIOR> 12,238,526
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,776,624)
<ACCUMULATED-NET-GAINS> 1,016,007
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,854,580
<NET-ASSETS> 255,994,110
<DIVIDEND-INCOME> 2,373,706
<INTEREST-INCOME> 1,055,244
<OTHER-INCOME> 0
<EXPENSES-NET> 4,097,562
<NET-INVESTMENT-INCOME> (668,612)
<REALIZED-GAINS-CURRENT> 1,326,728
<APPREC-INCREASE-CURRENT> 3,962,657
<NET-CHANGE-FROM-OPS> 4,620,773
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,271,808
<DISTRIBUTIONS-OF-GAINS> 1,947,264
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,300,657
<NUMBER-OF-SHARES-REDEEMED> 7,037,475
<SHARES-REINVESTED> 232,856
<NET-CHANGE-IN-ASSETS> 58,476,538
<ACCUMULATED-NII-PRIOR> 483,473
<ACCUMULATED-GAINS-PRIOR> 1,691,215
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,658,185
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,258,290
<AVERAGE-NET-ASSETS> 241,613
<PER-SHARE-NAV-BEGIN> 16.14
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> .48
<PER-SHARE-DIVIDEND> (.18)
<PER-SHARE-DISTRIBUTIONS> (.15)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.27
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Scudder Short Term Global Income Fund Annual Report for the fiscal year
ended October 31, 1994 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER>4
<NAME> Scudder Short Term Global Income Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 560,181,630
<INVESTMENTS-AT-VALUE> 559,539,077
<RECEIVABLES> 50,954,443
<ASSETS-OTHER> 1,959,633
<OTHER-ITEMS-ASSETS> 477,163,442
<TOTAL-ASSETS> 1,089,616,595
<PAYABLE-FOR-SECURITIES> 29,471,820
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 500,215,552
<TOTAL-LIABILITIES> 529,687,377
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 576,001,783
<SHARES-COMMON-STOCK> 51,959,978
<SHARES-COMMON-PRIOR> 89,107,607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,071,829)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (11,000,736)
<NET-ASSETS> 559,929,218
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 67,681,085
<OTHER-INCOME> 0
<EXPENSES-NET> 7,727,211
<NET-INVESTMENT-INCOME> 59,953,874
<REALIZED-GAINS-CURRENT> (52,947,602)
<APPREC-INCREASE-CURRENT> (12,317,902)
<NET-CHANGE-FROM-OPS> (5,311,630)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,254,033
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (58,437,746)
<NUMBER-OF-SHARES-SOLD> 18,796,142
<NUMBER-OF-SHARES-REDEEMED> 59,954,327
<SHARES-REINVESTED> 4,010,556
<NET-CHANGE-IN-ASSETS> (481,008,237)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (39,491,534)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,801,194
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,903,329
<AVERAGE-NET-ASSETS> 772,832,420
<PER-SHARE-NAV-BEGIN> 11.68
<PER-SHARE-NII> .87
<PER-SHARE-GAIN-APPREC> (.90)
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .85
<PER-SHARE-NAV-END> 10.78
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Scudder Emerging Markets Income Fund Annual Report for the fiscal year
ended October 31, 1994 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> Scudder Emerging Markets Income Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> DEC-31-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 98,382,183
<INVESTMENTS-AT-VALUE> 96,932,599
<RECEIVABLES> 8,738,482
<ASSETS-OTHER> 64,155
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105,735,236
<PAYABLE-FOR-SECURITIES> 10,512,960
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 470,3301
<TOTAL-LIABILITIES> 10,983,290
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,180,123
<SHARES-COMMON-STOCK> 8,577,789
<SHARES-COMMON-PRIOR> 100
<ACCUMULATED-NII-CURRENT> 743,590
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,698,606)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,473,161)
<NET-ASSETS> 94,751,946
<DIVIDEND-INCOME> 11,993
<INTEREST-INCOME> 5,307,471
<OTHER-INCOME> 0
<EXPENSES-NET> 748,058
<NET-INVESTMENT-INCOME> 4,571,406
<REALIZED-GAINS-CURRENT> (2,784,125)
<APPREC-INCREASE-CURRENT> (1,473,161)
<NET-CHANGE-FROM-OPS> 314,120
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,742,297
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,083,394
<NUMBER-OF-SHARES-REDEEMED> 2,800,028
<SHARES-REINVESTED> 294,323
<NET-CHANGE-IN-ASSETS> 94,750,746
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 494,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,112,374
<AVERAGE-NET-ASSETS> 60,270,067
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> (1.04)
<PER-SHARE-DIVIDEND> .51
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.05
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
