SCUDDER
Supplement to Prospectuses
Prospectus dated August 1, 1994 As Revised November 1, 1994
Scudder International Fund
Prospectuses dated November 1, 1994
Scudder Development Fund
Scudder Global Fund
Scudder Gold Fund
Prospectus dated February 1, 1995
Scudder Value Fund
Prospectuses dated March 1, 1995
Scudder Emerging Markets Income Fund
Scudder Global Small Company Fund
Scudder Greater Europe Growth Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Prospectuses dated May 1, 1995
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
The following text replaces the section entitled "By telephone order."
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 three business days, the order is
subject to cancelation and the shareholder will be responsible for any loss
to the Fund resulting from this cancelation. Telephone orders are not
available for shares held in Scudder IRA accounts and most other Scudder
retirement plan accounts.
June 7, 1995 PS999-2A-65
SFD99SU1
MIST3PS
<PAGE>
SCUDDER
June 7, 1995
Dear Scudder Investor,
The prospectus supplement on the reverse side is formal notice of a change in
Scudder's policy concerning the purchase of shares by telephone order. Investors
who purchase shares by telephone will now have three business days to pay for a
purchase, instead of the previous time limit of seven business days.
This new deadline is part of a new securities industry standard that mandates
settlement of all securities trades within three business days. The Securities
and Exchange Commission implemented this new deadline, called "T+3," to enhance
the stability of U.S. financial markets by reducing the amount of outstanding
debt among financial firms due to transaction activity.
If you have any questions about these changes, or about your Scudder Fund,
please call us at 1-800-225-2470. We will be happy to assist you.
Sincerely,
/s/David S. Lee
David S. Lee
President, Scudder Investor Services, Inc.
This letter is for explanatory purposes and is not part of the prospectus
supplement on the reverse side.
(over, please)
<PAGE>
Scudder Global Fund
Supplement to Statement of Additional Information dated November 1, 1994
The following text replaces the paragraph under "PURCHASES - Additional
Information About Making Subsequent Investments By Telephone Order:"
With respect to Global 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, telegram, etc., by
established shareholders (except by Scudder Individual Retirement Account (IRA),
Scudder Horizon Plan, Scudder Profit Sharing and Money Purchase Pension Plans,
Scudder 401(k) and Scudder 403(b) Plan holders), members of the NASD and banks.
Orders placed in this manner may be directed to any office of the Distributor
listed in the Fund's prospectus. A confirmation of the purchase will be mailed
out promptly following receipt of a request to buy. Federal regulations require
that payment be received within three business days. If payment is not received
within that time, the order is subject to cancelation. In the event of such
cancelation or cancelation 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 cancelation. 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.
June 7, 1995
<PAGE>
Supplement to Statement of Additional Information dated March 1, 1995
Scudder Global Small Company Fund
Scudder Emerging Markets Income Fund
The following text replaces the paragraph under "PURCHASES - Additional
Information About Making Subsequent Investments By Telephone Order:"
With respect to Global Small Company Fund and Emerging Markets Income
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 Horizon Plan, Scudder Profit Sharing and Money
Purchase Pension Plans, Scudder 401(k) and Scudder 403(b) Plan holders), members
of the NASD and banks. Orders placed in this manner may be directed to any
office of the Distributor listed in the Funds' prospectuses. A confirmation of
the purchase will be mailed out promptly following receipt of a request to buy.
Federal regulations require that payment be received within three business days.
If payment is not received within that time, the order is subject to
cancelation. In the event of such cancelation or cancelation at the purchaser's
request, the purchaser will be responsible for any loss incurred by a Fund or
the principal underwriter by reason of such cancelation. 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 relevant 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 relevant Fund.
June 7, 1995
<PAGE>
This prospectus sets forth concisely the information about Scudder Global 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 November 1, 1994, 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
Global
Fund
Prospectus
November 1, 1994
A pure no-load(TM) (no sales charges) mutual fund series which seeks long-term
growth of capital from worldwide investing.
<PAGE>
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 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 Fun 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 expenseH: 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 June 30,
1994.
Investment management fee 0.98%**
12b-1 fees NONE
Other expenses 0.47%
-----
Total Fund operating expenses 1.45%**
=====
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
------ ------- ------- --------
$15 $46 $79 $174
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."
** These fees have been restated to reflect the fees which would have been
payable for the fiscal year ended June 30, 1994 under the Investment
Management Agreement dated September 7, 1993.
2
<PAGE>
<TABLE>
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 June 30, 1994 and may be obtained
without charge by writing or calling Scudder Investor Services, Inc.
<CAPTION>
For the
Period
July 23, 1986
(commencement
Years Ended June 30, of
----------------------------------------------------------------------- operations)
----------------------------------------------------------------------- to June 30,
1994 (d) 1993 1992 1991 1990 1989 1988 1987
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.63 $ 19.56 $ 18.06 $ 20.36 $ 17.64 $ 14.47 $ 15.42 $ 12.00
Income from investment operations:
Net investment income .23 .15 .19 .40 .19 .19 .18 .05
Net realized and unrealized gain
(loss) on investment 2.57 2.42 2.28 (1.50) 3.28 3.20 (.82) 3.37
transactions ---- ---- ---- ----- ---- ---- ---- ----
Total from investment operations 2.80 2.57 2.47 (1.10) 3.47 3.39 (.64) 3.42
---- ---- ---- ----- ---- ---- ---- ----
Less distributions from:
Net investment income (.24) (.16) (.31) (.37) (.20) (.14) (.06) --
Net realized gains on investment
transactions (.26) (.34) (.66) (.83) (.55) (.08) (.25) --
---- ---- ---- ---- ---- ---- ---- ----
Total distributions (.50) (.50) (.97) (1.20) (.75) (.22) (.31) --
---- ---- ---- ----- ---- ---- ---- ----
Net asset value, end of period $23.93 $21.63 $19.56 $18.06 $20.36 $17.64 $14.47 $15.42
====== ====== ====== ====== ====== ====== ====== ======
Total Return (%) 12.99 13.45 14.09 (5.20) 20.00 23.90 (4.45) 28.50**
Ratios and Supplemental Data
Net assets, end of period 1,096 577 371 268 257 91 81 102
($ millions)
Ratio of operating expenses,
net to average daily 1.45 1.48 1.59 1.70 1.81 1.98 1.71(b) 1.84*(a)
net assets (%)
Ratio of net investment income .97 .90 1.09 2.21 1.77 1.22 1.23 .63*
to average daily net assets (%)
Portfolio turnover rate (%) 59.7 64.9 44.6 85.0(c) 38.3 30.7 53.8 32.2*
(a) The Adviser did not impose all of its management fee during the period
July 23, 1986 (commencement of operations) to December 31, 1986,
amounting to $.01 per share.
(b) The Adviser absorbed a portion of the Fund's expenses exclusive of
management fees, amounting to $.03 per share.
(c) The portfolio turnover rate on equity securities and debt securities
was 62.7% and 174.4%, respectively, based on average monthly equity
holdings and average monthly debt holdings.
(d) Per share amounts have been calculated using weighted average shares
outstanding.
<FN>
* Annualized
** Not Annualized
</FN>
</TABLE>
3
<PAGE>
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 Fund
Investment objective
* long-term growth of capital from global investment markets
Investment characteristics
* worldwide investing with international investment risk
* efficient vehicle for investors to participate in investments denominated in
U.S. and foreign currencies
Contents
Investment objective and policies 5
Investment results 6
Risks of global investing 6
Why invest in the Fund? 7
International investment experience 8
Additional information about policies and investments 8
Distribution and performance information 10
Fund organization 11
Purchases 12
Exchanges and redemptions 13
Transaction information 14
Shareholder benefits 17
Directors and Officers 20
Investment products and services 21
How to contact Scudder 22
4
<PAGE>
Investment objective and policies
Scudder Global Fund (the "Fund"), a series of Scudder Global Fund, Inc., seeks
long-term growth of capital through a diversified portfolio of marketable
securities, primarily equity securities, including common stocks, preferred
stocks and debt securities convertible into common stocks. The Fund invests on a
worldwide basis in equity securities of companies which are incorporated in the
U.S. or in foreign countries. It also may invest in the debt securities of U.S.
and foreign issuers. Income is an incidental consideration.
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
The Fund invests in companies that the Fund's investment adviser, Scudder,
Stevens & Clark, Inc. (the "Adviser"), believes will benefit from global
economic trends, promising technologies or products and specific country
opportunities resulting from changing geopolitical, currency or economic
relationships. It is expected that investments will be spread broadly around the
world. The Fund will be invested usually in securities of issuers located in at
least three countries, one of which may be the U.S. The Fund may be invested
100% in non-U.S. issues, and for temporary defensive purposes may be invested
100% in U.S. issues, although under normal circumstances it is expected that
both foreign and U.S. investments will be represented in the Fund's portfolio.
It is expected that investments will include companies of varying size as
measured by assets, sales or capitalization.
The Fund generally invests in equity securities of established companies listed
on U.S. or foreign securities exchanges, but also may invest in securities
traded over-the-counter. It also may invest in debt securities convertible into
common stock, and convertible and non-convertible preferred stock, and
fixed-income securities of governments, government agencies, supranational
agencies and companies when the Adviser believes the potential for appreciation
will equal or exceed that available from investments in equity securities. These
debt and fixed-income securities will be predominantly investment-grade
securities, that is, 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 those of
equivalent quality as determined by the Adviser. The Fund may not invest more
than 5% of its total assets in debt securities rated Baa or below by Moody's, or
BBB or below by S&P or deemed by the Adviser to be of comparable quality (see
"Additional information about policies and investments--Risk factors").
The Fund may invest in zero coupon securities which pay no cash income and are
issued at substantial discounts from their value at maturity. When held to
maturity, their entire income, which consists of accretion of discount, comes
from the difference between the issue price and their value at maturity.
Fixed-income securities also may be held for temporary defensive purposes when
the Adviser believes market conditions so warrant and for temporary investment.
Similarly, the Fund may invest in cash equivalents (including foreign money
market instruments, such as bankers' acceptances, certificates of deposit,
commercial paper, short-term government and corporate obligations and repurchase
agreements) for temporary defensive purposes and for liquidity. The Fund may
invest in closed-end investment companies holding foreign securities. In
addition, the Fund may engage in strategic transactions.
5
<PAGE>
Investment results
Scudder Global Fund is designed for long-term investors who can accept
international investment risk. The dollar value of the Fund's portfolio
securities fluctuates with changes in market and economic conditions abroad and
with changes in relative currency values. Changes in the Fund's share price may
not be related to changes in the U.S. stock and bond markets. As with any
long-term investment, the value of shares when sold may be higher or lower than
when purchased. For additional information concerning risks of international
investment see "Risks of global investing."
Annual capital changes**
------------------------
Year ending Net Asset Capital Gains
June 30, Value/Share Dividends Distributions Capital Change
-------- ----------- --------- ------------- --------------
1987* $15.42
1988 14.47 $.06 $.25 - 4.88%
1989 17.64 .14 .08 + 22.69
1990 20.36 .20 .55 + 19.33
1991 18.06 .37 .83 - 8.47
1992 19.56 .31 .66 + 12.24
1993 21.63 .16 .34 + 12.53
1994 23.93 .24 .26 + 11.88
Growth of a $10,000 investment Total Return
------------------------------ ------------
Year Ended Value of Initial
June 30, 1994 $10,000 Investment Average Annual Cumulative
------------- ------------------ -------------- ----------
One Year $11,299 + 12.99% + 12.99%
Five Years 16,639 + 10.72 + 66.39
Life of the Fund 25,330 + 12.42 +153.30
Performance figures are historical and all total return calculations assume
reinvestment of capital gains and income distributions. Investor returns and
principal value fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. *For the period July 23, 1986
(commencement of operations) to June 30, 1987. **For a definition of "capital
change," see "Distribution and performance information."
These results are not intended to indicate future investment performance.
Risks of global investing
Global investing involves economic and political considerations not typically
found in U.S. markets. These considerations include changes in exchange rates
and exchange rate controls (which may include suspension of the ability to
6
<PAGE>
transfer currency from a given country), costs incurred in conversions between
currencies, non-negotiable brokerage commissions, less publicly available
information, 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
dividends and interest 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 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 diversification and active
professional management.
The Fund is designed for long-term investors who can accept international
investment risk. Since the 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. The Fund's share price will
reflect the movements of both the different stock and 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 may account
for part of the Fund's investment performance. As with any long-term investment,
the value of shares when sold may be higher or lower than when purchased.
Because of the Fund's global investment policies and the investment
considerations discussed above, investment in shares of the Fund should not be
considered a complete investment program.
Why invest in the Fund?
The management of the Fund believes that there is substantial opportunity for
long-term capital growth from a professionally managed portfolio of securities
selected from the U.S. and foreign equity markets. This global investment
framework takes advantage of the investment opportunities created by the global
economy. The world has become highly integrated in economic, industrial and
financial terms. Companies increasingly operate globally as they purchase raw
materials, produce and sell their products and raise capital. As a result,
international trends such as movements in currency and trading relationships are
becoming more important to many industries than purely domestic influences. To
understand a company's business, it is frequently more important to understand
how it is linked to the world economy than whether or not it is, for example, a
U.S., French or Swiss company. Just as a company takes a global perspective in
deciding where to operate, so too may an investor benefit from looking globally
in deciding which industries are growing, which producers are efficient and
which companies' shares are undervalued. The Fund affords the investor access to
opportunities wherever they arise, without being constrained by the location of
a company's headquarters or the trading market for its shares.
The Fund is designed for investors seeking worldwide equity opportunities in
developed, newly industrialized and developing countries (some of these
developing countries are located in Latin America and Africa). Like consumers
who seek to buy a good product wherever it is made, the Fund seeks to find
investment opportunities regardless of location. Because the Fund's portfolio
invests globally, it provides the potential to augment returns available from
the U.S. stock market. In addition, since U.S. and foreign markets do not always
move in step with each other, a global portfolio will be more diversified than
one invested solely in U.S. securities.
7
<PAGE>
Investing directly in foreign securities is usually impractical for most
investors because it presents complications and extra costs. Investors often
find it difficult to arrange purchases and sales, to obtain current information,
to hold securities in safekeeping and to convert the value of their investments
from foreign currencies into dollars. The Fund manages these problems for the
investor. With a single investment, the investor has a diversified worldwide
investment portfolio which is managed actively by experienced professionals. The
Adviser has had many years of experience investing in foreign markets and
dealing with trading, custody and currency transactions around the world. The
Adviser has the benefit of information it receives from worldwide sources and
believes the Fund affords investors an efficient and cost-effective method of
investing worldwide.
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 Short Term Global Income Fund and Scudder
Global Small Company Fund which invest worldwide, Scudder Greater Europe Growth
Fund which invests primarily in the equity securities of European companies, The
Japan Fund, Inc., which invests primarily in securities of Japanese companies,
Scudder Latin America Fund, which invests in Latin American issuers, and Scudder
Pacific Opportunities Fund, which invests in issuers located in the Pacific
Basin, with the exception of Japan. 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.
Assets of international investment company clients of the Adviser exceeded $9
billion as of September 30, 1994.
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 maintain the
portfolio's diversity and reduce 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, in restricted securities and repurchase agreements maturing
in more than seven days. The Fund may not invest more than 5% of its total
assets in restricted securities.
8
<PAGE>
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's combined 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.
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 include the use of derivative contracts. Such strategies are
generally accepted as 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.
9
<PAGE>
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 of the
sellers of the securities before repurchase of the securities under a repurchase
agreement, the Fund may encounter delay and incur costs before being able to
sell the securities.
Debt securities. The Fund will invest no more than 5% of its total assets in
debt securities rated BBB or Baa or below or in unrated securities. Securities
rated below BBB/Baa are commonly referred to as "junk bonds." The lower the
quality of such debt securities, the greater their risks render them like equity
securities. The Fund may invest in securities which are rated as low as C by
Moody's or D by S&P at the time of purchase. Such securities may be in default
with respect to payment of principal or interest.
Zero coupon securities. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current cash distributions of interest.
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 combined Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute dividends from its ordinary income and any net
realized capital gains after utilization of capital loss carryforwards, if any,
10
<PAGE>
in November or December to prevent application of a federal excise tax, although
an additional distribution may be made within three months of the Fund's fiscal
year end, 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. 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 income
distributions are taxable as ordinary income. A portion of dividends from net
investment 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 portions of qualified taxes paid by the
Fund to foreign countries.
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. "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 that the investment has been held for periods of
one year, five years 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 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
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 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.
(Continued on page 14)
11
<PAGE>
Purchases
- -------------------------------------------------------------------------------
Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar or
lower minimums. See appropriate plan literature.
Make checks o By Mail Send your completed and signed application
payable to "The and check
Scudder Funds."
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
o 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.
o 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 Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar
shares or lower minimums. See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip,
payable to "The or with a letter of instruction including
Scudder Funds." your account number and the complete Fund
name, tothe appropriate address listed above.
o By Wire Please see Transaction information--
Purchasing shares--By wire following these
tables for details, including the ABA wire
transfer number.
o 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.
o By Telephone You may purchase additional shares in an
amount of $10,000 or more. Please call
1-800-225-5163 for more details.
o By Automatic You may arrange to make investments on a
Investment regular basis through automatic deductions
Plan from your bank checking account. Please call
1-800-225-5163 ($50 minimum) for more
information and an enrollment form.
-------------------------------------------------------------------------------
12
<PAGE>
Exchanges and redemptions
- -------------------------------------------------------------------------------
Exchanging Minimum investments: $1,000 to establish a new account; $100 to
shares exchange among existing accounts
o By Telephone To speak with a service representative, call
1-800-225-5163 from 8 a.m. to 6 p.m. eastern
time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours
a day).
o By Mail Print or type your instructions and include:
or Fax
- 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.
<TABLE>
<C> <C>
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 1099 Hingham Street
Boston, MA 02107-2291 Rockland, MA 02370-1052
-----------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from 8 a.m. to 6
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.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax 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.
o By Automatic You may arrange to receive automatic cash payments periodically if the value of
Withdrawal Plan your account is $10,000 or more. Call 1-800-225-5163 for more information and
an enrollment form.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Fund organization (cont'd)
(Continued from page 11)
For the fiscal year ended June 30, 1994, the Adviser received an investment
management fee of 0.98% of the Fund's average daily net assets on an annual
basis.
The fee is graduated so that increases in the Fund's net assets may result in a
lower fee rate and decreases in the Fund's net assets may result in a higher fee
rate. 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 many funds which invest primarily in U.S.
securities, but not necessarily higher than the fees charged to funds with
investment objectives similar to those of the Fund.
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 cancelled 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.
14
<PAGE>
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 cancelled 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.
15
<PAGE>
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, State Street Bank and Trust Company, 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
16
<PAGE>
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 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'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 William E. Holzer has had day-to-day responsibility for
Scudder Global Fund's worldwide strategy and investment themes since its
inception in 1986. Mr. Holzer, who has over 20 years' experience in global
investing, joined Scudder in 1980. Nicholas Bratt, Portfolio Manager, directs
Scudder's overall global equity investment strategies. Mr. Bratt joined Scudder
in 1976 and the team in 1993. Alice Ho, Portfolio Manager, joined the team in
1994 and is also responsible for implementing the Fund's strategy. Ms. Ho, who
joined Scudder in 1986 as a member of the institutional and private investment
counsel areas, has worked as a portfolio manager since 1989.
17
<PAGE>
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.
18
<PAGE>
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 or a Scudder
Horizon Plan, please call 1-800-225-2470. For information about 401(k)s,
403(b)s, Profit Sharing Plans, Money Purchase Pension Plans or SEP-IRAs, 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.
19
<PAGE>
Directors and Officers
Edmond D. Villani*
Chairman of the Board and Director
William E. Holzer*
President
Paul Bancroft III
Director; Venture Capitalist and Consultant
Nicholas Bratt*
Director
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*
Director and Vice President
Robert G. Stone, Jr.
Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor, Columbia
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.
20
<PAGE>
<TABLE>
<CAPTION>
Investment products and services
<C> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder GNMA Fund
Scudder U.S. Treasury Money Fund Scudder Income Fund
Tax free money market+ Scudder International Bond Fund
Scudder Tax Free Money Fund Scudder Short Term Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Global Income Fund
Scudder New York Tax Free Money Fund* Scudder Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Value Fund
Scudder Balanced Fund The Japan Fund
Scudder Growth and Income Fund
------------------------------------------------------------------------------------------------------------------------
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan*+++ (a variable annuity) Profit Sharing and
401(k) Plans Money Purchase Pension Plans
------------------------------------------------------------------------------------------------------------------------
Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia 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.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
<C> <C>
Account Service and Information: Please address all correspondence to:
For existing account Scudder Service The Scudder Funds
service and transactions Corporation P.O. Box 2291
1-800-225-5163 Boston, Massachusetts
02107-2291
For account updates, prices, Scudder Automated
yields, exchanges and Information Line
redemptions (SAIL)
1-800-343-2890
Investment Information: Or Stop by a Scudder Funds Center:
To receive information about Scudder Investor Many shareholders enjoy the personal, one-on-one
the Scudder funds, for Information service of the Scudder Funds Centers. Check for a
additional applications and 1-800-225-2470 Funds Center near you--they can be found in the
prospectuses, or for following cities:
investment questions
For establishing Keogh, 401(k) Scudder Group Retirement Boca Raton New York
and 403(b) plans Services Boston Portland, OR
1-800-323-6105 Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*, funds
institutional cash management service for corporations, designed to meet the broad investment management and
non-profit organizations and trusts which utilizes service needs of banks and other institutions, call:
certain portfolios of Scudder Fund, Inc.* ($100,000 1-800-854-8525.
minimum), call: 1-800-541-7703.
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.
</TABLE>
<PAGE>
SCUDDER GLOBAL FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund
Series Which Seeks Long-Term Growth of Capital
from Worldwide Investing
and
SCUDDER INTERNATIONAL BOND FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund Series Which Seeks
Income Primarily by Investing in 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.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1994
- --------------------------------------------------------------------------------
This combined Statement of Additional Information is not a prospectus
and should be read in conjunction with the prospectus of Scudder Global Fund
dated November 1, 1994, and the prospectus of Scudder International Bond Fund
dated November 1, 1994, 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.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.........................................................................1
General Investment Objective and Policies of Global Fund.....................................................1
General Investment Objectives and Policies of International Bond Fund........................................1
Special Investment Considerations of the Funds...............................................................2
Investments and Investment Techniques........................................................................3
Investment Restrictions.....................................................................................14
Other Investment Policies...................................................................................14
PURCHASES............................................................................................................16
Additional Information About Opening an Account.............................................................16
Additional Information About Making Subsequent Investments By Telephone Order...............................17
Checks......................................................................................................17
Wire Transfer of Federal Funds..............................................................................17
Share Price.................................................................................................18
Share Certificates..........................................................................................18
Other Information...........................................................................................18
EXCHANGES AND REDEMPTIONS............................................................................................18
Exchanges...................................................................................................18
Redemption by Telephone.....................................................................................19
Redemption by Mail or Fax...................................................................................20
Redemption-in-Kind..........................................................................................20
Other Information...........................................................................................21
FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................21
The Pure No-Load(TM) Concept................................................................................21
Distribution Plans..........................................................................................22
Diversification.............................................................................................23
Scudder Funds Centers.......................................................................................23
Reports to Shareholders.....................................................................................23
Transaction Summaries.......................................................................................23
THE SCUDDER FAMILY OF FUNDS..........................................................................................23
SPECIAL PLAN ACCOUNTS................................................................................................27
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for
Corporations and Self-Employed Individuals.............................................................27
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals..............................................................................27
Scudder IRA: Individual Retirement Account.................................................................27
Scudder 403(b) Plan.........................................................................................28
Automatic Withdrawal Plan...................................................................................28
Group or Salary Deduction Plan..............................................................................29
Automatic Investment Plan...................................................................................29
Uniform Transfers/Gifts to Minors Act.......................................................................29
Scudder Trust Company.......................................................................................29
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................30
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
----
PERFORMANCE INFORMATION..............................................................................................30
Average Annual Total Return.................................................................................30
Cumulative Total Return.....................................................................................31
Total Return................................................................................................31
Capital Change..............................................................................................31
Yield of International Bond Fund............................................................................32
Comparison of Fund Performance..............................................................................32
ORGANIZATION OF THE FUNDS............................................................................................36
INVESTMENT ADVISER...................................................................................................37
REMUNERATION.........................................................................................................42
DISTRIBUTOR..........................................................................................................42
TAXES................................................................................................................43
PORTFOLIO TRANSACTIONS...............................................................................................47
NET ASSET VALUE......................................................................................................48
ADDITIONAL INFORMATION...............................................................................................49
Experts.....................................................................................................49
Other Information...........................................................................................49
FINANCIAL STATEMENTS.................................................................................................50
APPENDIX
</TABLE>
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See Scudder Global Fund--"Investment objective and
policies" and "Additional information about policies and
investments", Scudder International Bond Fund--
"Investment objectives and policies" and "Additional
information about policies and investments" in
the Funds' prospectuses.)
Scudder Global Fund, Inc., a Maryland corporation of which Scudder
Global Fund ("Global Fund") and Scudder International Bond Fund ("International
Bond Fund") are series, is referred to herein as the "Corporation". The
Corporation is a no-load, 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 Fund is a diversified series and
International Bond Fund is a non-diversified series of the Corporation. These
series sometimes are jointly referred to herein as the "Funds".
Except as otherwise indicated, the Funds' objectives and policies are
not fundamental and may be changed without a shareholder vote. There can be no
assurance that either Fund will achieve its objectives.
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.
General Investment Objective and Policies of Global Fund
Global Fund seeks long-term growth of capital through a diversified
portfolio of marketable securities, primarily equity securities, including
common stocks, preferred stocks and debt securities convertible into common
stocks. The Fund invests on a worldwide basis in equity securities of companies
which are incorporated in the U.S. or in foreign countries. It may also invest
in the debt securities of U.S. and foreign issuers. Income is an incidental
consideration.
The management of the Fund believes that there is substantial
opportunity for long-term capital growth from a professionally managed portfolio
of securities selected from the U.S. and foreign equity markets. This global
investment framework takes advantage of the investment opportunities created by
the global economy. The world has become highly integrated in economic,
industrial and financial terms. Companies increasingly operate globally as they
purchase raw materials, produce and sell their products, and raise capital. As a
result, international trends such as movements in currency and trading
relationships are becoming more important to many industries than purely
domestic influences. To understand a company's business, it is frequently more
important to understand how it is linked to the world economy than whether or
not it is, for example, a U.S., French or Swiss company. Just as a company takes
a global perspective in deciding where to operate, so too may an investor
benefit from looking globally in deciding which industries are growing, which
producers are efficient and which companies' shares are undervalued. The Fund
affords the investor access to opportunities wherever they arise, without being
constrained by the location of a company's headquarters or the trading market
for its shares.
The Fund invests in companies that the Fund's investment adviser,
Scudder, Stevens & Clark, Inc. (the "Adviser"), believes will benefit from
global economic trends, promising technologies or products and specific country
opportunities resulting from changing geopolitical, currency, or economic
relationships. It is expected that investments will be spread broadly around the
world. The Fund will be invested usually in securities of issuers located in at
least three countries, one of which may be the U.S. The Fund may be invested
100% in non-U.S. issues, and for temporary defensive purposes may be invested
100% in U.S. issues, although under normal circumstances it is expected that
both foreign and U.S. investments will be represented in the Fund's portfolio.
It is expected that investments will include companies of varying size as
measured by assets, sales, or capitalization. More information about these
investment techniques is provided under "Investments and Investment Techniques."
General Investment Objectives and Policies of International Bond Fund
International Bond Fund offers investors a convenient way to invest in
a managed portfolio of debt securities denominated in foreign currencies
("international securities"). The Fund's objective is to provide income
primarily by investing in a managed portfolio of high-grade international bonds.
<PAGE>
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. To achieve its objectives, the Fund will primarily
invest in international bonds that are denominated in foreign currencies,
including bonds denominated in the European Currency Unit (ECU). The Fund's
investments may include debt securities issued or guaranteed by a foreign
national government, its agencies, instrumentalities or political subdivisions,
debt securities issued or guaranteed by supranational organizations, corporate
debt securities, bank or bank holding company debt securities and other debt
securities including those convertible into common stock. The Fund will invest
no more than 15% of its total assets in debt securities that are rated below BBB
by Standard and Poor's ("S&P") or below Baa by Moody's Investors Service, Inc.
("Moody's"), but rated no lower than B by S&P or Moody's, respectively. (See
"Risk factors" in the Fund's Prospectus.)
Special Investment Considerations of the Funds
The Funds are intended to provide individual and institutional
investors with an opportunity to invest a portion of their assets in globally
and/or internationally oriented portfolios, according to the Funds' respective
objectives and policies, and are designed for long-term investors who can accept
international investment risk. Management of the Funds believes that allocation
of assets on a global or international 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, thus providing
investment opportunities; although there can be no assurance that this will be
true in the future. As with any long-term investment, the value of the Funds'
shares when sold may be higher or lower than when purchased.
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 Funds' performance. As foreign companies are
not generally subject to uniform standards, practices and requirements, with
respect to accounting, auditing and financial reporting, as are domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, 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 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 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 the 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 and bid to asked spreads in foreign bond markets are generally higher
than negotiated commissions on U.S. exchanges and bid to asked spreads in the
U.S. bond market, although the Funds will endeavor to achieve the most favorable
net results on their portfolio transactions. Further, the Funds 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, securities exchanges, brokers and listed
companies than in the U.S. It may be more difficult for the Funds' 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. Payment for securities without
delivery may be required in certain foreign markets. 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. 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. The management of the Funds seeks to mitigate the
risks associated with the foregoing considerations through continuous
professional management.
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
2
<PAGE>
countries. Investments in companies domiciled in developing countries may be
subject to potentially greater risks than investments in developed countries.
Investments in foreign securities usually will involve currencies of
foreign countries. Because of the considerations discussed above, the value of
the assets of the Funds 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 Funds may incur costs in connection with conversions
between various currencies. Although the Funds value their assets daily in terms
of U.S. dollars, they do not intend to convert their holdings of foreign
currencies into U.S. dollars on a daily basis. They 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. The
Funds will conduct their 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 strategic transactions involving currencies
(see "Strategic Transactions and Derivatives").
Because the Funds may be invested in both U.S. and foreign securities
markets, changes in a Fund's share price may have a low correlation with
movements in the U.S. markets. Each 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
each Fund's investment performance. Foreign securities such as those purchased
by a Fund may be subject to foreign government taxes which could reduce the
yield on such securities, although a shareholder of the 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"). 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.
Because of the Funds' investment considerations discussed above and the
investment policies, investment in shares of the Funds is not intended to
provide a complete investment program for an investor.
Neither Fund can guarantee a gain or eliminate the risk of loss. The
net asset value of each Fund's shares will increase or decrease with changes in
the market price of the Fund's investments, and there is no assurance that each
Fund's objectives will be achieved.
Investments and Investment Techniques
Repurchase Agreements. Each Fund may enter into repurchase agreements
with member banks of the Federal Reserve System, any foreign bank 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 a
Fund may purchase.
A repurchase agreement provides a means for a Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., a Fund) acquires a debt 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 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 a Fund, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to a Fund
together with the repurchase price on repurchase. In either case, the income to
a Fund is unrelated to the interest rate on the Obligation itself. Obligations
will be physically held by the Fund's custodian (State Street Bank and Trust
Company for Global Fund and Brown Brothers Harriman and Co. for International
Bond Fund) or in the Federal Reserve Book Entry system.
For purposes of the Investment Company Act of 1940, as amended (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 restrictions applicable to loans. It is not
3
<PAGE>
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 a 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, a 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 a 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 security. However, if the market value of the Obligation subject
to the repurchase agreement becomes less than the repurchase price (including
interest), a 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 enforce the seller's contractual obligation
to deliver additional securities. A repurchase agreement with foreign banks may
be available with respect to government securities of the particular foreign
jurisdiction, and such repurchase agreements involve risks similar to repurchase
agreements with U.S. entities.
The Funds 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 a Fund may purchase. Such transactions may not provide a Fund
with collateral which is marked-to-market during the term of the commitment.
Debt Securities. Each 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. Global Fund may also invest up to 5% of its net assets in
securities rated Baa/BBB or lower and in unrated securities of equivalent
quality in the Adviser's judgment. International Bond Fund may invest up to 15%
of its total assets in securities rated below BBB or Baa, but may not invest in
securities rated lower than B by Moody's and S&P or in equivalent unrated
securities. Global 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.
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.
4
<PAGE>
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, 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").
Zero Coupon Securities. Each Fund may invest in zero coupon securities
which pay no cash income and are sold at substantial discounts from their value
at maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest (cash). Zero
coupon securities which are convertible into common stock offer the opportunity
for capital appreciation as increases (or decreases) in market value of such
securities closely follows the movements in the market value of the underlying
common stock. Zero coupon convertible securities generally are expected to be
less volatile than the underlying common stocks, as they usually are issued with
maturities of 15 years or less and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.
Zero coupon securities include securities issued directly by the U.S.
Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons
and receipts for their underlying principal ("coupons") which have been
separated by their holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the underlying principal
(the "corpus") of the U.S. Treasury security. A number of securities firms and
banks have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" (TIGRS(TM)) and Certificate of Accrual on Treasuries
(CATS(TM)). The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S.
Treasury securities have stated that, for federal tax and securities purposes,
in their opinion purchasers of such certificates, such as the Fund, most likely
will be deemed the beneficial holder of the underlying U.S. Government
securities. The Fund understands that the staff of the Division of Investment
Management of the Securities and Exchange Commission (the "SEC") no longer
considers such privately stripped obligations to be U.S. Government securities,
as defined in the 1940 Act; therefore, the Fund intends to adhere to this staff
position and will not treat such privately stripped obligations to be U.S.
Government securities for the purpose of determining if the Global Fund is
"diversified" under the 1940 Act.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Under the STRIPS program,
the Fund will be able to have its beneficial ownership of zero coupon securities
recorded directly in the book-entry record-keeping system in lieu of having to
hold certificates or other evidences of ownership of the underlying U.S.
Treasury securities.
When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the principal or corpus is sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold bundled in such form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells
itself (see "TAXES").
5
<PAGE>
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.
International Bond Fund will limit its purchases of convertible securities to
debt securities convertible into common stocks.
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.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities. Convertible securities may be issued as fixed income
obligations that pay current income or as zero coupon notes and bonds, including
Liquid Yield Option Notes ("LYONs"(TM)).
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
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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.
Dollar Rolls. International Bond 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 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 the
counterparty 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 different repurchase price 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.
International Bond 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. Notwithstanding such safeguards, the Fund's overall investment
exposure may be increased by such transactions to the extent that the Fund bears
a risk of loss on the securities it is committed to purchase, as well as on the
segregated assets.
Dollar rolls are treated for purposes of 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 of 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 Corporation on behalf of International Bond Fund
have adopted guidelines to ensure that those 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.
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 the fixed-income securities in a Fund's portfolio, or to
enhance potential gain. These strategies may include the use of derivative
contracts. Such strategies are generally accepted as 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, a 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
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portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the 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 a 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
a 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.
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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.
Each 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. A Fund
will only sell OTC options (other than OTC currency options) that are subject to
a buy-back provision permitting a Fund to require the Counterparty to sell the
option back to a 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, a 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 nationally recognized statistical
rating organization ("NRSRO"). 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 a 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
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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 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.
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. Neither Fund will sell put options if, as a result, more than
50% of a 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 a 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 a 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
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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 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 (except for OTC currency options) 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 a 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 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 a Fund has or in which a 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 a 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"),
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 a 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 a 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 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
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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 a
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 a 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 a 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.
Each 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 a 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 Funds 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 a 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. Each 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
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make trading decisions, (iii) delays in a 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 a 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 a 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, 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 a 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 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.
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Each Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company.
(See "TAXES.")
Investment Restrictions
The policies set forth below are fundamental policies of each Fund and
may not be changed with respect to a Fund without approval of a majority of the
outstanding voting securities of that Fund. As used in this Statement of
Additional Information a "majority of the outstanding voting securities of a
Fund" means the lesser of (1) 67% or more of the voting securities present at
such 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 the Fund.
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 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 and the purchase of debt securities in accordance
with its investment objectives 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 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; or
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, 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).
In addition, as a matter of fundamental policy Global Fund may not,
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 other investment companies.
Other Investment Policies
The Directors of the Corporation have voluntarily adopted certain
policies and restrictions which are observed in the conduct of the Funds'
affairs. These represent intentions of the Directors based upon current
circumstances. They differ from fundamental investment policies in that they may
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be changed or amended by action of the Directors without requiring prior notice
to or approval of shareholders.
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 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 % (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 % (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 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;
(f) purchase securities of any issuer with a record of less than
three years continuous operations, including predecessors,
except U.S. Government securities, 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 total net assets or more than 2% of its
net assets in warrants that are not listed on the New York or
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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; or
(l) purchase or sell real estate limited partnership interests.
In addition, as a matter of nonfundamental policy, Global Fund may not:
(1) 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; or
(2) invest more than 5% of its total assets in debt securities
rated Baa or below by Moody's, or BBB or below by S&P or
deemed by the Adviser to be of comparable quality.
Further, as a matter of nonfundamental policy, International Bond Fund
may not:
(1) purchase securities which are not bonds denominated in foreign
currency ("international bonds") if, immediately after such
purchase, less than 65% of its total assets would be invested
in international bonds, except that for temporary defensive
purposes the Fund may purchase securities which are not
international bonds without limitation;
(2) 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 borrowings; or
(3) invest more than 15% of its total assets in debt securities
rated lower than BBB (commonly referred to as "junk bonds") by
S&P or Baa by Moody's, or deemed by the Adviser to be of
comparable quality, and the Fund may not invest in debt
securities rated below B.
With respect to International Bond Fund, 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.
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 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 through Scudder Investor Services, Inc. (the
"Distributor") by letter, telegram, or telephone.
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Shareholders of other Scudder funds who have submitted an account
application and have certified a tax 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 tax 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
02110, ABA Number 011000028, DDA Account Number 9903-5552. The investor must
give the Scudder fund name, account name and the new account number. Finally,
the investor must send a completed and signed application form 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 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, telegram, 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 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 (7) 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 obtain the net asset value determined as of the close of regular
trading on the New York Stock Exchange (the "Exchange") (normally 4 p.m. eastern
time) 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 a Fund
prior to 4 p.m.
To purchase shares of International Bond 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 International
Bond 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
Exchange 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.
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The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, the Funds pay a fee for receipt by State Street Bank
and Trust Company of "wired funds," but the right to charge investors for this
service is reserved.
Boston banks are presently closed on certain local 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 and Trust Company 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 next day's
net asset value. If the order has been placed by a member of the NASD, other
than Scudder Investor Services, Inc., it is the responsibility of that member
broker, rather than the Funds, 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 Fund management to afford ease of redemption,
certificates will not be issued to indicate ownership in the Funds. Share
certificates now in a shareholder's possession may be sent to the Funds'
Transfer Agent for cancellation and credit to such shareholder's account.
Shareholders who prefer may hold the certificates in their possession until they
wish to exchange or redeem such shares.
Other Information
If purchases or redemptions of the Funds' shares are arranged and
settlement is made, at an investor's election, through a member of the NASD,
other than Scudder Investor Services, Inc., that member may, at its discretion,
charge a fee for that service. The Board of Directors and Scudder Investor
Services, Inc., 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 may suspend or terminate the offering of shares of either
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 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 of 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
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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 an original
signature guarantee as described under "Transaction information--Signature
guarantees" in the Funds' prospectuses.
Exchange orders received before the close of regular trading on the
Exchange on any business day will ordinarily be executed at respective net asset
values determined on that day. Exchange orders received after the close of
trading 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.
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 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, the Funds 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 by telephone up to $50,000 and have the proceeds mailed
to their address of record. Shareholders may request 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
an 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)
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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 Funds employ 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 each Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Funds will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with a signature guarantee as explained in the
Funds' prospectuses.
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 share certificates or 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 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.
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Other Information
With respect to Global Fund, 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 repurchase request. A written request in good order as
described above and any certificates with proper original signature
guarantee(s), as described in the Fund's prospectus under "Transaction
information--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 certificates 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
the 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 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
Corporation does not impose a redemption or repurchase charge. 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 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 a Fund 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 Commission (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 in a
Fund 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, close the account and send the 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.
21
<PAGE>
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 NASD
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 No-Load Fund
Pure No-Load(TM) Load Fund with with 0.25% 12b-1
YEARS Fund 8.50% Load Fund 0.75% 12b-1 Fee Fee
----- ---- --------------- --------------- ---
<S> <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 a 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 also 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
22
<PAGE>
dividends or capital gains distributions. If no election is made, dividends and
distributions will be invested in additional shares of a 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 gain 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.
Diversification
An investment in Global Fund represents an interest in a large,
diversified portfolio of carefully selected securities. Diversification helps
protect you against the possible risks of concentrating in fewer securities.
Scudder Funds Centers
Investors may visit any of the Centers maintained by Scudder Investor
Services, Inc. listed in the Funds' prospectuses. 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 the prospectuses.
Reports to Shareholders
The Corporation issues to Fund shareholders audited semiannual
financial statements, including a list of investments held and statements of
assets and liabilities, operations, changes in net assets and supplementary
information. The Corporation presently intends to distribute to Fund
shareholders informal quarterly reports during the intervening quarters,
containing a summary of the Funds' 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 Funds' prospectuses.)
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.
23
<PAGE>
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.
- ---------------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
24
<PAGE>
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.
- ---------------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
25
<PAGE>
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.
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.
26
<PAGE>
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By
Automatic Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in the Funds' prospectuses.)
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 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 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 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
27
<PAGE>
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>
24
<PAGE>
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 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
Code. In general, employees of tax-exempt organizations described in Section
501(c)(3) of the 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
28
<PAGE>
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.
29
<PAGE>
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 and in no event less than 90% of its investment company taxable income
including any excess of net realized short-term capital gains over net realized
long-term capital losses. A 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 income taxes for which the
shareholders may then claim a credit against their federal income tax liability.
If a Fund does not distribute an amount of capital gains and/or ordinary income
required to be distributed by an excise tax provision of the Code, it may be
subject to such tax. In certain circumstances, a Fund may determine that it is
in the interest of shareholders to distribute less than such an amount. (See
"TAXES.")
International Bond Fund intends to declare daily and distribute monthly
substantially all of its investment company taxable income resulting from Fund
investment activity. Distributions, if any, of net realized capital gains
normally will be distributed in November or December and, if necessary, within
three months after the Fund's fiscal year end on June 30. 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 also normally will be made in December and, if necessary,
within three months after the Fund's fiscal year end on June 30.
Global Fund intends to distribute in September as well as in December
substantially all of its investment company taxable income and any net realized
capital gains resulting from Fund investment activity.
All distributions will be made in shares of a 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 the Funds' 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 the periods of one year, five years and the life of a Fund, each
ended on the last day of a recent calendar quarter. Average annual total return
quotations reflect changes in the price of the Funds' 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
computing 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.
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Average Annual Total Return for periods ended June 30, 1994
One Year Five Year Life of the Fund
-------- --------- ----------------
Global Fund 12.99% 10.72% 12.42%(1)
International Bond Fund -2.83% 13.57% 11.59%(2)
(1) For the period beginning July 23, 1986.
(2) For the period beginning July 6, 1988.
With respect to International Bond Fund, if the investment management
fee had been imposed and the expenses had not been reduced, the average annual
total return for the one year period and five year period ended June 30, 1994
and life of the Fund would have been approximately -2.83%, 13.17% and 10.52%,
respectively.
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 Funds' shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by computing
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 periods ended June 30, 1994
One Year Five Year Life of the Fund
-------- --------- ----------------
Global Fund 12.99% 66.39% 153.30%(1)
International Bond Fund -2.83% 88.97% 93.04%(2)
(1) For the period beginning July 23, 1986.
(2) For the period beginning July 6, 1988.
With respect to International Bond Fund, if the investment management
fee had been imposed and the expenses had not been reduced, the cumulative total
return for the one year period and five year period ended June 30, 1994 and life
of the Fund would have been approximately -2.83%, 85.66% and 82.00%,
respectively.
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.
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Yield of International Bond Fund
Yield of International Bond Fund is the net annualized yield of the
Fund 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
The yield of International Bond Fund for the 30-day period ended June
30, 1994 was 8.14%.
Calculation of the Fund's yield does not take into account "Section 988
Transactions." (See TAXES.)
From time to time International Bond Fund may advertise potential
advantages of investing in foreign markets and may use these figures in an
updated form. 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.
Quotations of each Fund's performance are historical, show the
performance of a hypothetical investment, 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 changed in
market conditions and the level of the Fund's expenses.
Comparison of Fund 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,
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<PAGE>
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
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
33
<PAGE>
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 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.
34
<PAGE>
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.
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<PAGE>
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.)
The Funds are separate series of Scudder Global Fund, Inc., a Maryland
corporation organized on May 15, 1986. Scudder Short Term Global Income Fund,
Scudder Global Small Company Fund and Scudder Emerging Markets Income Fund are
other series of the Corporation.
The authorized capital stock of the Corporation consists of 800 million
shares with $0.01 par value, 100 million shares of which are allocated to Global
Fund and 200 million shares of which are allocated to International Bond 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. 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.
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INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the
Funds' prospectuses.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to each Fund. 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, the Adviser introduced Scudder International
Fund, the first mutual fund registered with the SEC 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 of approximately $12 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 the 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 a 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 day. 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 most favorable net
results to a Fund.
The Investment Management Agreement between International Bond Fund and
the Adviser was approved by the Directors on September 8, 1994. The continuance
of the Investment Management Agreement between Global Fund and the Adviser was
approved by the Directors on September 8, 1994. The International Bond Fund
Agreement dated September 8, 1994 and the Global Fund Agreement dated September
7, 1993 (collectively, the "Agreements") will continue in effect until September
30, 1995 and from year to year thereafter only if their continuance is approved
annually by the vote of a majority of those Directors who are not parties to
such Agreements 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
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<PAGE>
either by vote of the Corporation's Directors or of the outstanding voting
securities of the respective Fund. The Agreements may be terminated at any time
without payment of penalty by either party on sixty days written notice, and
automatically terminate in the event of their 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 objectives, 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
Code and to the Fund's investment objectives, policies and restrictions, and
subject, further, to such policies and instructions as the Directors of the
Corporation may from time to time establish. The Adviser also advises and
assists the officers of the Corporation 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
Corporation.
Under each Agreement, the Adviser also renders significant
administrative services (not otherwise provided by third parties) necessary for
a 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, custodians, 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 Funds; 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 Funds, 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.
For the Adviser's services, effective September 7, 1993, Global Fund
pays the Adviser an annual fee equal to 1.00% on the first $500 million of
average daily net assets and 0.95% on assets in excess of $500 million. 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.
From December 14, 1990 to September 6, 1993 Global Fund paid the
Adviser an annual fee equal to 1.00% of the Fund's average daily net assets. The
fee was paid monthly, provided the Fund made such interim payments as requested
by the Adviser not to have exceeded 75% of the amount of the fee then accrued on
the books of the Fund and unpaid.
The net investment advisory fees for the Global Fund for the fiscal
years ended June 30, 1994, 1993 and 1992, were $9,049,260, $4,300,271 and
$3,056,684, respectively.
For the Adviser's services effective September 8, 1994, International
Bond Fund pays the Adviser an annual fee equal to 0.85% of the first $1 billion
of average daily net assets and 0.80% of such assets in excess of $1 billion.
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.
From December 14, 1990 to September 7, 1994, International Bond Fund
paid the Adviser an annual fee equal to 0.85 of 1% of the Fund's average daily
net assets. The fee was payable monthly, provided the Fund made such interim
payments as requested by the Adviser not to have exceeded 75% of the amount of
the fee then accrued on the books of the Fund and unpaid.
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For the fiscal years ended June 30, 1994, 1993 and 1992, the fees
imposed for the International Bond Fund amounted to $10,598,081, $5,669,210 and
$1,663,893, respectively, and the fees not imposed amounted to $341,680,
$955,128 and $976,711, respectively.
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 or 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 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 Funds. 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 agreements provide that the custodian shall compute each
Fund's net asset value. The Agreements expressly provide that the Adviser shall
not be required to pay a pricing agent of the Funds for portfolio pricing
services, if any.
The Adviser has agreed in each Agreement to reimburse the Funds for
annual expenses to the extent required by the most restrictive expense
limitations imposed by any state in which the Corporation is at the time
offering the 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. For the fiscal years ended
June 30, 1994, 1993 and 1992, expenses, net of reimbursement, equaled 1.45%,
1.48% and 1.59% of the average net assets of Global Fund. For each of the fiscal
years ended June 30, 1994, 1993 and 1992, expenses, net of reimbursement,
equaled 1.27%, 1.25% and 1.25% of the average net assets of International Bond
Fund. If reimbursement is required, it will be made as promptly as practicable
after the end of a 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.
Each Agreement also provides that a 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.
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 the relevant
Fund in connection with matters to which the Agreements relate, 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 Agreements.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian banks. 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 Position with Underwriter,
Name and Address with Corporation Principal Occupation** Scudder Investor Services, Inc.
- ---------------- ---------------- ---------------------- -------------------------------
<S> <C> <C> <C>
Edmond D. Villani++*# Chairman of the President and Managing --
Board and Director Director of Scudder,
Stevens & Clark, Inc.
39
<PAGE>
Position Position with Underwriter,
Name and Address with Corporation Principal Occupation** Scudder Investor Services, Inc.
- ---------------- ---------------- ---------------------- -------------------------------
Nicholas Bratt++*#@ President, Short Managing Director of --
Term Global Income Scudder, Stevens & Clark,
Fund, Scudder Inc.
International Bond
Fund and Scudder
Global Small
Company Fund; and
Director
William E. Holzer++ @ President, Scudder Managing Director --
Global Fund of Scudder, Stevens & Clark,
Inc.
Paul Bancroft III Director Venture Capitalist and --
1120 Cheston Lane Consultant; Retired,
Queenstown, MD 21658 President, Chief Executive
Officer and Director,
Bessemer Securities
Corporation
Thomas J. Devine Director Consultant --
641 Lexington Avenue
New York, NY 10022
William H. Gleysteen, Jr. Director President, The Japan --
333 East 47th Street Society, Inc. (1989 until
New York, NY 10017 present); Vice President of
Studies, Council on Foreign
Relations (until 1989)
William H. Luers Director President, The Metropolitan --
993 Fifth Avenue Museum of Art (1986 until
New York, NY 10028 present)
Daniel Pierce+ Director and Vice Chairman of the Board and Vice President, Director &
President Managing Director of Assistant Treasurer
Scudder, Stevens & Clark,
Inc.
Robert G. Stone, Jr. Director Chairman of the Board and --
405 Lexington Avenue Director, Kirby Corporation
New York, NY 10174 (marine transportation,
diesel repair and property
and casualty insurance in
Puerto Rico)
Robert W. Lear Honorary Director Executive-in-Residence and --
429 Silvermine Road Visiting Professor,
New Canaan, CT 06840 Columbia University
Graduate School of Business
40
<PAGE>
Position Position with Underwriter,
Name and Address with Corporation Principal Occupation** Scudder Investor Services, Inc.
- ---------------- ---------------- ---------------------- -------------------------------
Jerard K. Hartman++ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Thomas W. Joseph+ Vice President Principal of Scudder, Vice President, Director,
Stevens & Clark, Inc. Treasurer & Assistant Clerk
Douglas M. Loudon++ Vice President Managing Director of Senior Vice President
Scudder, Stevens & Clark,
Inc.
Gerald J. Moran++ Vice President Principal of Scudder, --
Stevens & Clark, Inc.
Cornelia M. Small++ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.
Lawrence Teitelbaum+ Vice President Principal of Scudder, --
Stevens & Clark, Inc.;
Senior Portfolio Manager,
Merrill Lynch Asset
Management from 1986 to
1993
Thomas F. McDonough+ Vice President and Principal of Scudder, Clerk
Secretary Stevens & Clark, Inc.
Pamela A. McGrath+ Vice President and Principal of Scudder, --
Treasurer Stevens & Clark, Inc.
David S. Lee+ Vice President and Managing Director of President, Assistant Treasurer
Assistant Treasurer Scudder, Stevens & Clark, and Director
Inc.
Edward J. O'Connell++ Vice President and Principal of Scudder, Assistant Treasurer
Assistant Treasurer Stevens & Clark, Inc.
Juris Padegs++ Vice President and Managing Director of Vice President and Director
Assistant Secretary Scudder, Stevens & Clark,
Inc.
Kathryn L. Quirk++ Vice President and Managing Director of Vice President
Assistant Secretary Scudder, Stevens & Clark,
Inc.
Coleen Downs Dinneen+ Assistant Secretary Vice President of Assistant Clerk
Scudder, Stevens & Clark,
Inc.
* Messrs. Villani and Bratt 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.
41
<PAGE>
# 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
@ The President of a series shall have the status of Vice President of the Corporation.
</TABLE>
As of September 30, 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) less than 1% of the shares of Global Fund outstanding on
such date.
As of September 30, 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) less than 1% of the shares of International Bond Fund
outstanding on such date.
As of September 30, 1994, 7,415,537 shares in the aggregate, 7.36% of
the outstanding shares of International Bond Fund, were held in the name of
Northern Trust Company for the benefit of Teacher Retirement Systems of Texas,
P.O. Box 92956, Mutual Funds, Chicago, IL, 60675 who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
As of September 30, 1994, 20,027,296 shares in the aggregate, 19.87% of
the outstanding shares of International Bond Fund, were held in the name of
Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, CA 94104-4122,
who may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
Except as stated above, to the best of the Corporation's knowledge, as
of September 30, 1994, no person owned beneficially more than 5% of a 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 year ended June 30, 1994, Directors' fees amounted
to $42,314 for Global Fund, and $42,313 for International Bond Fund.
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
42
<PAGE>
(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 "Transaction information--Tax information,
Tax identification number" in the Funds'
prospectuses.)
Each Fund has elected to be treated as a regulated investment company
under the Code, and each has qualified as such since its inception. They intend
to continue to qualify for such treatment. Such qualification does not involve
governmental supervision or management of investment practices or policy.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% 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. The Funds intend to distribute at least
annually substantially all, and in no event less than 90%, of their investment
company taxable income and net realized capital gains.
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 a Fund, each 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 a
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 such an election, it may not be treated as having met
the excise tax distribution requirement.
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 prescribed by the Code) 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.
43
<PAGE>
Dividends from domestic corporations are expected to comprise some
portion of Global Fund's gross income. To the extent that such dividends
constitute a portion of the Fund's gross income, a portion 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 the Fund shares with respect to which the 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 for less than 46 days.
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 discussed
above. 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 are taxable to
shareholders as ordinary income.
Investment company taxable income generally includes dividends,
interest, net short-term capital gains in excess of net long-term capital
losses, and net foreign currency gains, if any, less expenses. Net realized
capital gains for a fiscal year are computed by taking into account any capital
loss carryforward of a Fund.
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 ($40,050 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 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
such 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.
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,
44
<PAGE>
and may 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 a 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 a Fund invests in stock of certain 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 each 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, each Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Funds' adjusted basis in these shares. No mark to market losses
would 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 Funds may elect to include as income and gain their share of
the ordinary earnings and net capital gain of certain foreign investment
companies in lieu of being taxed in the manner described above.
Equity options (including options on stock and options on narrow-based
stock indices) and over-the-counter options on debt securities written or
purchased by a 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 the Fund's holding period for the option and in
the case of an exercise of the option on the 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 stock or substantially identical stock in the 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 is exercised the character of
the gain or loss depends on the holding period of the underlying stock.
Many futures and forward contracts entered into by a Fund, 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 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. 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 of the Code requires that each 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. Each 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.
45
<PAGE>
Positions of a 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 a 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. The 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 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 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.
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 a 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 Funds which must
be distributed to shareholders in order to maintain the qualification of the
Funds as regulated investment companies and to avoid federal income tax at the
level of the Funds. In addition, if a Fund invests in certain high yield
original issue discount obligations issued by corporations, a portion of the
original issue discount accruing on such obligations 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
46
<PAGE>
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
To the maximum extent feasible the Adviser places orders for portfolio
transactions on behalf of each Fund through the Distributor which in turn places
orders on behalf of a Fund with issuers, underwriters or other brokers and
dealers. The Distributor receives no commission, fees or other remuneration from
a Fund for this service.
Allocation of brokerage is supervised by the Adviser.
International Bond Fund's purchases and sales of portfolio 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.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for each Fund's portfolios is to obtain the most
favorable net results, taking into account such factors as price, commission,
where applicable, (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 custodian of a Fund for
appraisal purposes, or who supply research, market and statistical information
to a 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, 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
Fund shares. 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 a Fund and to the Adviser, it is the
opinion of the Adviser that such information is only supplementary to 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 June 30, 1994, 1993 and 1992, Global Fund
paid brokerage commissions of $1,322,674, $1,040,167.26 and $547,134,
respectively. For the fiscal year ended June 30, 1994, $1,308,382, (98%) of the
total brokerage commissions paid by the Fund resulted from orders placed,
consistent with the policy of obtaining the most favorable net results, with
brokers and dealers who provided supplementary research, market and statistical
47
<PAGE>
information to the Fund or the Adviser. The amount of such transactions
aggregated $1,261,241,647 (97%) of all brokerage transactions. Such brokerage
was not allocated to any particular brokers or dealers or with any regard to the
provision of market quotations for purposes of valuing the Fund's portfolio or
to any other special factors.
In the fiscal years ended June 30, 1994, 1993 and 1992, International
Bond Fund paid no brokerage commissions.
The Directors of the Corporation review from time to time whether the
recapture for the benefit of each Fund of some portion of the brokerage
commissions or similar fees paid by a Fund on portfolio transactions is legally
permissible and advisable.
Average annual portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio 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.
Global Fund's portfolio turnover rate for the fiscal years ended June 30, 1994
and 1993 were 59.7% and 64.9%, respectively. International Bond Fund's portfolio
turnover rate for the fiscal years ending June 30, 1994 and 1993 were 232.9% and
249.7%, respectively. Recent economic and market conditions necessitated more
active trading, resulting in the higher portfolio turnover rates. A higher rate
involves greater transaction expenses to a Fund and may result in the
realization of net capital gains, which would be taxable to shareholders when
distributed. Purchases and sales are made for a Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objectives.
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 NASD
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.
48
<PAGE>
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 each Fund included in the Funds'
prospectuses 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, Massachusetts 02109, independent accountants, and 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 they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in the light of the objectives and policies of the
Fund, and such factors as its other portfolio holdings and tax considerations
and should not be construed as recommendations for similar action by other
investors.
The CUSIP number of Global Fund is 811150-10-1.
The CUSIP number of International Bond Fund is 811150-20-0.
Global Fund and International Bond Fund each have fiscal years ending
on June 30.
The law firm of Dechert Price & Rhoads is counsel for the Funds.
The Corporation employs State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02101 as Custodian for Global Fund. The
Corporation employs Brown Brothers Harriman and Co., 40 Water Street, Boston,
Massachusetts 02109 as Custodian for International Bond Fund. State Street Bank
and Trust Company and Brown Brothers Harriman and Co. have entered into
agreements with foreign subcustodians approved by the Directors of the
Corporation pursuant to Rule 17f-5 of the 1940 Act.
Scudder 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 each Fund. Global Fund pays
Scudder Service Corporation an annual fee of $17.55 for each account maintained
for a participant. International Bond Fund pays Scudder Service Corporation an
annual fee of $25.00 for each account maintained for a participant. Scudder
Service Corporation charged Global Fund aggregate fees of $1,818,074 during the
Fund's last fiscal year. Scudder Service Corporation charged International Bond
Fund aggregate fees of $1,706,494 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.
49
<PAGE>
The Funds' prospectuses and this 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 the 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
Each Fund's Annual Report for the fiscal year ended June 30, 1994,
together with the Report of Independent Accountants, is incorporated into this
Statement of Additional Information by reference in its entirety.
50
<PAGE>
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
<PAGE>
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
Fund
Annual Report
June 30, 1994
o For investors seeking long-term growth of capital from a professionally
managed portfolio consisting primarily of U.S. and foreign common stocks.
o A pure no-load(TM) fund with no commissions to buy, sell or exchange
shares.
<PAGE>
SCUDDER GLOBAL FUND
CONTENTS
2 Highlights
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
11 Investment Portfolio
21 Financial Statements
24 Financial Highlights
25 Notes to Financial Statements
30 Report of Independent Accountants
31 Tax Information
33 Officers and Directors
34 Investment Products and Services
35 How to Contact Scudder
HIGHLIGHTS
* Scudder Global Fund provided a 12.99% total return for its fiscal year
ended June 30, 1994, despite the higher interest rates and declining stock
prices that dominated world markets thus far in 1994. In the past six
months, the Fund returned -3.51%.
* Average annual total returns for the Fund have topped the MSCI World Index
by a considerable margin for the five years ended June 30, 1994. In the
most recent 12 months, the Fund has also outpaced the Index.
BAR CHART - Average Annual Total Returns
for Periods Ended June 30, 1994
CHART DATA:
MSCI World Index Scudder Global Fund
---------------- -------------------
One Year 10.23% 12.99%
Five Years 6.44% 10.72%
* During the period we shifted toward economically sensitive stocks due to
signs of strengthening global economic growth. The Fund's industrial sector
exposure reflects this shift, with manufacturing, metals and minerals, and
energy groups among the top five industry group weightings.
* Among the Fund's Japanese holdings, which comprise 14% of the portfolio, are
leading exporters we believe are likely to benefit from improved global
growth and any decline in the yen.
2
<PAGE>
LETTER FROM THE FUND'S CHAIRMAN
Dear Shareholders,
The world's financial markets have been a study in contrasts over the past
12 months. Fueled by historically low interest rates in many countries, bond and
stock markets soared in the second half of 1993. But financial markets have
cooled considerably since then. Early in the first quarter of 1994, U.S. Federal
Reserve interest rate hikes caused bond prices to fall across the maturity
spectrum. Yields also rose outside the United States, leading to declines in
most of the world's stock and bond markets. The declines in global markets were
unusual in that they were generally synchronized, further confusing investors
struggling to adapt to the changing investment landscape.
What do these events mean for investors? On the positive side, we expect a
moderate overall pace of economic expansion and low relative inflation
worldwide. Clearly, however, the markets are much more sensitive to a rebound in
inflation than they have been for some time. As a result, financial markets are
likely to be fairly volatile through 1994. Nevertheless, we expect global
markets to revert to more typically diverse behavior as investors again focus on
each country's individual strengths and weaknesses, which should create varied
opportunities.
In light of the current market environment, we encourage you to examine
your portfolio periodically to make sure your investments remain appropriate for
your time frame and financial goals. It may help to keep in mind that over the
long term, stocks have historically provided higher total returns than bonds,
which in turn have outperformed cash equivalents such as money market
funds--although stock and bond prices can fluctuate noticeably over short time
periods, as we have seen in 1994.
Please call Scudder Investor Information at 1-800-225-2470 if you have
questions about your Fund or your investments. Page 35 provides more information
on how to contact Scudder. Thank you for choosing Scudder Global Fund to help
meet your investment needs.
Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman
3
<PAGE>
Scudder Global Fund
Performance Update as of June 30, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Global Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $11,299 12.99% 12.99%
5 Year $16,639 66.39% 10.72%
Life of
Fund* $25,330 153.30% 12.42%
MSCI World Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $11,023 10.23% 10.23%
5 Year $13,665 36.65% 6.44%
Life of
Fund* $21,491 114.91% 10.14%
*The Fund commenced operations on July 23, 1986.
Index comparisons begin July 31, 1986.
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 June 30
Scudder Global Fund
Year Amount
- ----------------------
7/31/86 10000
87 12850
88 12286
89 15223
90 18268
91 17318
92 19758
93 22417
94 25330
MSCI World Index
Year Amount
- ----------------------
7/31/86 10000
87 14131
88 13983
89 15727
90 16845
91 16020
92 16697
93 19496
94 21491
Morgan Stanley Capital International (MSCI) World Index is a
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 June 30
- ----------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1987* 1988 1989 1990 1991 1992 1993 1994
---------------------------------------------------------------
Net Asset Value... $15.42 $14.47 $17.64 $20.36 $18.06 $19.56 $21.63 $23.93
Income Distributions $ -- $ .06 $ .14 $ .20 $ .37 $ .31 $ .16 $ .24
Capital Gains
Distributions..... $ -- $ .25 $ .08 $ .55 $ .83 $ .66 $ .34 $ .26
Fund Total
Return (%)........ 28.50 -4.45 23.90 20.00 -5.20 14.09 13.45 12.99
Index Total
Return (%)........ 41.31 -1.05 12.48 7.09 -4.90 4.22 16.75 10.23
</TABLE>
Performance is historical and 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.
Total returns in some periods were higher due to maintenance of the
Fund's expenses. See Financial Highlights on page 24.
4
<PAGE>
Portfolio Summary as of June 30, 1994
- ---------------------------------------------------------------------------
Geographical (Excludes 10% Cash Equivalents)
- ---------------------------------------------------------------------------
Europe 35%
U.S. & Canada 29% Investments in Italy, where combined
Pacific Basin 15% privatization has fueled investment
Japan 14% gains, now account for four percentage
Latin America 4% points of the Fund's equity holdings.
Other 3%
----
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)
- --------------------------------------------------------------------------
Financial 19%
Manufacturing 14%
Consumer Staples 8%
Metals and Minerals 7% We have increased our exposure to
Energy 7% economically sensitive companies and
Communications 6% pared back investment in banking stocks.
Construction 6%
Utilities 5%
Technology 5%
Other 23%
----
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. Samsung Electronics
Major Korean electronics manfacturer
2. Canon Inc.
Leading Japanese producer of visual image and information equipment
3. Internationale-Nederlanden Groep CVA
Banking and insurance holding company
4. Enron Corp.
Major U.S. producer of natural gas pipeline systems
5. Brown, Boveri & Cie. AG (Bearer)
Swiss manufacturer of electrical equipment
6. WMX Technologies Inc.
U.S. provider of solid and chemical waste management services
7. Hitachi Ltd.
Japanese general electronics manufacturer
8. Canadian Pacific Ltd.
Transportation and resource conglomerate
9. Toshiba Corp.
Japanese general electronics manufacturer
10. Kyocera Corp.
Japanese leading ceramic IC package manufacturer
Our focus on major Japanese players in the world's export markets reflects
our view that the yen should weaken, which should enhance profits for these
companies.
For more complete details about the Fund's Investment Portfolio,
see page 11. A monthly Investment Portfolio Summary is available
upon request.
5
<PAGE>
SCUDDER GLOBAL FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
June 30, 1994, marked the close of Scudder Global Fund's eighth fiscal
year. The Fund provided a relatively strong performance for the year, despite a
very difficult environment for global stock markets in the past five months. The
Fund's net asset value increased to $23.93 on June 30, 1994, from $21.63 a year
earlier. In addition, shareholders received $0.24 per share in income and $0.26
per share in capital gain distributions during the period. Combined, price
change and reinvested distributions provided a total return of 12.99% for the
fiscal year. By comparison, the unmanaged Morgan Stanley Capital International
(MSCI) World Index generated a 10.23% total return and the unmanaged S&P 500
returned 1.40% for the same period. In the six months ended June 30, 1994, the
Fund returned -3.51% versus 3.63% for the MSCI Index.
Importantly, over the five years ended June 30 the Fund generated an
average annual total return of 10.72%, considerably higher than the 6.44%
average annual return for the Index. For more information on the Fund's
performance, including comparisons to the Index, please turn to the Performance
Update on page 4.
Investment Markets Changed Course In 1994
From last July through January, 1994, global stock markets were fueled by
low relative global interest rates. The economies of the United States, much of
southeast Asia, and China gained momentum while Japan and Europe experienced
generally weak economic activity. In this environment, U.S. investors seeking
higher returns looked overseas, contributing to new highs in financial markets.
But in February, economic conditions and investor perceptions began to
change. European economic activity began to improve, and signs grew that the
Japanese recession was bottoming. In the United States, commodity prices and
productivity began to rise. Faced with these potential warning signs of higher
inflation, the Federal Reserve began raising short-term interest rates, the
first such Fed action in five years. In reaction, interest rates shot up around
the world, and stock and bond prices declined. Hedge funds and other leveraged
speculators accumulated significant losses, which prompted additional waves of
selling in global markets.
Since February, stock and bond prices have declined in most parts of the
world, the principal exceptions being the stock markets of Japan and Italy.
6
<PAGE>
Markets remained uneasy through March and April due to higher interest rates and
economic and political uncertainty. May was calmer, and securities prices began
to climb again. But in June, the U.S. dollar's dramatic decline versus the
Japanese yen and German mark raised the prospect of further increases in U.S.
interest rates and generally erased May's stock price gains.
BAR CHART - Most World Stock Markets Have Retreated In 1994
After Strong Gains in the Second Half of 1993
(Total returns in U.S. dollar terms)
CHART DATA:
6/30/93-12/31/93 12/31/93-6/30/94
---------------- ----------------
Australia 29.13% 0.25%
Canada 6.15% -9.50%
France 15.43% -6.93%
Germany 27.76% -1.29%
Hong Kong 66.52% -24.13%
Italy 4.21% 20.24%
Japan -11.36% 29.98%
Mexico 56.18% -21.77%
Switzerland 26.55% 1.21%
U.K. 18.37% -8.66%
U.S. 4.43% -3.78%
MSCI World Index 6.38% 3.63%
Scudder Global Fund 17.10% -3.51%
Source: Morgan Stanley Capital International,
International Finance Corporation
CALLOUT NEXT TO CHART - Stock market gains in the last
12 months primarily came
before global interest rates
began to move up in
February 1994.
Portfolio Strategy Reflects Expectations of Competing Demands for
Savings, Global Economic Growth
Our investment philosophy focuses on identifying important global
trends--such as industrial, demographic, technological, and political
developments--we think may either create or restrict investment opportunities.
Next, we evaluate a variety of countries to determine each one's unique
opportunities and risks, especially in political and regulatory arenas. After
making these evaluations, we focus on individual investments we believe will
7
<PAGE>
capitalize on global developments and local factors to offer strong long-term
performance.
Among the trends we observed were shifts in the use of U.S. savings, which
are in short supply. For some time, U.S. savers have been taking their money out
of insured bank deposits and putting it into money market funds and bond funds
and from there to equity investments. Most recently, foreign stock funds and
emerging market funds have been the beneficiaries of this flow of U.S.
investment capital. At this point, however, we believe further U.S. economic
growth will depend on domestic savings, which will serve to siphon off capital
that would otherwise have gone into the investment markets. Also, recent global
stock market activity clearly shows that individuals and institutions are no
longer relying on falling interest rates to support high investment returns, but
instead, are looking to companies whose earnings are expected to benefit from
economic growth.
We have adjusted the Fund's portfolio to match these new circumstances by
reducing our investment in banks around the world and increasing our exposure to
economically sensitive companies. For example, we purchased or added to
Australian and Canadian mineral companies such as Broken Hill Proprietary
(steel/oil), CRA (nonferrous metals), Cambior (gold), and Alcan (aluminum).
Additionally, we purchased oil companies Lasmo and Enterprise in the North Sea,
and Canadian Pacific, positions we believe will allow us to participate in
rising energy prices without exposing the portfolio to the potential volatility
of oil stocks dependent on the Middle East.
In Italy, continued privatization fueled investment returns and price gains
in the Fund's Italian investments. Italian holdings accounted for 4% of equities
on June 30. Our research also indicates that high-quality European life insurers
will likely benefit from the growing feeling among European citizens that
European social security systems will be unable to meet their financial
obligations. Some of the Continent's most respected insurance companies are
among the Fund's holdings, such as Dutch-based Internationale Nederlanden and
AEGON.
8
<PAGE>
In contrast to America's low savings rate, Japan has continued to maintain
a high savings rate. The yen's high value has made many Japanese investments
expensive relative to the rest of the world. But forces of change, including
ongoing regulatory and political reforms, are paving the way to new business and
investment opportunities and setting the stage for a possible decline in the
value of the yen which, in our opinion, will make Japanese products cheaper for
foreign consumers. Accordingly, we have emphasized holdings of major Japanese
players in the world's export markets, such as Canon, Hitachi, MEI, and Toshiba.
Another key global theme is the role of capital investment in world
economic growth. We believe capital spending will propel economic activity
thanks to a combination of first-time demand from emerging economies and the
need for replacement items in developed nations. We added a number of companies
related to infrastructure-building, including plant builders and components
manufacturers such as FLS, a Danish-based builder of cement plants, SKF, a
global producer of ball bearings, and Brown-Boveri, a maker of power plants.
Infrastructure-related holdings play a large role in the Fund's emerging
markets exposure, although we also favor companies that provide products or
services to the emerging markets' growing consumer populations. Emerging market
holdings accounted for 14% of equities on June 30, and are centered in Korea and
Mexico. All of these markets experienced price declines in 1994 after making
extraordinary gains in 1993. In South Korea, the stock market is temporarily
overshadowed by uncertainties surrounding the successor to recently deceased
North Korean leader Kim Il Sung and ongoing concern over North Korea's nuclear
capabilities. Although these markets may remain volatile over the short run, we
think our holdings continue to offer strong long-term growth potential.
Outlook
Until February 1994, investment capital had flowed into global stock
markets, fueled by the relative attractiveness of financial assets versus the
returns on direct investments in the economy. Now, however, stronger economic
growth in developed countries, along with governments and private entities
seeking capital, are making strong bids for the world's available savings. In
9
<PAGE>
recent years, particularly, many governments have worked to reduce budget
outlays, increase efficiency, and attract investment money by privatizing
utilities and financial institutions, adding to the world's supply of common
stocks.
Currently, the battle for the world's savings features on the one side the
savings-poor United States, which requires an injection of foreign savings to
aid its economy, currency value, and investment markets. On the other side is
Japan, which commands a disproportionate share of the world's savings but is
reluctant to deploy them outside of Japan.
We believe the foreign exchange markets are providing important signals
about the future availability of global capital. If the yen weakens, it implies
that the Japanese are prepared to sell their currency and fuel economic growth
in the United States and beyond. If the yen remains high versus the dollar, the
United States probably will be driven to raise interest rates as a way to reduce
spending and encourage savings. Higher rates, as we've already seen, can
sidetrack the world's financial markets and inhibit economic growth.
Despite these uncertainties, we continue to believe the opening of emerging
economies, the globalization of economic activity, and the development of new
technologies offer the world's entrepreneurs and investors a multitude of
opportunities. We remain committed to positioning Scudder Global Fund's
portfolio to benefit from the growth-oriented global economy we foresee and
believe the Fund is well diversified to help mitigate the effects of short-term
fluctuations.
Sincerely,
Your Portfolio Management Team
/s/William E. Holzer /s/Nicholas Bratt
William E. Holzer Nicholas Bratt
/s/Alice Ho
Alice Ho
Scudder Global Fund:
A Team Approach to Investing
Scudder Global 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 closely 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 our 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 William E. Holzer has had day-to-day responsibility
for Scudder Global Fund's worldwide strategy and investment themes since its
inception in 1986. Willy, who has 20 years' experience in global investing,
joined Scudder in 1980. Nicholas Bratt, Portfolio Manager, directs Scudder's
overall global equity investment strategies. Nick joined Scudder in 1976 and the
team in 1993. Alice Ho, Portfolio Manager, joined the team in 1994 and is also
responsible for implementing the Fund's strategy. Alice, who joined Scudder in
1986 as a member of the institutional and private investment counsel areas, has
worked as a portfolio manager since 1989.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of June 30, 1994
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
3.0% REPURCHASE AGREEMENTS
----------------------------------------------------------------------------------
33,355,000 Repurchase Agreement with
Kidder, Peabody & Co. Inc., dated
6/30/94 at 4.25% to be repurchased at
$33,358,938 on 7/1/94, collateralized by a
$26,765,000 U.S. Treasury Bond, 10.375%,
11/15/12 (Cost $33,355,000)....................... 33,355,000
----------
----------------------------------------------------------------------------------
7.0% COMMERCIAL PAPER
----------------------------------------------------------------------------------
42,717,000 Bell Atlantic Financial Services, 4.3%, 7/21/94.... 42,614,954
35,099,000 Ford Motor Credit Co., 4.23%, 7/5/94............... 35,082,503
----------
TOTAL COMMERCIAL PAPER (Cost $77,697,457).......... 77,697,457
----------
----------------------------------------------------------------------------------
4.0% BONDS
----------------------------------------------------------------------------------
CANADA 1.1% CAD 16,015,000 Government of Canada, 9.75%, 6/1/21................ 11,945,740
----------
ITALY 0.0% ITL 686,400,000 Medio Banca, 4.5%, 1/1/00 (c)...................... 317,604
----------
UNITED KINGDOM 1.3% GBP 9,770,000 United Kingdom Treasury Bond, 7.75%, 9/8/06........ 14,005,550
----------
UNITED STATES 1.6% 84,400,000 U.S. Treasury Separate Trading Registered
Interest and Principal, Zero Coupon, 8/15/18...... 12,705,576
33,325,000 U.S. Treasury Separate Trading Registered
Interest and Principal, Zero Coupon, 5/15/18...... 5,111,055
----------
17,816,631
----------
TOTAL BONDS (Cost $54,407,359)..................... 44,085,525
----------
----------------------------------------------------------------------------------
1.3% CONVERTIBLE BONDS
----------------------------------------------------------------------------------
INDONESIA 0.1% 1,250,000 Astra International, 6.75%, 5/30/06................ 1,006,250
----------
KOREA 0.5% 625,000 Cheil Food and Chemical Co., Ltd.,
3%, 12/31/06...................................... 1,112,500
2,700,000 Ssangyong Cement Industrial Co., Ltd.,
3%, 12/31/05...................................... 3,726,000
650,000 Ssangyong Oil Refining Co., Ltd.,
3.75%, 12/31/08................................... 799,500
----------
5,638,000
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER GLOBAL FUND
- --------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MEXICO 0.7% 8,200,000 Empresa ICA Sociedad Controladora S.A.,
5%, 3/15/04..................................... 7,462,000
----------
TOTAL CONVERTIBLE BONDS (Cost $13,607,096)....... 14,106,250
----------
--------------------------------------------------------------------------
1.8% PREFERRED STOCKS
--------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------
BRAZIL 0.4% 18,228,000 Centrais Electricas Brasileiras S/A
(Electric utility).............................. 4,011,053
----------
GERMANY 1.4% 4,050 SAP AG (Computer software)....................... 8,029,009
30,000 Spar Handels AG (Food and beverage
wholesaler and retailer) ....................... 6,880,526
----------
14,909,535
----------
NETHERLANDS 0.0% 58,960 Internationale-Nederlanden Groep CVA
(Banking and insurance holding company)......... 242,781
----------
TOTAL PREFERRED STOCKS (Cost $11,698,010)........ 19,163,369
----------
--------------------------------------------------------------------------
82.9% COMMON STOCKS
--------------------------------------------------------------------------
ARGENTINA 0.4% 253,143 Electricidad Argentina SA (ADR)
(Electric utility) (c).......................... 4,430,003
----------
AUSTRALIA 3.4% 638,173 Australian Gas & Light Co. (Electric and
gas utility).................................... 1,874,451
743,616 Broken Hill Proprietary (Petroleum,
minerals and steel)............................. 9,768,958
402,000 CRA Limited (Mining, manufacturing
and development) ............................... 5,228,244
1,148,000 Central Pacific Minerals* (Shale oil and
mineral development)............................ 922,665
232 GIO Australia Holdings (Insurance company)....... 402
3,074,000 M.I.M. Holdings Ltd. (Nonferrous metals
and coal)....................................... 6,468,538
250,000 Western Mining Corp. Ltd. (Mineral production
and exploration)................................ 1,316,998
3,711,000 Woodside Petroleum Ltd. (Major oil and
gas producer)................................... 12,472,645
----------
38,052,901
----------
BERMUDA 1.9% 378,150 Mid Ocean Limited* (Property and casualty
insurance company).............................. 9,501,019
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
570,200 Partnerre Holdings Ltd. (Property and casualty
insurance company)............................... 11,546,550
----------
21,047,569
----------
BRAZIL 0.1% 10,591,625 Companhia Siderurgica Belgo-Mineira
(Iron and steel producer)........................ 1,051,102
----------
CANADA 2.6% 187,487 Alcan Aluminum Ltd. (Manufacturer of
aluminum products)............................... 4,265,329
355,600 Cambior Inc. (Medium-sized gold producer
bringing into production a major mine
in Guyana)....................................... 4,568,758
162,800 Cambior Inc. Warrants* (expire 6/30/95)........... 589,200
1,036,885 Canadian Pacific Ltd. (Transportation and
resource conglomerate)........................... 15,292,262
157,000 Inco Ltd. (Producer of nickel and copper)......... 3,826,875
----------
28,542,424
----------
CHINA 0.8% 526 American Standard China (c)(d) ................... 5,260,000
13,920,000 Maanshan Iron & Steel Co. "H" (Steel producer).... 3,781,994
----------
9,041,994
----------
DENMARK 0.9% 117,000 FLS Industries "B" (Machinery for cement
and allied industries; manufacturer and
shipper of cement).............................. 9,922,192
----------
FRANCE 0.4% 387,540 Eurotunnel PLC SA* (Channel tunnel
consortium)..................................... 1,579,600
645,900 units Eurotunnel SA Units* (b).......................... 2,632,667
----------
4,212,267
----------
GERMANY 3.3% 38,200 Bayerische Vereinsbank AG (Universal bank)........ 10,585,454
34,650 Mannesmann AG (Producer of steel tubing and
machinery, industrial plant constructor, and
cellular franchise communications)............... 8,796,140
4,162 Mannesmann AG (New)............................... 1,046,091
2,446 Muenchener Rueckversicherungs AG
(Insurance company).............................. 4,180,545
2,199 Muenchener Rueckversicherungs AG
(Registered)..................................... 3,958,744
515 Muenchener Rueckversicherungs AG
Warrants* (expire 3/13/98)....................... 70,546
18,040 Siemens AG (Manufacturer of electrical and
electronic equipment)............................ 7,322,790
----------
35,960,310
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER GLOBAL FUND
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HONG KONG 1.9% 1,750,000 Cheung Kong Holdings Ltd.
(Real estate company)............................... 7,641,424
834,600 China Light & Power Co., Ltd. (Electric utility)..... 4,265,186
323,749 Jardine Matheson Holding Co., Ltd.
(Conglomerate: real estate, merchandising
engineering)........................................ 2,492,229
2,225,000 Mandarin Oriental (Luxury hotel chain)............... 3,166,540
390,258 New World Development Co., Ltd. (Property
investment and development, construction
and engineering, hotels and restaurants,
telecommunications)................................. 1,085,557
608,000 Television Broadcasts, Ltd. (Television
broadcasting) ...................................... 2,399,197
----------
21,050,133
----------
HUNGARY 0.4% 4,000 First Hungary Fund, Ltd. "A" (Investment
company) (c)....................................... 4,180,000
----------
INDIA 0.1% 137,000 Arvind Mills Ltd. (GDR)* (Cotton textile
manufacturer)...................................... 822,000
----------
INDONESIA 0.1% 180,000 Supreme Cable Co. (Manufacturer of power and
telecommunication cables).......................... 829,529
----------
ITALY 3.4% 143,000 Assicurazioni Generali SpA (Life and property
insurance company)................................. 3,662,957
4,465,000 Autostrade SpA (Highway construction)................ 5,669,206
474,000 Istituto Mobiliare Italiano SpA (Banking and
financial services)................................ 3,197,824
429,000 La Rinascente SpA di Risparmio (Department store
chain)............................................. 1,544,675
85,800 La Rinascente SpA di Risparmio Warrants*
(expire 12/31/99) (c).............................. 48,237
85,800 La Rinascente SpA Warrants* (expire 12/31/99) (c).... 103,520
208,000 Riunione Adriatica di Sicurta SpA (Insurance company) 3,330,782
4,322,020 S.I.P. SpA (Telecommunication services).............. 10,756,920
2,969,000 Societa Finanziaria Telefonica Torino SpA
(Telephone utility and telecommunication equipment
manufacturer).................................... 9,105,510
----------
37,419,631
----------
JAPAN 12.3% 130,000 Aoyama Trading Co., Ltd. (Men's clothing retailer)... 5,087,090
1,018,000 Canon Inc. (Leading producer of visual image and
information equipment).............................. 17,853,881
80,000 Fuji Photo Film Co., Ltd. (Leading film and camera
manufacturer)....................................... 1,784,232
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,490,000 Hitachi Ltd. (General electronics manufacturer)......... 15,558,304
107,000 Iino Kaiun Kaisha, Ltd. (Operator of tankers and
specialized carriers)................................. 769,075
230,000 Ito-Yokado Co., Ltd. (Leading supermarket retailer)..... 12,707,588
140,000 Koa Fire & Marine Insurance Co., Ltd.
(Insurance company)................................... 1,036,071
191,000 Kyocera Corp. (Leading ceramic IC package manufacturer). 14,270,514
775,000 Matsushita Electrical Industrial Co., Ltd.
(Manufacturer of consumer electronic products)........ 14,220,637
35,000 Nintendo Co., Ltd. (Game equipment manufacturer)........ 2,533,407
189,000 Secom Co., Ltd. (Electronic security system operator)... 13,124,753
66,400 Sega Enterprises Co., Ltd (Maker of commercial
amusement equipment).................................. 5,149,538
82,000 Shimachu Co., Ltd. (Furniture retailer)................. 3,300,222
7,000 Shimamura Co., Ltd. (Discount retailer)................. 358,367
213,000 Sony Corp. (Consumer electronic products)............... 13,063,927
1,823,000 Toshiba Corp. (General electronics manufacturing)....... 14,932,647
-----------
135,750,253
-----------
KOREA 4.9% 10,000 Baikyang (Underwear manufacturer) (c)................... 1,252,447
89,754 Cheil Food and Chemical Co., Ltd. (Leading sugar refiner
and integrated food processor)........................ 5,284,737
219,780 Daewoo Heavy Industries Ltd.* (Leading manufacturer of
heavy industrial equipment)........................... 3,631,040
3,594 Daewoo Heavy Industries Ltd.* (New)..................... 54,913
100,000 Hanil Bank* (Major commercial bank).................... 1,329,153
69,000 units Korea Asia Fund (Investment company) (b)................ 1,397,250
25,000 Korea Electric Power Co. (Electric utility)............. 832,273
140 units Korea Equity Trust (Investment company) (b)............. 1,452,500
75,207 Korea Express Co., Ltd. (General freight transport
company).............................................. 3,484,643
40,000 Korea Long Term Credit Bank (Major commercial bank)..... 1,207,417
7,516 Korea Long Term Credit Bank (New)....................... 214,736
80,000 Korea Zinc Co. (Zinc mining and manufacturing).......... 1,858,330
4,220 Lotte Confectionary Co. Ltd. (Major producer of
snacks) (c)........................................... 486,465
96,570 Oriental Brewery Co., Ltd. (Leading brewery)............ 2,399,183
25,000 Pang-Rim Spinning Co., Ltd. (Leading manufacturer of
cotton-polyester spun fabrics)........................ 1,583,804
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER GLOBAL FUND
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12,489 Samsung Electromechanics Co., Ltd. (Major
electronics parts company)............................. 646,926
1,444 Samsung Electromechanics Co., Ltd. (New)................. 74,799
27,643 Samsung Electronics Co., Ltd. (Major electronics
manufacturer) (c)...................................... 3,510,900
110,449 Samsung Electronics Co., Ltd. (GDR)...................... 6,488,879
7,737 Samsung Electronics Co., Ltd. (GDS) (sponsored).......... 454,549
57,000 Samsung Electronics Co., Ltd. (GDS)...................... 3,348,750
92,347 Samsung Electronics Co., Ltd. (GDS) (non-voting)......... 5,425,386
84,120 Samsung Heavy Industries Co., Ltd. (Machinery
manufacturer).......................................... 4,179,751
43 units Seoul International Trust (Investment company) (b)....... 2,128,500
37,206 Ssangyong Cement Industrial Co., Ltd.
(Major cement producer)................................ 1,201,649
----------
53,928,980
----------
MALAYSIA 0.3% 467,000 Telekom Malaysia Berhad* (Telecommunication services).... 3,480,721
----------
MEXICO 1.5% 804,000 Grupo Carso, S.A. de CV "A"* (Diversified industrial
group)................................................. 7,285,360
23,650 Grupo Financiero Banamex-Accival S.A. "L"
(Commercial bank)...................................... 146,591
540,000 Grupo Financiero Banamex-Accival, S.A. "C"
(Commercial bank)...................................... 3,442,739
88,000 Grupo Financiero Bancomer "C" (ADR) (Premier retail and
middle-market bank).................................... 1,958,000
228,800 Grupo Financiero Serfin (ADR) (Bank)..................... 4,032,600
----------
16,865,290
----------
NETHERLANDS 1.9% 107,069 AEGON Insurance Group NV (Insurance company)............. 5,476,509
372,475 Internationale-Nederlanden Groep CVA..................... 15,942,624
----------
21,419,133
----------
NETHERLANDS
ANTILLES 0.5% 89,000 Schlumberger Ltd. (Oil field services and electronics).... 5,262,125
----------
NEW ZEALAND 0.6% 2,600,000 Telecom Corp. of New Zealand (Telecommunications services) 7,011,740
----------
NORWAY 0.2% 200,000 Smedvig Tankships Ltd.* (Owner and operator of tankers)... 1,728,008
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PANAMA 0.5% 165,900 Banco Latinoamericano de Exportaciones, SA (ADR) (Bank)....... 5,246,588
----------
SOUTH AFRICA 0.3% 122,200 Impala Platinum Holdings (ADR) (Leading platinum producer).... 2,184,496
75,000 Rustenburg Platinum Holdings, Ltd. (ADR)
(Leading platinum producer)................................. 1,481,250
----------
3,665,746
----------
SPAIN 0.3% 163,000 Compania Telefonica Nacional de Espana SA
(Telecommunication services)................................ 2,192,312
35,000 Compania Telefonica Nacional de Espana SA (ADR)............... 1,408,750
----------
3,601,062
----------
SWEDEN 2.3% 366,000 Astra AB "A" (Free) (Pharmaceutical company).................. 7,382,409
715,500 S.K.F. AB "B" (Free) (Manufacturer of roller bearings)........ 12,569,811
62,500 Volvo AB "B" (Free) (Automobile manufacturer)................. 5,449,293
----------
25,401,513
----------
SWITZERLAND 7.3% 17,915 Brown, Boveri & Cie. AG (Bearer) (Manufacturer of electrical
equipment)................................................... 15,719,928
4,000 Ciba-Geigy AG (Bearer) (Pharmaceutical company)................ 2,433,605
13,735 Ciba-Geigy AG (Registered)..................................... 8,099,744
5,700 Landis & Gyr Holding AG (Registered) (Manufacturer of
electrical metering control and measuring equipment)......... 3,408,242
5,700 Landis & Gyr Holding AG Warrants* (expire 2/15/95)............. 4,686
9,621 Nestle SA (Registered) (Food manufacturer)..................... 8,075,429
17,015 Sandoz Ltd. AG (Registered) (Pharmaceutical company)........... 8,825,860
2,675 Schindler Holdings AG (PC) (Leading elevator and escalator
manufacturer)................................................ 3,258,945
21,670 Schweizerische Rueckversicherungs-Gesellschaft (Registered)
(Life, accident and health insurance company)................ 9,070,110
19,700 Schweizerische Rueckversicherings-Gesellschaft Warrants*
(expire 6/30/95)............................................. 58,897
19,700 Schweizerische Rueckversicherungs-Gesellschaft Warrants*
(expire 10/14/94)............................................ 44,173
14,218 Swiss Bank Corp. (Bearer) (Switzerland's second largest
universal bank).............................................. 4,186,975
662 Swiss Bank Corp. Warrants* (expire 6/30/95).................... 13,359
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER GLOBAL FUND
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
406 Swiss Bank Corp. Warrants* (expire 6/30/98).................... 7,890
----------
7,895 Union Bank of Switzerland (Bearer) (Switzerland's largest
universal bank).............................................. 6,856,838
1,180 Zurich Insurance Group (Bearer) (Insurance company)............ 1,159,774
8,970 Zurich Insurance Group (Registered) (Insurance company)........ 8,849,771
----------
80,074,226
----------
TAIWAN 0.5% 144,000 China Steel Corp. (ADR)* (Integrated steel mill)............... 2,736,000
17,726 President Enterprises Corp. (GDS) (Food and beverage
conglomerate)................................................ 274,753
134,719 President Enterprises Corp. (GDR)* ............................ 2,088,145
----------
5,098,898
----------
THAILAND 0.8% 34,900 American Standard Sanitaryware (Manufacturer of bathroom
fixtures).................................................... 1,090,888
132,800 Siam Cement Co., Ltd. (Construction materials and industrial
conglomerate)................................................ 6,199,823
89,650 Thai President Foods (Food processor) (c) ..................... 1,044,536
----------
8,335,247
----------
UNITED KINGDOM 8.4% 903,000 British Gas PLC (Integrated gas utility)....................... 3,735,333
975,964 Cable and Wireless PLC (International telecommunication
services in the United Kingdom and Hong Kong)................ 6,100,923
1,647,000 Enterprise Oil PLC (Oil and gas exploration and production).... 9,939,787
677,600 Great Universal Stores PLC (Catalog home shopping, retailing,
finance and property investment)............................. 5,867,363
6,067,285 Lasmo PLC (Oil exploration and production)..................... 12,595,732
140,900 London & Overseas Freighters (ADR) (Operator of a fleet of oil
tankers)..................................................... 1,972,600
1,356,000 PowerGen PLC (Electric utility)................................ 10,297,494
972,570 RTZ Corp. PLC (Mining and finance company)..................... 12,339,553
35,000 RTZ Corp. PLC (ADR)............................................ 1,820,000
1,680,000 Reuters Holdings PLC (International news agency)............... 11,111,350
1,544,900 St. James's Place Capital PLC (Money management and insurance). 3,696,057
1,063,000 Waste Management International PLC (Waste collection and
disposal services)........................................... 9,549,112
1,601,000 Willis Corroon Group PLC (Insurance brokers)................... 3,564,625
----------
92,589,929
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES 20.5% 84,800 AMBAC Inc. (Insurer of municipal bonds)........................ 3,328,400
121,000 AMR Corp.* (Leading airline)................................... 7,184,375
227,500 Airtouch Communications* (Telecommunication services).......... 5,374,688
241,100 American President Companies, Ltd. (Major containership
operator) ................................................... 5,394,613
284,200 Boeing Co. (Manufacturer of jet airplanes and missiles)........ 13,144,250
214,600 CBI Industries, Inc. (Design and manufacture of metal plate
structures).................................................. 6,008,800
117,000 CMS Energy Corp. (Holding company, electric and gas utility
in Michigan)................................................. 2,442,375
138,200 Chemical Banking Corp. (Commercial bank)....................... 5,320,700
261,468 Comerica Inc. (Bank holding company)........................... 7,386,471
250,000 Commonwealth Edison Co. (Electric utility in northern Illinois) 5,687,500
141,600 Consolidated Freightways Inc.* (Trucking, air freight)......... 3,363,000
479,000 Destec Energy Inc.* (Non-utility producer of cogeneration and
coal gasification power)..................................... 4,790,000
228,300 EXEL, Ltd. (Provider of liability insurance)................... 8,818,088
481,100 Enron Corp. (Major natural gas pipeline system)................ 15,756,025
114,200 Fluor Corp. (Engineering and construction company)............. 5,809,925
44,335 General Re Corp. (Property and casualty reinsurance)........... 4,832,515
150,000 Giant Group Ltd.* (Cement manufacturer)........................ 1,612,500
498,000 Homestake Mining Co. (Major international gold producer)....... 9,337,500
71,454 J.P. Morgan & Co., Inc. (Commercial banking and financial
services).................................................... 4,421,216
575,400 LaFarge Corp. (Leading cement producer)........................ 11,148,375
179,650 MBIA Inc. (Insurer of municipal bonds)......................... 10,307,419
334,900 MCI Communications Corp. (Long-distance telecommunications
network)..................................................... 7,409,663
227,500 Pacific Telesis Group (Telephone operating company in
California and Nevada)....................................... 7,024,063
107,500 Policy Management Systems Corp.* (Insurance company software
and services)................................................ 3,547,500
259,400 Public Service Co. of New Mexico* (Large electric utility
serving the Southwest)....................................... 2,983,100
194,700 Southdown Inc.* (Cement and concrete producer)................. 4,088,700
145,000 Surgical Care Affiliates Inc. (Outpatient surgical centers).... 1,921,250
91,000 Texas Instruments Inc. (Semiconductors and electronic
equipment)................................................... 7,234,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER GLOBAL FUND
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
54,000 Thermo Electron Corp. (Engineered industrial products and
environmental instruments)................................... 2,011,500
244,200 United Healthcare Corp. (Owner/manager of health maintenance
organizations and provider of other speciality health
services).................................................... 11,202,675
178,700 United Technologies Corp. (Aerospace, climate control systems
and elevators)............................................... 11,481,477
591,200 WMX Technologies Inc. (Solid and chemical waste management
services).................................................... 15,666,800
105,000 Xerox Corp. (Leading manufacturer of copier and duplicators)... 10,263,750
-----------
226,303,713
-----------
Venezuela 0.1% 195,000 Venezolana de Prerreducidos Caroni C.A. (GDS) (Manufacturer of
steel pellets)............................................... 1,462,500
-----------
TOTAL COMMON STOCKS (Cost $782,205,600)...................... 913,787,727
-----------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $972,970,522) (a) ................................... 1,102,195,328
=============
<FN>
* Nonincome producing security.
(a) The cost for federal income tax purposes was $974,960,552. At June 30, 1994, net unrealized appreciation for all
securities based on tax cost was $127,234,776. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of $166,371,048 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over market value of $39,136,272.
(b) 500 shares = 1 IDR unit (International Depository Receipt) for Korea Asia Fund
1,000 shares = 1 IDR unit for Korea Equity Trust
1,000 shares = 1 unit for Seoul International Trust
1 share = 1 unit for Eurotunnel SA (Bearer)
(c) Securities valued in good faith by the valuation committee of the Board of Directors. The cost of these securities
at June 30, 1994 aggregated $17,488,385. See Note A of the Notes to Financial Statements.
(d) Market value and cost reflect full payment. Remaining payments aggregating $3,506,000 are payable through August 12, 1995.
See page 5 for sector breakdown.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------
JUNE 30, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $972,970,522)
(Note A)................................................... $ 1,102,195,328
Forward foreign currency exchange contracts to buy, at
market (contract cost $592,365) (Notes A and D)........... 578,687
Receivable on forward foreign currency exchange contracts to
sell (Notes A and D)....................................... 53,087,000
Other receivables:
Fund shares sold........................................... 741,231
Dividends and interest..................................... 3,537,830
Other assets ................................................ 519,417
---------------
Total assets........................................... 1,160,659,493
LIABILITIES
Payables:
Investments purchased ..................................... $ 5,907,604
Fund shares redeemed ...................................... 1,175,557
Accrued management fee (Note C) ........................... 900,781
Forward foreign currency exchange contracts to buy
(Notes A and D) ......................................... 592,365
Forward foreign exchange contracts to sell, at market
(contract cost $53,087,000) Notes A and D) .............. 55,773,085
Other accrued expenses (Note C) ........................... 776,100
-------------
Total liabilities ..................................... 65,125,492
---------------
Net assets, at market value ................................. $ 1,095,534,001
===============
NET ASSETS
Net assets consist of:
Undistributed net investment income (Note E) .............. $ 6,097,828
Unrealized appreciation (depreciation) on:
Investments ............................................. 129,224,806
Foreign currency related transactions ................... (2,571,006)
Accumulated net realized gain (Note E) .................... 15,691,975
Capital stock ............................................. 457,877
Additional paid-in capital (Note E) ....................... 946,632,521
---------------
Net assets, at market value ................................. $ 1,095,534,001
===============
NET ASSET VALUE, offering and redemption price per share ....
($1,095,534,001/45,787,687 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares
authorized) ............................................... $23.93
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
SCUDDER GLOBAL FUND
- --------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED JUNE 30, 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of withholding taxes of $1,286,503) ........ $ 12,379,548
Interest .................................................. 9,978,592
------------
22,358,140
Expenses:
Management fee (Note C) ................................... $ 9,049,260
Services to shareholders (Note C) ......................... 2,251,940
Directors' fees (Note C) .................................. 42,314
Custodian fees ............................................ 905,763
Reports to shareholders ................................... 433,931
Auditing .................................................. 80,640
Legal ..................................................... 202,311
Federal and state registration ............................ 227,359
Other ..................................................... 170,023 13,363,541
------------ ------------
Net investment income ..................................... 8,994,599
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments ............................................. 15,996,187
Foreign currency related transactions ................... (307,156) 15,689,031
------------
Net unrealized appreciation (depreciation) during the
period on:
Investments ............................................. 57,665,377
Foreign currency related transactions ................... (1,985,068) 55,680,309
------------ ------------
Net gain on investment transactions ....................... 71,369,340
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 80,363,939
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 8,994,599 $ 3,864,568
Net realized gain from investment transactions .............. 15,689,031 18,880,108
Net unrealized appreciation on investment transactions
during the period ......................................... 55,680,309 35,816,395
-------------- --------------
Net increase in net assets resulting from operations ........ 80,363,939 58,561,071
-------------- --------------
Distributions to shareholders from:
Net investment income ($.24 and $.16 per share,
respectively) ............................................. (8,281,802) (3,189,697)
-------------- --------------
Net realized gains from investment transactions
($.26 and $.34 per share, respectively) ................... (8,616,585) (6,892,259)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................... 690,156,086 267,618,192
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 15,676,758 9,533,014
Cost of shares redeemed ..................................... (250,398,396) (119,773,682)
-------------- --------------
Net increase in net assets from Fund share transactions ..... 455,434,448 157,377,524
-------------- --------------
INCREASE IN NET ASSETS ...................................... 518,900,000 205,856,639
Net assets at beginning of period ........................... 576,634,001 370,777,362
-------------- --------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $6,097,828 and $2,967,081,
respectively).............................................. $1,095,534,001 $ 576,634,001
============== ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ................... 26,658,760 18,956,753
-------------- --------------
Shares sold ................................................. 28,794,350 13,100,696
Shares issued to shareholders in reinvestment of
distributions ............................................. 670,735 493,211
Shares redeemed ............................................. (10,336,158) (5,891,900)
-------------- --------------
Net increase in Fund shares ................................. 19,128,927 7,702,007
-------------- --------------
Shares outstanding at end of period ......................... 45,787,687 26,658,760
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
SCUDDER GLOBAL 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
JULY 23, 1986
(COMMENCEMENT
YEARS ENDED JUNE 30, OF OPERATIONS) TO
--------------------------------------------------------------- JUNE 30,
1994(d) 1993 1992 1991 1990 1989 1988 1987
--------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period................... $ 21.63 $ 19.56 $ 18.06 $ 20.36 $ 17.64 $ 14.47 $ 15.42 $ 12.00
------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income................. .23 .15 .19 .40 .19 .19 .18 .05
Net realized and unrealized gain
(loss) on investment transactions... 2.57 2.42 2.28 (1.50) 3.28 3.20 (.82) 3.37
------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations........ 2.80 2.57 2.47 (1.10) 3.47 3.39 (.64) 3.42
------- ------- ------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income................. (.24) (.16) (.31) (.37) (.20) (.14) (.06) -
Net realized gains on investment
transactions.......................... (.26) (.34) (.66) (.83) (.55) (.08) (.25) -
------- ------- ------- ------- ------- ------- ------- -------
Total distributions..................... (.50) (.50) (.97) (1.20) (.75) (.22) (.31) -
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $ 23.93 $ 21.63 $ 19.56 $ 18.06 $ 20.36 $ 17.64 $ 14.47 $ 15.42
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN (%)........................ 12.99 13.45 14.09 (5.20) 20.00 23.90 (4.45) 28.50**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions).. 1,096 577 371 268 257 91 81 102
Ratio of operating expenses, net to
average daily net assets (%).......... 1.45 1.48 1.59 1.70 1.81 1.98 1.71(b) 1.84*(a)
Ratio of net investment income to
average daily net assets (%).......... .97 .90 1.09 2.21 1.77 1.22 1.23 .63*
Portfolio turnover rate (%)............. 59.7 64.9 44.6 85.0(c) 38.3 30.7 53.8 32.2*
<FN>
(a) The Adviser did not impose all of its management fee during the period July 23, 1986 (commencement of operations) to
December 31, 1986, amounting to $.01 per share.
(b) The Adviser absorbed a portion of the Fund's expenses exclusive of management fees, amounting to $.03 per share.
(c) The portfolio turnover rate on equity securities and debt securities was 62.7% and 174.4%, respectively, based on average
monthly equity holdings and average monthly debt holdings.
(d) Per share amounts have been calculated using weighted average shares outstanding.
* Annualized
** Not Annualized
</FN>
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Global Fund (the "Fund") is a diversified series of Scudder Global
Fund, Inc., a Maryland corporation (the "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.
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 $20,633,712 (1.88% of net assets) and have been noted in the
investment portfolio as of June 30, 1994.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with 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.
25
<PAGE>
SCUDDER GLOBAL FUND
- --------------------------------------------------------------------------------
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.
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 from foreign currency related transactions.
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,
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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 an accrual basis. Original
issue discounts are accreted for both tax and financial reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments)
for the year ended June 30, 1994 aggregated $878,177,810 and $500,120,447,
respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
On September 7, 1993, the Fund's Board of Directors approved a new Investment
Management Agreement (the "Management Agreement") with Scudder, Stevens &
Clark, Inc. (the "Adviser"). 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
Management Agreement. The management fee payable under the
27
<PAGE>
SCUDDER GLOBAL FUND
- --------------------------------------------------------------------------------
Management Agreement is equal to an annual rate of 1% of the first $500,000,000
of average daily net assets and 0.95% of such assets in excess of $500,000,000
computed and accrued daily and payable monthly. Under the Investment Management
Agreement which was in effect prior to September 7, 1993 (the "Agreement"),
the Fund agreed to pay the Adviser a fee equal to an annual rate of 1% of the
Fund's average daily net assets, computed and accrued daily and payable
monthly. Both the Management Agreement and the Agreement provide 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. For the year ended June 30, 1994, the fee
pursuant to the Management Agreement amounted to $9,049,260, which was
equivalent to an annualized effective rate of .98% of the Fund's average
daily net assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is transfer, dividend-paying and shareholder service agent for the Fund.
Included in services to shareholders is $1,818,074 charged to the Fund by SSC
during the year ended June 30, 1994, of which $173,242 is unpaid at
June 30, 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 June 30, 1994, Directors' fees aggregated $42,314.
D. COMMITMENTS
- --------------------------------------------------------------------------------
As of June 30, 1994, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
($2,699,763).
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE (U.S.$)
- ---------------------------- --------------------------- ------------------------ ----------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 3,933,449,800 U.S. Dollars 39,893,000 4/25/96 (2,613,003)
Japanese Yen 1,219,389,480 U.S. Dollars 13,194,000 7/1/96 (73,082)
U.S. Dollars 592,365 Swedish Krona 4,539,293 7/5/94 (13,678)
----------
(2,699,763)
==========
</TABLE>
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
E. RECLASSIFICATION OF CAPITAL ACCOUNTS
- --------------------------------------------------------------------------------
As required, effective July 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
$2,679,241 to increase undistributed net investment income, $2,685,124 to
decrease accumulated net realized gains and $5,883 to increase additional
paid-in capital. 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 have not been
restated to reflect this change in presentation.
F. CONTINGENCIES
- --------------------------------------------------------------------------------
In November 1993 a shareholder of the Fund filed a class action lawsuit against
the Fund and other mutual funds that held shares of Policy Management Systems
Corporation. The lawsuit, as amended in May 1994, alleges that the Fund, the
Fund's investment adviser, the Fund's underwriter, and other mutual funds
violated their fiduciary duty to shareholders by purchasing or continuing to
hold shares of Policy Management after it was reported that Policy Management
may have misstated earnings over the past three years. The lawsuit also alleges
that the Fund and other defendants violated their fiduciary duty by failing to
disclose to shareholders that they would purchase or continue to hold shares of
companies such as Policy Management. The Fund's management believes the
lawsuit is without merit and intends to defend the suit vigorously. Management
is of the opinion that the outcome of the suit will not have a material adverse
effect on the Fund's net asset value.
29
<PAGE>
SCUDDER GLOBAL FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE SHAREHOLDERS OF
SCUDDER GLOBAL FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Global Fund including the investment portfolio, as of June 30, 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 seven years in the period then ended
and for the period July 23, 1986 (commencement of operations) to June 30, 1987.
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
June 30, 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 Fund as of June 30, 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 seven
years in the period then ended, and for the period July 23, 1986 (commencement
of operations) to June 30, 1987 in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 15, 1994
30
<PAGE>
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund paid distributions of $.26 per share from net capital gains during
its fiscal year ended June 30, 1994.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$13,677,720 as a long-term capital gain dividend for the fiscal year ended
June 30, 1994.
For its fiscal year ended June 30, 1994, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was $.145 per share (representing a total of $6,678,637). The total
amount of taxes paid by the Fund to such countries was $.028 per share
(representing a total of $1,286,503).
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.
31
PAGE 32 WAS INTENTIONALLY LEFT BLANK
<PAGE>
OFFICERS AND DIRECTORS
Edmond D. Villani*
Chairman of the Board and Director
William E. Holzer*
President
Paul Bancroft III
Director; Venture Capitalist and Consultant
Nicholas Bratt*
Director
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*
Director and Vice President
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.
33
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Money market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax free money market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Value Fund
Scudder Balanced Fund The Japan Fund
Scudder Growth and Income Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-end Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea 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.
34
<PAGE>
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 Los Angeles
Boston New York
Chicago Portland, OR
Cincinnati San Francisco
Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust(TM), an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts which service needs of banks and
utilizes certain portfolios of other institutions, call:
Scudder Fund, Inc.* ($100,000 1-800-854-8525.
minimum), call: 1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
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.
</TABLE>
35
<PAGE>
Celebrating 75 Years of Serving Investors
- --------------------------------------------------------------------------------
This year marks the 75th anniversary of the founding of Scudder, Stevens &
Clark, 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 35 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
International
Bond Fund
Annual Report
June 30, 1994
o For investors seeking an easy and low-cost way to broaden their
income-oriented investments beyond U.S. borders. Invests primarily in
high-grade bonds denominated in foreign currencies.
o A pure no-load(TM) fund with no commissions to buy, sell or exchange
shares.
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
CONTENTS
2 Highlights
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
11 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
27 Report of Independent Accountants
28 Tax Information
29 Officers and Directors
30 Investment Products and Services
31 How to Contact Scudder
HIGHLIGHTS
* Interest rates moved higher in bond markets worldwide, sparked by
short-term rate hikes in the United States. The Fund's net annualized
30-day yield on June 30, 1994, was 8.14%, compared with 6.41% one year
ago.
* After achieving solid performance during the first half of the fiscal
year--June to December 1993--the Fund's earlier gains were erased by
declining bond values across global markets, resulting in a total return
of -2.83% for the 12-month period.
* The Fund's defensive strategy of hedging foreign currencies back to U.S.
dollars helped to preserve gains early in the fiscal year, but hampered
performance as the dollar declined against key currencies in recent
months.
* Japanese government bonds generally were the strongest performing sector
in dollar terms throughout the 12 months.
* Your Fund upheld its "5-star" status, the highest rating awarded by
Morningstar, a respected independent mutual fund monitor. Morningstar
ratings reflect risk-adjusted three-year performance and are updated
monthly. A "5-Star Fund" must be in the top 10% of funds evaluated in its
category. Past performance, of course, is no guarantee of future results.
2
<PAGE>
LETTER FROM THE FUND'S CHAIRMAN
- --------------------------------------------------------------------------------
Dear Shareholders,
The world's financial markets have been a study in contrasts over the past
12 months. Fueled by historically low interest rates in many countries, bond and
stock markets soared in the second half of 1993. But financial markets have
cooled considerably since then. Early in the first quarter of 1994, U.S. Federal
Reserve interest rate hikes caused bond prices to fall across the maturity
spectrum. Yields also rose outside the United States, leading to declines in
most of the world's stock and bond markets. The declines in global markets were
unusual in that they were generally synchronized, further confusing investors
struggling to adapt to the changing investment landscape.
What do these events mean for investors? On the positive side, we expect a
moderate overall pace of economic expansion and low relative inflation
worldwide. Clearly, however, the markets are much more sensitive to a rebound in
inflation than they have been for some time. As a result, financial markets are
likely to be fairly volatile through 1994. Nevertheless, we expect global
markets to revert to more typically diverse behavior as investors again focus on
each country's individual strengths and weaknesses, which should create varied
opportunities.
In light of the current market environment, we encourage you to examine
your portfolio periodically to make sure your investments remain appropriate for
your time frame and financial goals. It may help to keep in mind that over the
long term, stocks have historically provided higher total returns than bonds,
which in turn have outperformed cash equivalents such as money market
funds?--?although stock and bond prices can fluctuate noticeably over short time
periods, as we have seen in 1994.
Please call Scudder Investor Information at 1-800-225-2470 if you have
questions about your Fund or your investments. Page 31 provides more information
on how to contact Scudder. Thank you for choosing Scudder International Bond
Fund to help meet your investment needs.
Sincerely,
/s/ Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder International Bond Fund
3
<PAGE>
SCUDDER
PERFORMANCE UPDATE as of June 30, 1994
<TABLE>
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -------------------------------------------------------------------------------
Scudder International Bond Fund
- -------------------------------
Total Return
Period Growth ---------------
Ended of Cumu- Average
6/30/94 $10,000 lative Annual
- ----------------------------------
<S> <C> <C> <C>
1 Year $ 9,717 -2.83% -2.83%
5 Year $18,897 88.97% 13.57%
Life of
Fund* $19,304 93.04% 11.59%
</TABLE>
<TABLE>
Salomon Brothers Non-U.S. Dollar
World Government Bond Index
- --------------------------------
Total Return
Period Growth ---------------
Ended of Cumu- Average
6/30/94 $10,000 lative Annual
- ----------------------------------
<S> <C> <C> <C>
1 Year $10,946 9.46% 9.46%
5 Year $18,012 80.12% 12.48%
Life of
Fund* $17,704 77.04% 10.13%
</TABLE>
* The Fund commenced operations on July 6, 1988.
Index comparisons begin July 31, 1988.
<TABLE>
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 June 30
Scudder International Bond Fund
<CAPTION>
Year Amount
- ----------------
<S> <C>
7/31/88 $10,000
89 10,216
90 12,013
91 13,800
92 17,699
93 19,866
94 19,304
</TABLE>
<TABLE>
Salomon Brothers Non-U.S. Dollar
World Government Bond Index
<CAPTION>
Year Amount
- ---------------
<S> <C>
7/31/88 $10,000
89 9,829
90 10,544
91 11,581
92 14,741
93 16,175
94 17,704
</TABLE>
Salomon Brothers Non-U.S. Dollar World Government Bond Index consists of
worldwide fixed-rate government bonds with remaining maturities greater than
one year. Index returns assume reinvestment of dividends, and unlike Fund
returns, do not reflect any fees or expenses.
<TABLE>
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.
- -----------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------------------
Yearly periods ended June 30
<CAPTION>
<C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994
----------------------------------------------
Net Asset Value . . . . . . $11.27 $12.08 $12.35 $13.68 $13.57 $11.97
Income Dividends . . . . . . $ 1.00 $ 1.09 $ 1.21 $ 1.09 $ 1.04 $ .91
Capital Gains
Distribution . . . . . . . . $ -- $ -- $ .29 $ .81 $ .62 $ .39
Fund Total Return (%) . . . 2.16 17.59 14.88 28.25 12.24 -2.83
Index Total Return (%) . . . -1.69 7.25 9.84 27.29 9.74 9.46
</TABLE>
Performance is historical and 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 Adviser had not temporarily capped
expenses, the average annual total return for the Fund for the one year, five
year and life of Fund periods would have been approximately -2.83%, 13.17% and
10.52%, respectively.
4
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1994
<TABLE>
- --------------------------------------------------------------------------------
MARKET EXPOSURE
- --------------------------------------------------------------------------------
Bond Market Net Currency
Holdings Exposure (a)
----------- ------------
<S> <C> <C> <C>
Australia 8.2% -2.0% The Fund finished the
Belgium 0.0 -4.2 fiscal year with much
Canada 12.1 8.0 of the portfolio
Denmark 12.6 2.5 invested in European
ECU 12.3 10.2 bond markets, while
France 6.1 -6.2 hedging the bulk of
Germany 3.8 -3.0 its currency exposure
Italy 5.4 5.0 back to U.S. dollars
Mexico 2.1 2.1 in expectation of a
Netherlands 0.0 -4.2 strengthening dollar.
New Zealand 2.9 0.8
Spain 4.7 0.5
Sweden 7.0 3.6
Switzerland 0.0 -4.4
Turkey 0.9 0.9
U.K. 7.8 2.3
U.S. 14.1 88.1
------ ------
100.0% 100.0%
====== ======
<FN>
(a) Currency exposure after taking into account the effects of foreign currency
options, futures, and forward contracts.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------------
____________________________________
/ / Less than 1 year 13% The fund has recently focused
/ / 1 - 3 years 7% on longer-maturity issues in
/ / 3 - 5 years 7% European bond markets to
/ / 5 - 7 years 5% take advantage of high real
/ / 7 - 10 years 25% (inflation-adjusted) yields.
/ / Greater than 10 years 43%
----
100%
====
____________________________________
Weighted average effective
maturity: 11 years
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 listing of the Investment Portfolio Summary is available upon request.
5
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
Scudder International Bond Fund's performance during the fiscal year ended
June 30, 1994, featured solid performance in the first six months which was
overshadowed by losses during the second half of the fiscal year as virtually
all fixed-income investments declined in the face of rising yields.
Performance Review
Volatility in world bond markets during 1994 took a toll on your Fund's
12-month results. The Fund's share price declined from $13.57 at the start of
the Fund's fiscal year to $11.97 on June 30, after income distributions of $0.91
per share and capital gain distributions of $0.39 per share paid to shareholders
during the year. The Fund delivered positive results in the first half of the
fiscal year. The six-month total return (which reflects change in share price
and reinvested distributions) from June 30, 1993, through December 31, 1993, was
5.57%. But falling prices in 1994 resulted in a -2.83% total return for the 12
months ended June 30, 1994. The Fund's 30-day net annualized yield on June 30,
1994, was 8.14%, higher than its 6.41% yield a year ago, reflecting the rise in
global interest rates.
During the 12-month period ended June 30, 1994 the Fund's bond market
benchmark, the Salomon Brothers Non-U.S. Dollar World Government Bond Index,
posted a return of 9.46%, while the Fund's peer group of general world income
funds, as measured by Lipper Analytical Services, Inc., returned 0.34%. For the
one-year period, Lipper ranked your Fund 72 out of 85 comparable funds. Despite
price declines in recent months, however, the Fund has performed exceptionally
well during the past few years. On a longer-term basis, the Fund still stands
among the top funds in its class?--?it was the number one fund out of 25 funds
for the five-year period ended June 30, as ranked by Lipper. Past performance,
however, does not guarantee future results.
Challenging Investment Conditions in 1994
The first half of the fiscal year featured rising bond prices as interest
rates worldwide reached new lows against the backdrop of slow economic growth in
most developed nations, namely European countries, Japan, and the United States.
At the same time, European currencies tied to Europe's Exchange Rate Mechanism
experienced volatility immediately after member countries relaxed the trading
ties among their currencies in August of 1993, allowing currencies to fluctuate
6
<PAGE>
within a wider range. Major European currencies such as the German mark, French
franc, and Dutch guilder gained relative strength (as did the U.S. dollar),
while currencies of smaller, peripheral European markets such as the Italian
lira and Spanish peseta weakened. By October 1993 relative calm had returned to
Europe's currency markets.
The favorable interest rate environment of 1993 came to an abrupt end
early in 1994. U.S. economic growth was unusually strong in the fourth quarter
of 1993 and soon afterward, Europe began to show signs of emerging from
recession. In February, the Federal Reserve raised U.S. short-term interest
rates for the first time in five years, igniting a period of turbulence that
spared neither the world's major bond and stock markets nor its emerging
markets. Subsequent Fed rate hikes through the spring months led to higher bond
yields and additional price declines, fueled by fears about the prospect of
synchronized global growth and rising inflation. Contrary to investors' fears,
however, inflation rates in many countries were not only stable but falling.
While rising short-term interest rates were the catalyst that moved
markets lower, they by no means were the only force at work. Forced selling by
highly leveraged speculative investors faced with steadily rising rates spilled
from one bond market to another. Another important factor was the growing real
economy's increased demand for global savings, which siphoned money away from
the investment markets.
Even as these events unfolded in 1994, most currencies remained
surprisingly stable until June, when the U.S. dollar weakened dramatically
against the German mark and particularly the Japanese yen.
Portfolio Strategy Contended with
the Changing Market Climate
Throughout the fiscal year, the Fund continued to blend currency and bond
management strategies, adapting them as the investment environment evolved.
Generally speaking, the Fund employed a "value" approach--that is buying
favorably priced issues that offer the most attractive yields. While we believe
this approach remains sound, it served to undermine performance during the 12
months as a whole, as interest rates in "value" markets--Canada, Australia, and
Sweden, for example?--?retreated the most. In a period that was universally bad
for global bonds, the most expensive bond markets where prices had risen the
most, such as the United States, Germany, and Japan, performed best.
7
<PAGE>
At the start of the fiscal year, we structured the portfolio to benefit
from declining interest rates and rising currency values in several developed
markets, including the United States. During this period, the Fund emphasized
the stronger currencies of Japan, Belgium, Germany, France, and the United
States while investing in bonds from countries such as the United Kingdom,
France, and Denmark--where interest rates were declining--to capture price
appreciation. In addition, the Fund employed defensive hedging techniques to
convert foreign currency exposure back to U.S. dollars. In some instances, this
strategy meant your Fund held positions in a particular country's bonds,
virtually without exposure to that same country's currency, as was the case in
some of the smaller European markets. In addition, we purchased dollar-linked
investments, again to help manage foreign currency risk. These strategies worked
well as the Fund's European bond holdings, by and large, rose in value while a
number of currencies we elected to avoid suffered losses. The Fund also invested
selectively in emerging debt markets, such as Mexico and Argentina, which
performed exceedingly well but began to look overvalued by the end of 1993. As a
result, we pared back these holdings to lock in profits, a fortuitous move as
the emerging debt market subsequently became the sector hardest hit by the 1994
market turmoil. Our current position in these markets stands at approximately
10%.
Strategic Adjustments Amidst Rising Global Interest Rates
As European interest rates rose early in 1994, we began aggressively to
remove U.S. dollar currency hedges on European currencies that had begun to
stabilize, enabling the Fund to benefit from rising currency values in Europe
relative to the United States. At the same time, we continued to hedge some of
the Fund's European currencies into Japanese yen, which in 1994 alone
appreciated 12% relative to the dollar. However, we chose to avoid Japanese
bonds which, as it turned out, were generally the best performing bonds over the
course of the fiscal year, though even they did not escape declines.
The Fund's holdings in Canadian bonds endured blows both from their
declining prices and weakness in the Canadian dollar. Nevertheless, we continued
to hold these positions as they offered convincing value based on their low
prices and solid fundamentals. We believe Canada's unusually high real
(inflation-adjusted) interest rates are unsustainable given that inflation is
currently running at a -2% annualized rate. Should interest rates fall, Canadian
bonds stand to appreciate in value.
8
<PAGE>
Another factor that hindered performance was the portfolio's average
effective maturity during the fiscal year. Because the growth landscape remained
bleak for much of the period in many economies in Europe and in Japan, we
believed that long-term interest rates still had room to fall. As a result, the
Fund's average-effective maturity was approximately 11 years, somewhat longer
than the 7.1 year average-effective maturity of the Salomon Brothers Non-U.S.
Dollar World Government Bond Index, its benchmark. But as interest rates rose,
bonds with longer maturities declined in price more than those with shorter
maturities, as you would expect. In recent months, we took steps to shorten
average effective maturity, which did help mitigate price volatility.
Recently, we also selectively reduced your Fund's investments in bonds
from the larger "core" European markets, such as Germany, the United Kingdom,
and France, in favor of U.S. bonds whose prices had fallen to attractively low
levels. We also began reducing currency exposure to the yen, expecting that its
strength was likely to wane, while hedging key European currencies back to U.S.
dollars. As a result, the Fund missed some of the currency gains that could have
been garnered from the yen, which remained extraordinarily strong through June,
and the weak dollar, whose value declined significantly in June.
Outlook: Growth, But How Much?
We believe the pace of economic recovery in Europe and Japan may not be as
strong as recent signs suggest. As with the United States, these economies may
soon discover that growth, while positive, remains slow. Much of Europe's growth
has been powered by exports to the United States and other countries. Now that
European currencies have become 20% more expensive relative to the dollar,
exporting to the United States will become more difficult. At the same time,
there is little evidence of domestic demand in Europe picking up to any
significant degree. To help sustain growth, we think governments must lower
interest rates. Consequently, we expect Germany's Bundesbank, which sets the
monetary tone for the rest of Europe, to cut interest rates. Consistent with
this view, underscored by significantly higher interest rates worldwide, we are
again lengthening average effective maturities in European bond markets. In
9
<PAGE>
addition, we will continue to minimize foreign currency exposure, believing the
U.S. dollar has reached its lows against key currencies and will begin to
strengthen. Japan may even find that it's worthwhile to allow the yen's value to
come down to rescue the Japanese economy's all-important export sector.
In the months ahead, we will maintain our strategy of emphasizing bond
markets where real yields are high, to benefit from a potential decline in
interest rates, while also investing in issues selling at attractively low
prices. At the same time, we plan to increase our position in Latin American
countries by capturing buying opportunities when bond prices in those markets
are weak. Meanwhile, currencies we presently favor include U.S. and Canadian
dollars. If European currencies weaken enough, we will begin to add them back
into the portfolio by removing dollar hedges, as we did earlier in 1994.
As always, we remain attentive to global interest rate, economic, and
currency trends. Any divergence in market patterns should afford opportunities
to emphasize investments in markets poised to perform well and to reduce
investments from markets that have begun to waver.
Sincerely,
Your Portfolio Management Team
/s/Lawrence Teitelbaum /s/Adam M. Greshin
Lawrence Teitelbaum Adam M. Greshin
Scudder International
Bond Fund:
A Team Approach to Investing
Scudder International Bond 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 closely 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 our 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 Lawrence Teitelbaum assumed responsibility for the
Fund's day-to-day management when he joined Scudder in 1993, bringing more than
10 years of experience managing foreign and domestic fixed-income assets. Larry
also serves as a Portfolio Manager for Scudder Short Term Global Income Fund.
Adam M. Greshin, Portfolio Manager, has had responsibility for researching,
analyzing, and selecting international bonds for the Fund since 1988. Adam
joined Scudder in 1986 and also has experience as a Japanese market analyst.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of June 30, 1994
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
81.8% FOREIGN DENOMINATED DEBT OBLIGATIONS
---------------------------------------------------------------------------------
AUSTRALIAN DOLLARS 7.1% AUD 23,700,000 Commonwealth of Australia, 6.75%, 11/15/06. . . 13,547,406
32,520,000 Commonwealth of Australia, 9%, 9/15/04. . . . . 22,685,523
42,000,000 New South Wales Treasury Bond, 6.5%, 5/1/06 . . 22,883,237
11,790,000 News Corp. Ltd. Global Holdings,
8.625%, 2/7/14 . . . . . . . . . . . . . . . 6,560,312
39,700,000 Queensland Treasury Corp., 6.5%, 6/14/05 . . . 22,087,387
-----------
87,763,865
-----------
BRITISH POUNDS 7.0% GBP 2,250,000 European Investment Bank, 9.5%, 12/9/09 . . . . 3,642,364
24,100,000 United Kingdom Treasury Bond, 7%, 11/6/01 . . . 33,837,519
32,205,000 United Kingdom Treasury Bond, 8%, 6/10/03 . . . 47,424,555
1,000,000 United Mexican States, 12.25%, 12/3/98. . . . . 1,644,892
-----------
86,549,330
-----------
CANADIAN DOLLARS 11.4% CAD 49,125,000 Government of Canada, Residual Strip, 3/15/14 . 5,693,748
9,735,000 Government of Canada, 6.25%, 2/1/98 . . . . . . 6,481,248
140,330,000 Government of Canada, 8%, 6/1/23 . . . . . . . 87,157,711
10,000,000 Government of Canada, 9.75%, 6/1/21 . . . . . 7,452,081
33,500,000 Government of Canada Separate Trading
Registered Interest and Principal,
Zero Coupon, 6/1/15 . . . . . . . . . . . . . 3,468,566
3,000,000 Mobil Oil Canada, Ltd., 9%, 5/2/97 . . . . . . 2,140,920
10,000,000 Mobil Oil Canada, Ltd., 8.125%, 1/20/98 . . . . 6,932,143
11,735,000 Ontario Hydro, 7.25%, 3/31/98 . . . . . . . . 7,933,354
10,000,000 Province of Manitoba, 9.25%, 5/21/97 . . . . . 7,299,808
8,000,000 Province of Ontario, 10%, 9/30/96 . . . . . . 5,892,773
-----------
140,452,352
-----------
DANISH KRONER 12.5% DKK 107,800,000 Byggeriets Realkreditfond, 9%, 10/1/06. . . . . 17,218,233
50,000,000 Kingdom of Denmark, 7%, 11/10/24 . . . . . . . 6,537,442
645,000,000 Kingdom of Denmark, 7%, 12/15/04 . . . . . . . 93,962,181
184,000,000 Kingdom of Denmark, 9%, 11/15/00 . . . . . . . 30,688,814
39,400,000 Kreditforeningen Danmark, 10%, 10/1/07. . . . . 6,387,992
-----------
154,794,662
-----------
DEUTSCHEMARKS 3.8% DEM 19,000,000 Federal Republic of Germany, 6.625%, 7/9/03 . . 11,520,340
68,500,000 State of Baden-Wuerttemberg, 6.5%, 1/18/24 . . 35,356,231
-----------
46,876,571
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EUROPEAN CURRENCY
UNITS 10.9% ECU 5,000,000 Council of Europe, 9%, 11/14/01 . . . . . . . 6,312,017
3,500,000 Credit Local, 8.5%, 1/30/97 . . . . . . . . 4,317,244
13,100,000 Eurofima, 8.5%, 6/4/07 . . . . . . . . . . . 15,879,491
21,700,000 Government of France OAT, 8.25%, 4/25/22. . . 25,743,652
17,000,000 Government of France OAT, 8.5%, 3/15/02 . . . 21,112,501
10,200,000 Republic of Italy, Principal Strips, 3/7/11 . 2,635,917
10,000,000 Republic of Italy, 9.25%, 3/7/11 . . . . . . 12,202,148
32,500,000 Republic of Portugal Global, 6%, 2/16/04 . . 33,522,157
10,400,000 United Kingdom Treasury Bond,
9.125%, 2/21/01 . . . . . . . . . . . . . . 13,279,428
-----------
135,004,555
-----------
FRENCH FRANCS 6.1% FRF 30,000,000 Credit Local de France, 7.5%, 3/31/04 . . . . 5,448,479
25,000,000 Credit National, 9%, 11/4/02 . . . . . . . . 4,896,911
50,000,060 Government of France, Principal Strips,
10/25/99 . . . . . . . . . . . . . . . . . 6,386,624
92,000,000 Government of France OAT, 5.5%, 4/25/04 . . . 14,511,628
220,000,000 Government of France, 6.75%, 10/25/03 . . . . 38,220,425
27,400,000 Government of France, 8.5%, 10/25/08 . . . . 5,343,491
-----------
74,807,558
-----------
ITALIAN LIRE 5.4% ITL 32,200,000,000 Republic of Italy, 10%, 8/1/98 . . . . . . . 20,051,286
70,300,000,000 Republic of Italy, 12%, 1/1/02 . . . . . . . 46,658,477
-----------
66,709,763
-----------
MEXICAN PESOS 2.1% MXN 6,862,500 Certificados de la Tesoreria, 7/21/94 . . . . 2,006,825
32,942,320 Certificados de la Tesoreria, 7/28/94 . . . . 9,605,088
25,304,550 Certificados de la Tesoreria, 10/13/94. . . . 7,113,533
7,428,730 Certificados de la Tesoreria, 12/22/94. . . . 2,030,521
19,204,570 Certificados de la Tesoreria, 4/12/95 . . . . 5,057,346
-----------
25,813,313
-----------
NEW ZEALAND
DOLLARS 2.9% NZD 52,365,000 Government of New Zealand, 10%, 3/15/02 . . . 35,205,538
-----------
SPANISH PESETAS 4.7% ESP 2,150,000,000 Kingdom of Spain, 11%, 6/15/97. . . . . . . . 16,809,351
500,000,000 Kingdom of Spain, 11.4%, 7/15/95 . . . . . . 3,906,099
1,250,000,000 Kingdom of Spain, 11.45%, 8/30/98 . . . . . 9,857,785
220,000,000 Kingdom of Spain, 11.8%, 1/15/95 . . . . . . 1,702,564
3,300,000,000 Kingdom of Spain, 11.85%, 8/30/96 . . . . . 26,183,224
-----------
58,459,023
-----------
SWEDISH KRONOR 7.0% SEK 652,000,000 Kingdom of Sweden, 6%, 2/9/05 . . . . . . . . 62,753,278
175,000,000 Kingdom of Sweden, 11%, 1/21/99 . . . . . . 24,025,002
-----------
86,778,280
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TURKISH LIRE 0.9% TKL 145,000,000,000 Government of Turkey Treasury Bill, 10/26/94 . . . 3,371,157
246,000,000,000 Government of Turkey Treasury Bill, 7/6/94 . . . . 7,775,695
-------------
11,146,852
-------------
TOTAL FOREIGN DENOMINATED DEBT
(Cost $1,087,383,839) . . . . . . . . . . . . . . 1,010,361,662
-------------
14.1% U.S. DOLLAR DENOMINATED DEBT OBLIGATIONS
--------------------------------------------------------------------------------------
U. S. DOLLARS USD 12,248,000 Associates Corp. of North America,
Commercial Paper, 4.35%, 7/1/94 . . . . . . . . 12,248,000
15,000,000 Bankers Trust Time Deposit, 4.5%, 7/1/94 . . . . . 15,000,000
7,000,000 Federative Republic of Brazil C Bond,
Front-Loaded Interest Reduction with Interest
Capitalization Bonds, 8%, 4/15/14 . . . . . . . . 2,835,000
19,800,000 Federative Republic of Brazil IDU Bond,
Floating Rate Bond, LIBOR plus .8125%
(4.3125%), 1/1/01 . . . . . . . . . . . . . . . . 13,761,000
5,000,000 Fomento Economico Mexicano S.A. de C.V.,
9.5%, 7/22/97 . . . . . . . . . . . . . . . . . . 5,025,000
8,000,000 News America Finance Inc., 9.25%, 2/1/13 . . . . . 7,945,600
13,500,000 Rabobank Certificate of Deposit, indexed to
30 year U.S. Treasury Bond, 3.45%, 3/25/97 . . . 11,419,650
35,000,000 Republic of Argentina, Discount Bond,
LIBOR plus .8125% (4.25%), 3/31/23 . . . . . . . 17,368,750
7,000,000 Republic of Argentina, Floating Rate Bond,
LIBOR plus .8125% (5%), 3/31/05 . . . . . . . . . 4,987,500
34,500,000 Republic of Venezuela Debt Conversion Bond,
Series DL, LIBOR plus .875% (5.75%),
12/18/07 . . . . . . . . . . . . . . . . . . . . 15,266,250
5,000,000 Republic of Venezuela Front Loaded Interest
Reduction Bond, Series A, 7%, 3/31/07 . . . . . . 2,237,500
10,000,000 U.S. Treasury Bond, 7.25%, 5/15/16 . . . . . . . . 9,465,625
228,300,000 U.S. Treasury Separate Trading Registered
Interest and Principal, Zero Coupon,
5/15/18(b) . . . . . . . . . . . . . . . . . . . 35,055,648
26,000,000 United Mexican States Collateralized Par
Bond (Detachable Oil Price Indexed
Value Recovery Rights), Series A, 6.25%,
12/31/19 . . . . . . . . . . . . . . . . . . . . 16,445,000
7,000,000 United Mexican States Collateralized Par
Bond (Detachable Oil Price Indexed
Value Recovery Rights), Series B, 6.25%,
12/31/19 . . . . . . . . . . . . . . . . . . . . 4,427,500
-------------
TOTAL U.S. DOLLAR DENOMINATED DEBT
(Cost $195,028,166) . . . . . . . . . . . . . . . 173,488,023
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.8% PRINCIPAL INDEXED SECURITIES
----------------------------------------------------------------------------------
AUSTRALIAN DOLLARS 1.0% AUD 17,500,000 New South Wales Treasury Corp.
Medium Term Note, indexed to six-month
swap rate for Australian Dollar, 5%, 4/19/95 . . 12,647,632
-------------
U.S. DOLLARS 2.8% USD 10,000,000 Bayerische Landesbank, Certificate of Deposit,
indexed to 2 year swap rate for British
Pound, 4.21%, 7/12/94 . . . . . . . . . . . . . 9,442,000
18,665,000 Mobil Corp., Basket Note, indexed to one year
swap rate for British Pound, French Franc,
Italian Lira and Spanish Peseta, 8%, 7/7/94 . . 16,458,797
10,000,000 Westdeutsche Landesbank Medium
Term Note, indexed to one year Canadian
banker's acceptance rate, 10.25%, 7/12/94 . . . 8,507,000
-------------
34,407,797
-------------
TOTAL PRINCIPAL INDEXED SECURITIES
(Cost $51,404,122) . . . . . . . . . . . . . . 47,055,429
-------------
TOTAL INVESTMENTS (Cost $1,333,816,127). . . . . . 1,230,905,114
-------------
0.3% PURCHASED OPTIONS
----------------------------------------------------------------------------------
DEM 117,818,500 Call option on Deutschemarks, strike price
DEM 1.67, expire 8/22/94 . . . . . . . . . . . 3,804,831
DEM 343,140,000 Put option on Deutschemarks, strike price
DEM 1.72, expire 7/27/94 . . . . . . . . . . . 1,720
DEM 388,297,500 Put option on Deutschemarks, strike price
DEM 1.725, expire 7/1/94 . . . . . . . . . . . --
NZD 25,305,000 Call option on New Zealand Dollars, strike price
NZD .614, expire 12/21/94 . . . . . . . . . . . 68,324
Number of
Contracts
-------------
1,000 Call option on September 1994 Eurodollar
Futures, strike price 96.25, expiration date,
9/19/94 . . . . . . . . . . . . . . . . . . . . 25,000
-------------
TOTAL PURCHASED OPTIONS (Cost $5,973,287) . . . . 3,899,875
-------------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $1,339,789,414)(a) . . . . . . . . . . . 1,234,804,989
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $1,353,518,425. At
June 30, 1994, net unrealized depreciation for all securities based
on tax cost was $118,713,436. This consisted of aggregate gross
unrealized appreciation for all securities in which there was
an excess of market value over tax cost of $6,227,765 and
aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of
$124,941,201.
FUTURES
--------------------------------------------------------------------
(b) At June 30, 1994, a $50,000,000 par value U.S. Treasury Separate
Trading Registered Interest and Principal, Zero Coupon, 5/15/18
with a market value of $7,677,540 was pledged to cover initial
margin requirements on open futures contracts.
<TABLE>
AT JUNE 30, 1994, OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
<CAPTION>
Aggregate Market
Index Expiration Contracts Face Value ($) Value ($)
------------- ----------- --------- -------------- -----------
<S> <C> <C> <C> <C>
30 Year U.S.
Treasury Bond . Sept 1994 400 41,903,813 40,487,500
----------
Net unrealized appreciation on open futures contracts sold short. . . 1,416,313
==========
</TABLE>
WRITTEN OPTIONS
--------------------------------------------------------------------
<TABLE>
AT JUNE 30, 1994 OUTSTANDING WRITTEN OPTIONS WERE AS FOLLOWS (NOTE A):
<CAPTION>
Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value ($)
--------------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C>
New Zealand Dollars. . . 25,305 9/21/94 NZD.5939 167,013
-------
Total outstanding written options (Premiums received $156,891). . 167,013
=======
</TABLE>
<TABLE>
CURRENCY ABBREVIATIONS
-------------------------------------------------------------------
<S> <C> <C> <C>
AUD Australian Dollar MXN Mexican Peso
BEF Belgian Franc NLG Netherlands Guilder
GBP British Pound NZD New Zealand Dollar
CAD Canadian Dollar ESP Spanish Peseta
DKK Danish Krone SEK Swedish Krone
DEM Deutschemark CHF Swiss Franc
ECU European Currency Unit TKL Turkish Lira
FRF French Franc USD United States Dollar
ITL Italian Lira
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL BOND FUND
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at market (identified cost $1,333,816,127) (Note A) . $1,230,905,114
Purchased options, at market (identified cost $5,973,287)(Note A) . 3,899,875
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,065
Foreign currency, at market (identified cost $13,109,966)(Note A) . 13,101,595
Forward foreign currency exchange contracts to buy, at market
(contract cost $132,760,893) (Notes A and D) . . . . . . . . . . . 134,914,530
Receivable on forward foreign currency exchange contracts to sell
(Notes A and D) . . . . . . . . . . . . . . . . . . . . . . . . . 1,062,094,174
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,414,414
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . 16,318,920
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . 747,745
Daily margin variation on open futures contracts (Note A). . . . . 647,487
--------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2,497,140,919
LIABILITIES
Payable for investments purchased . . . . . . . . . . . . . . . . . $ 33,933,644
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . 8,754,177
Payable for fund shares redeemed . . . . . . . . . . . . . . . . . 1,584,701
Accrued management fee (Note C) . . . . . . . . . . . . . . . . . 893,307
Other accrued expenses (Note C) . . . . . . . . . . . . . . . . . 1,006,240
Written options, at market (premiums received $156,891)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,013
Net payable on closed forward foreign currency exchange
contracts (Note A) . . . . . . . . . . . . . . . . . . . . . . . . 2,169,762
Forward foreign currency exchange contracts to buy
(Notes A and D) . . . . . . . . . . . . . . . . . . . . . . . . . 132,760,893
Forward foreign currency exchange contracts to sell, at market
(contract cost $1,062,094,174) (Notes A and D) . . . . . . . . . . 1,084,809,223
-------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 1,266,078,960
--------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . 1,231,061,959
==============
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net investment
income (Notes A and E) . . . . . . . . . . . . . . . . . . . . . $ (9,538,822)
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . (102,911,013)
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,083,534)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . 1,416,313
Foreign currency related transactions . . . . . . . . . . . . . . (19,185,841)
Accumulated distributions in excess of net realized gain
(Notes A and E) . . . . . . . . . . . . . . . . . . . . . . . . . (15,233,567)
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1,028,811
Additional paid-in capital (Note E) . . . . . . . . . . . . . . . 1,377,569,612
--------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . $1,231,061,959
==============
NET ASSET VALUE, offering and redemption price per share
($1,231,061,959 / 102,881,085 shares of capital stock outstanding,
$.01 par value, 200,000,000 shares of capital stock authorized) $11.97
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest (net of withholding taxes of $954,932) . . . . . . . . $104,486,197
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . . . . $ 10,598,081
Services to shareholders (Note C) . . . . . . . . . . . . . . . 2,245,316
Directors' fees and expenses (Note C) . . . . . . . . . . . . . 42,313
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 2,710,393
Reports to shareholders . . . . . . . . . . . . . . . . . . . . 300,064
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,995
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,863
State registration fees . . . . . . . . . . . . . . . . . . . . 87,603
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,360 16,307,988
----------- ------------
Net investment income . . . . . . . . . . . . . . . . . . . . . 88,178,209
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 23,920,608
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,844,974)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . 2,181,140
Foreign currency related transactions . . . . . . . . . . . . (15,285,879) (5,029,105)
-----------
Net unrealized appreciation (depreciation) during the period
on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . (109,561,124)
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,185,975
Futures contracts . . . . . . . . . . . . . . . . . . . . . . (94,543)
Foreign currency related transactions . . . . . . . . . . . . (23,496,304) (130,965,996)
----------- ------------
Net loss on investment and foreign currency related
transactions . . . . . . . . . . . . . . . . . . . . . . . . (135,995,101)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . $(47,816,892)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER INTERNATIONAL BOND FUND
- ---------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . $ 88,178,209 $ 59,813,674
Net realized gain (loss) from investment transactions . . (5,029,105) 41,722,657
Net unrealized depreciation on investment transactions
during the period . . . . . . . . . . . . . . . . . . . (130,965,996) (12,687,206)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations . . . . . . . . . . . . . . . . . . . . . . . (47,816,892) 88,849,125
-------------- --------------
Distributions to shareholders:
From net investment income ($.91 and $1.04 per share,
respectively) . . . . . . . . . . . . . . . . . . . . . (88,034,933) (59,934,489)
-------------- --------------
From net realized gains from investment
transactions ($.62 per share) . . . . . . . . . . . . . -- (34,050,794)
-------------- --------------
In excess of net realized gains from investment
transactions ($.39 per share) . . . . . . . . . . . . . (37,671,614) --
-------------- --------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . 974,377,033 906,306,340
Net asset value of shares issued to
shareholders in reinvestment of distributions. . . . . . 66,270,009 76,941,179
Cost of shares redeemed . . . . . . . . . . . . . . . . . (652,677,186) (503,569,727)
-------------- --------------
Net increase in net assets from Fund share transactions . 387,969,856 479,677,792
-------------- --------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . 214,446,417 474,541,634
Net assets at beginning of period . . . . . . . . . . . . 1,016,615,542 542,073,908
-------------- --------------
NET ASSETS AT END OF PERIOD (including accumulated
distributions in excess of net investment income of
$9,538,822 at June 30, 1994) . . . . . . . . . . . . . . $1,231,061,959 $1,016,615,542
============== ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . . . . 74,937,656 39,611,627
-------------- --------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . 72,265,334 67,123,676
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . . . . . . 4,976,780 5,807,627
Shares redeemed . . . . . . . . . . . . . . . . . . . . . (49,298,685) (37,605,274)
-------------- --------------
Net increase in Fund shares . . . . . . . . . . . . . . . 27,943,429 35,326,029
-------------- --------------
Shares outstanding at end of period . . . . . . . . . . . 102,881,085 74,937,656
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
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
JULY 6, 1988
(COMMENCEMENT
YEARS ENDED JUNE 30, OF OPERATIONS) TO
------------------------------------------------ JUNE 30,
1994(b) 1993 1992 1991 1990 1989
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period . $13.57 $13.68 $12.35 $12.08 $11.27 $12.00
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (a) . . . . . . .92 1.03 1.08 1.21 1.10 1.00
Net realized and unrealized gain (loss)
on investment transactions (c) . . . (1.22) .52 2.15 .56 .80 (.73)
------ ------ ------ ------ ------ ------
Total from investment operations . . . (.30) 1.55 3.23 1.77 1.90 .27
------ ------ ------ ------ ------ ------
Less distributions:
From net investment income . . . . . (.91) (1.04) (1.09) (1.21) (1.09) (1.00)
From net realized gains on investment
transactions . . . . . . . . . . . . -- (.62) (.81) (.29) -- --
In excess of net realized gains on
investment transactions . . . . . . (.39) -- -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions . . . . . . . . . . (1.30) (1.66) (1.90) (1.50) (1.09) (1.00)
------ ------ ------ ------ ------ ------
Net asset value, end of period . . . . $11.97 $13.57 $13.68 $12.35 $12.08 $11.27
====== ====== ====== ====== ====== ======
TOTAL RETURN (%) . . . . . . . . . . . (2.83) 12.24 28.25 14.88 17.59 2.16**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions). 1,231 1,017 542 144 73 13
Ratio of operating expenses, net to
average net assets (%) (a) . . . . . 1.27 1.25 1.25 1.25 1.25 1.00*
Ratio of net investment income to average
net assets (%) . . . . . . . . . . . 6.86 7.69 8.31 9.48 9.57 8.58*
Portfolio turnover rate (%) . . . . . . 232.9 249.7 147.9 260.1 215.6 103.8*
(a) Reflects a per share amount of
expenses, exclusive of management
fees, reimbursed by the Adviser of. -- -- -- -- -- $.39
Reflects a per share amount of
management fee not imposed by the
Adviser of . . . . . . . . . . . . -- $.02 $.04 $.06 $.10 $.10
Operating expense ratio including
expenses reimbursed, management
fee and other expenses not
imposed (%) . . . . . . . . . . . 1.29 1.37 1.57 1.75 2.51 5.59*
<FN>
(b) Per share amounts have been calculated using weighted average shares outstanding.
(c) Includes exchange gain (loss) of $.01, $.01 and ($.02) for the periods ended June 30, 1991, 1990
and 1989, previously included in net investment income.
* Annualized
** Not annualized
</FN>
</TABLE>
19
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder International Bond 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.
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. 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. 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.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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, 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.
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.
21
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
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.
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.
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.
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.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In addition, from November 1, 1993 through June 30, 1994, the Fund incurred
$347,244 of net realized capital losses and $13,025,595 of net realized
currency losses. As permitted by tax regulations, the Fund intends to elect to
defer these losses and treat them as arising in the fiscal year ended June 30,
1995.
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. Distributions of net realized
gains to shareholders are recorded on the ex-dividend date.
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
contracts, 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 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 were deferred and
amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade date
basis. Interest income is recorded on the accrual basis. All premiums and
discounts are amortized/accreted for both tax and financial reporting
purposes.
23
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the year ended June 30, 1994, purchases and sales of investment securities
(excluding short-term investments) aggregated $2,995,156,958 and
$2,684,748,671, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended June 30, 1994 was $4,593,887,077 and $4,818,020,361, respectively.
<TABLE>
Transactions in written options for the year ended June 30, 1994 are
summarized as follows:
<CAPTION>
- ---------------------------------------------------------------------------------------------
OPTION CONTRACTS OPTIONS ON CURRENCIES (000 OMITTED)
- ---------------------------------------------------------------------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED ($) AUD CAD DEM JPY
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of
Period . . . -- -- -- -- 87,313 6,096,919
Written. . . 16,066 14,301,719 226,204 464,920 1,291,400 34,997,262
Closed . . . (15,706) (14,023,681) (80,993) (95,782) (443,029) (20,956,316)
Exercised. . (360) (278,038) (36,909) (203,000) (251,834) (5,758,240)
Expired . . -- -- (108,302) (166,138) (683,850) (14,379,625)
-------- ------------ --------- --------- ---------- ------------
End of
Period . . . -- -- -- -- -- --
======== ============ ========= ========= ========== ============
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
OPTIONS ON CURRENCIES (000 OMITTED) (CONTINUED)
- -------------------------------------------------------------------------------
DKK/ SEK/ PREMIUMS
NZD AUD/JPY DEM DEM RECEIVED ($)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning of
Period . . . -- -- -- -- 2,508,165
Written . . 76,105 213,800 159,490 552,142 14,149,591
Closed . . (50,800) -- (159,490) -- (5,960,252)
Exercised. . -- (213,800) -- (552,142) (4,491,459)
Expired . . -- -- -- -- (6,049,154)
------- -------- -------- --------- ----------
End of
Period . . . 25,305 -- -- -- 156,891
======= ======== ======== ======== ==========
- -------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 0.85% 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 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 had agreed not to impose all or a
portion of its management fee, to the extent necessary, to maintain the
annualized expenses of the Fund at not more than 1.25% of average daily net
assets until January 1, 1994. For the year ended June 30, 1994, the Adviser did
not impose a portion of its fees amounting to $341,680 and the portion imposed
amounted to $10,598,081.
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 June 30, 1994, the amount charged by SSC aggregated
$1,706,494, of which $134,128 is unpaid at June 30, 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 June 30, 1994, Directors' fees aggregated $42,313.
25
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
D. COMMITMENTS
- --------------------------------------------------------------------------------
As of June 30, 1994, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$20,561,412.
<CAPTION>
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE (U.S.$)
- ------------------------ ------------------------ ------------------ --------------
<S> <C> <C> <C>
USD 46,875,963 AUD 64,165,272 7/1/94 to 7/11/94 (118,685)
USD 6,276,223 NZD 10,592,782 7/5/94 28,070
ECU 21,445,215 USD 24,750,995 7/8/94 (1,086,614)
AUD 217,467,310 USD 160,379,476 7/11/94 2,014,116
USD 20,797,422 ITL 33,619,095,000 7/11/94 497,084
ITL 42,677,354,293 USD 26,433,242 7/11/94 to 8/8/94 (575,713)
DEM 229,533,327 USD 139,613,327 7/13/94 to 7/28/94 (4,987,425)
NZD 35,985,220 USD 21,333,550 7/25/94 (48,043)
USD 27,666,900 GBP 18,000,000 7/28/94 136,622
CAD 70,459,915 USD 50,969,267 8/8/94 --
GBP 62,141,333 USD 94,330,543 8/8/94 (1,566,575)
BEF 1,686,045,240 USD 49,068,573 8/9/94 (2,486,452)
FRF 826,425,961 USD 145,248,241 8/16/94 (6,459,141)
NLG 92,959,702 USD 51,700,000 8/23/94 (506,954)
CHF 73,083,210 USD 54,397,626 8/24/94 (432,602)
DKK 977,775,329 USD 150,675,294 9/6/94 (5,866,440)
ESP 6,789,400,000 USD 51,938,494 9/6/94 441,694
USD 31,144,385 DKK 204,400,600 9/6/94 1,610,547
SEK 327,692,805 USD 41,255,546 11/22/94 (1,154,901)
------------
(20,561,412)
============
</TABLE>
E. RECLASSIFICATION OF CAPITAL ACCOUNTS
- --------------------------------------------------------------------------------
As required, effective July 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
$13,927,536 to increase undistributed net investment income, $14,256,757 to
decrease accumulated net realized gains and $329,221 to increase 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.
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE SHAREHOLDERS OF
SCUDDER INTERNATIONAL BOND FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
International Bond Fund including the investment portfolio, as of June 30,
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 five years in the
period then ended and for the period July 6, 1988 (commencement of operations)
to June 30, 1989. 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 June
30, 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 International Bond Fund as of June 30, 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 five years in the period then ended and for the period July 6, 1988
(commencement of operations) to June 30, 1989, in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 12, 1994
27
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$59,055 as a long-term capital gain dividend for the fiscal year ended June 30,
1994.
For its fiscal year ended June 30, 1994, the total amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $.910 per share. The total amount of taxes paid by the Fund to such
countries was $.009 per share.
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.
28
<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 G. Stone, Jr.
Director
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia University 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.
29
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PRODUCTS AND SERVICES
- --------------------------------------------------------------------------------
<C> <C> <C>
The Scudder Family of Funds
- -----------------------------------------------------------------------------------------------------------------
Money market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax free money market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Value Fund
Scudder Balanced Fund The Japan Fund
Scudder Growth and Income Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-end Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea 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.
</TABLE>
30
<PAGE>
HOW TO CONTACT SCUDDER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <C>
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 Los Angeles
Boston New York
Chicago Portland, OR
Cincinnati San Francisco
Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust(TM), an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts which service needs of banks and
utilizes certain portfolios of other institutions, call:
Scudder Fund, Inc.* ($100,000 1-800-854-8525.
minimum), call: 1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
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.
</TABLE>
31
<PAGE>
Celebrating 75 Years of Serving Investors
- --------------------------------------------------------------------------------
This year marks the 75th anniversary of the founding of Scudder, Stevens &
Clark, 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 35 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.
