SCUDDER GLOBAL FUND INC, 497, 1996-03-14

SCUDDER GLOBAL FUND INC
497, 1996-03-14

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This prospectus sets forth concisely the information about Scudder Global Small
Company Fund, a series of Scudder Global Fund, Inc., an open-end management
investment company, that a prospective investor should know before investing.
Please retain it for future reference.

If you require more detailed information, a Statement of Additional Information
dated March 1, 1996, as amended from time to time, may be obtained without
charge by writing to Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or calling 1-800-225-2470. The Statement, which is
incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Contents--see page 4.

Scudder
Global Small
Company Fund

Prospectus
March 1, 1996

A pure no-load(TM) (no sales charges) mutual fund which seeks above-average
capital appreciation over the long term by investing primarily in the equity
securities of small companies located throughout the world.

<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 Small Company Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.

1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.

Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE

2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended October 31, 1995.

Investment management fee 1.10%
12b-1 fees NONE
Other expenses 0.59%
----
Total Fund operating expenses 1.69%
====

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
------ ------- ------- --------
$17 $53 $92 $200

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."
2
<PAGE>

Financial highlights

The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited
financial statements.

If you would like more detailed information concerning the Fund's performance,
a complete portfolio listing and audited financial statements are available in
the Fund's Annual Report dated October 31, 1995 and may be obtained without
charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
For the Period
September 10, 1991
(commencement
Years Ended October 31, of operations)
-------------------------------------------------- to October 31
1995 1994 1993 1992 1991
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . $16.27 $16.14 $12.05 $11.92 $12.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) . . . . . . . . . . (.03) (.02) .04 .07 .01
Net realized and unrealized gain (loss) on investment
transactions . . . . . . . . . . . . . . . . . . . 1.38 .48 4.24 .08 (.09)
------ ------ ------ ------ ------
Total from investment operations . . . . . . . . . . . 1.35 .46 4.28 .15 (.08)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income . . . . . . . . . . . . . - - (.07) (.02) -
In excess of net investment income . . . . . . . . . - (.18) - - -
From net realized gains on investment transactions . (.08) (.15) (.12) - -
------ ------ ------ ------ ------
Total distributions. . . . . . . . . . . . . . . . . . (.08) (.33) (.19) (.02) -
------ ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . $17.54 $16.27 $16.14 $12.05 $11.92
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return (%) . . . . . . . . . . . . . . . . . . . 8.32 2.80 36.04 1.26 (.67)*
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . 255 256 198 55 9
Ratio of operating expenses net, to average daily
net assets (%) (a) . . . . . . . . . . . . . . . . . 1.69 1.70 1.50 1.50 1.50**
Ratio of net investment income (loss) to average daily
net assets (%) . . . . . . . . . . . . . . . . . . . (.12) (.28) .53 .78 2.47**
Portfolio turnover rate (%). . . . . . . . . . . . . . 43.7 45.8 54.6 23.4 -
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of . . $ - $ - $ - $ - $ .06
Reflects a per share amount of management fee not
imposed by the Adviser of . . . . . . . . . . . . $ - $ .01 $ .04 $ .09 $ .01
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%) . . . . . . . . . . . . . . . . . - 1.76 2.01 2.53 15.34**
* Not annualized
** Annualized
</TABLE>

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 $100 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 the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.

All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce

Scudder Global Small
Company Fund

Investment objective

- - above-average capital appreciation over the long term by investing
primarily in the equity securities of small companies located throughout
the world.

Investment characteristics

- - participation in a diversified, professionally-managed portfolio of
smaller, often lesser-known companies based in the U.S. and foreign
countries

- - access to global investment opportunities and diversification

- - potential for above-average long-term capital appreciation with the
likelihood of above-average stock market volatility

Contents

Investment objective and policies 5
Why invest in the Fund? 6
International investment experience 7
Special risk considerations 7
Additional information about policies and investments 8
Distribution and performance information 11
Purchases 12
Exchanges and redemptions 13
Fund organization 14
Transaction information 14
Shareholder benefits 18
Directors and Officers 21
Investment products and services 22
How to contact Scudder 23

4
<PAGE>

Investment objective and policies

Scudder Global Small Company Fund (the "Fund"), a diversified series of Scudder
Global Fund, Inc., seeks above-average capital appreciation over the long term
by investing primarily in the equity securities of small companies located
throughout the world. The Fund is designed for investors looking for
above-average appreciation potential (when compared with the overall domestic
stock market as reflected by Standard & Poor's 500 Composite Price Index) and
the benefits of investing globally, but who are willing to accept above-average
stock market risk, the impact of currency fluctuation and little or no current
income.

Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objective. If there is
a change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.

Investments in small companies

In pursuit of its objective, the Fund generally invests in small, rapidly
growing companies which offer the potential for above-average returns relative
to larger companies, yet are frequently overlooked and thus undervalued by the
market. The Fund has the flexibility to invest in any region of the world. It
can invest in companies based in emerging markets, typically in the Far East,
Latin America and Eastern Europe, as well as in firms operating in developed
economies, such as those of the United States, Japan and Western Europe.

The Fund's investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"),
invests the Fund's assets in companies it believes offer above-average earnings,
cash flow or asset growth potential. It also invests in companies which may
receive greater market recognition over time. The Adviser believes that these
factors offer significant opportunity for long-term capital appreciation. The
Adviser evaluates investments for the Fund from both a macroeconomic and
microeconomic perspective, using fundamental analysis, including field research.
The Adviser analyzes the growth potential and relative value of possible
investments. When evaluating an individual company, the Adviser takes into
consideration numerous factors, including the depth and quality of management; a
company's product line, business strategy and competitive position; research and
development efforts; financial strength, including degree of leverage; cost
structure; revenue and earnings growth potential; price-earnings ratios and
other stock valuation measures. Secondarily, the Adviser weighs the
attractiveness of the country and region in which a company is located.

While the Fund's Adviser believes that smaller, lesser-known companies can offer
greater growth potential than larger, more established firms, the former also
involve greater risk and price volatility. To help reduce risk, the Fund
expects, under usual market conditions, to diversify its portfolio widely by
company, industry and country. Under normal circumstances, the Fund invests at
least 65% of its total assets in the equity securities of small companies. The
Fund intends to allocate investments among at least three countries at all
times, one of which may be the United States.

5
<PAGE>

Investment objective and policies (cont'd)

typically will have individual equity market capitalizations of between
approximately $50 million and $1.4 billion (although the Fund will be free to
invest in smaller capitalization issues that satisfy the Fund's size standard).
Furthermore, at least 50% of the assets represented by such companies will be in
approximately the lowest 10% of market capitalization of U.S. equity securities
as described above. At current prices this lowest 10% equates to no more than
$550 million in market capitalization.

Because the Fund applies a U.S. size standard on a global basis, a small company
investment outside the U.S. might rank above the lowest 20% by market
capitalization in local markets and, in fact, might in some countries rank among
the largest companies in terms of capitalization.

The equity securities in which the Fund may invest consist of common stocks,
preferred stocks (either convertible or nonconvertible), rights and warrants.
These securities may be listed on the U.S. or foreign securities exchanges or
traded over-the-counter. For capital appreciation purposes, the Fund may
purchase notes, bonds, debentures, government securities and zero coupon bonds
(any of which may be convertible or nonconvertible). The Fund may invest in
foreign securities and American Depositary Receipts which may be sponsored or
unsponsored. The Fund may also invest in closed-end investment companies holding
foreign securities, enter into repurchase agreements and engage in strategic
transactions. For temporary defensive purposes, the Fund may, during periods in
which conditions in securities markets warrant, invest without limit in cash and
cash equivalents. More information about investment techniques is provided under
"Additional information about policies and investments."

Why invest in the Fund?

Scudder Global Small Company Fund offers convenient, low-cost access to a
diversified, global portfolio of equity securities issued by smaller companies.
The Fund's experienced, professional management can help investors take
advantage of a rapidly changing world economy.

Unlike small company funds which limit themselves to U.S. investments, the Fund
seeks investment opportunities wherever they arise. The Fund enjoys the
flexibility to invest in all established markets, as well as in newly free or
newly industrialized economies around the world. Because the Fund operates
globally, it may, under certain market conditions, augment the returns available
from a comparable investment in the U.S. market alone.

The Fund focuses specifically on small companies believed to have favorable
long-term growth prospects. Small companies can be attractive because they are
frequently sources of new technologies and services, often compete with larger
companies on the basis of lower labor costs and often grow faster than larger
firms. Their smaller size often allows them to respond rapidly to changing
business conditions. Also, small companies may not be closely followed by
securities analysts, so they may reward the investor with the patience and
knowledge to carefully seek them out and understand them. This can mean
significant long-term opportunity as these companies achieve greater recognition
over time.

While the Fund is broadly diversified, it is not a complete investment program.
However, adding shares of the Fund to a portfolio can increase diversification,
which should moderate overall portfolio risk.

The Fund is appropriate for investors who can accept the greater risks of
global, small company investing for the potentially greater rewards. Investing
directly in foreign securities is usually impractical for individual investors.

6
<PAGE>

Investors frequently find it difficult to arrange purchases and sales, obtain
current information about companies abroad, hold securities in safekeeping, and
convert their profits from foreign currencies to U.S. dollars. The Fund makes it
easy for investors to take advantage of small company opportunities on a global
basis and benefit from the Adviser's experience managing international mutual
funds.

In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.

International investment
experience

The Adviser has been a leader in international investment management for over 40
years. Its investment company clients include Scudder International Fund, Inc.,
which was incorporated in Canada in 1953 as the first foreign investment company
registered with the United States Securities and Exchange Commission, Scudder
International Bond Fund, which invests internationally, Scudder Global Fund and
Scudder Global Bond Fund, which invest worldwide, The Japan Fund, Inc., which
invests in Japanese issuers, Scudder Latin America Fund, which invests in Latin
American issuers, Scudder Pacific Opportunities Fund, which invests in Pacific
Basin issuers, Scudder Emerging Markets Income Fund, which invests in debt
securities issued in emerging markets and Scudder Greater Europe Growth Fund,
which invests in equity securities of European companies. The Adviser also
manages the assets of eight closed-end investment companies which invest in
foreign securities: The Argentina Fund, Inc., The Brazil Fund, Inc., The First
Iberian Fund, Inc., The Korea Fund, Inc., The Latin America Dollar Income Fund,
Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc. and Scudder
World Income Opportunities Fund, Inc.

Special risk considerations

The Fund is designed for long-term investors who can accept international
investment risk. Since the Fund normally will invest in both U.S. and foreign
securities markets, changes in the Fund's share price may have a low correlation
with movements in the U.S. markets, which enhances the Fund's appeal as a
diversification tool. The Fund's share price will reflect the movements of the
different stock markets in which it is invested and the different currencies in
which the investments are denominated. The strength or weakness of the U.S.
dollar against foreign currencies is likely to account for part of the Fund's
investment performance, although the Adviser believes that, over the long term,
the impact of currency changes on Fund performance will not be as significant as
changes in the underlying investments. As with any long-term investment, the
value of shares when sold may be higher or lower than when purchased.

Global investing involves economic and political considerations not typically
found in U.S. markets. These considerations, which may favorably or unfavorably
affect the Fund's performance, include changes in exchange rates and exchange
rate controls (which may include suspension of the ability to transfer currency
from a given country), costs incurred in conversions between currencies,
nonnegotiable brokerage commissions, different accounting standards, lower
trading volume and greater market volatility, the difficulty of enforcing
obligations in other countries, less securities regulation, different tax
provisions (including withholding on interest and dividends paid to the Fund),
war, expropriation, political and social instability, and diplomatic
developments.

7
<PAGE>

Special risk considerations (cont'd)

Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets. These considerations generally are more of a
concern in developing countries. For example, the possibility of political
upheaval and the dependence on foreign economic assistance may be greater in
these countries than in developed countries. The Adviser seeks to mitigate the
risks associated with these considerations through diversification and active
professional management. The Fund will limit investments in securities of
issuers located in Eastern Europe to 5% of its total assets.

There is typically less publicly available information concerning foreign and
smaller companies than for domestic and larger, more established companies. Some
small companies have limited product lines, distribution channels and financial
and managerial resources. Also, because smaller companies normally have fewer
shares outstanding than larger companies and trade less frequently, it may be
more difficult for the Fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices. Some of the companies
in which the Fund may invest may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel with
varying degrees of experience.

Additional information about policies and investments

Investment restrictions

The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk. The Fund may not borrow money except as a temporary measure for
extraordinary or emergency purposes and may not make loans except through the
lending of portfolio securities, the purchase of debt securities or through
repurchase agreements.

In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 10% of its total assets in securities which are not readily marketable, in
restricted securities or in repurchase agreements maturing in more than seven
days.

A complete description of these and other policies and restrictions is contained
under "The Fund's Investment Objectives and Policies" in the Fund's Statement of
Additional Information.

The Fund may invest up to 35% of its total assets in equity securities of
companies which do not meet its small company criteria and in debt securities if
the Adviser determines that the capital appreciation of debt securities is
likely to exceed the capital appreciation of equity securities. The Fund may
purchase investment-grade bonds, those rated Aaa, Aa, A or Baa by Moody's
Investors Service, Inc. ("Moody's"), or AAA, AA, A or BBB by Standard & Poor's
("S&P") or, if unrated, of equivalent quality as determined by the Adviser. The
Fund may also invest up to 5% of its net assets in debt securities rated below
investment-grade. See "Risk factors."

Special situation securities

From time to time, the Fund may invest in equity or debt securities issued by
companies that are determined by the Adviser to possess "special situation"
characteristics. In general, a special situation company is a company whose
securities are expected to increase in value solely by reason of a development
particularly or uniquely applicable to the company. Developments that may create
special situations include, among others, a liquidation, reorganization,
recapitalization or merger, material litigation, technological breakthrough and
new management or management policies. The principal risk associated with
investments in special situation companies is that the anticipated development
thought to create the special situation may not occur and the investments
therefore may not appreciate in value or may decline in value.

8
<PAGE>

Convertible securities

Prior to their conversion, convertible securities may have characteristics
similar to nonconvertible securities.

Repurchase agreements

Strategic Transactions and derivatives

The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.

In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").

Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and

9
<PAGE>

Additional information about policies and investments (cont'd)

not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.

Risk factors

The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.

Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.

Debt securities. The Fund may invest up to 5% of its net assets in debt
securities which are rated below investment-grade, that is, rated below Baa by
Moody's or below BBB by S&P, or unrated securities of equivalent quality.
Securities rated below Baa/BBB are commonly referred to as "junk bonds." The
lower the ratings of such debt securities, the greater their risks render them
like equity securities. The Fund may invest in securities rated D by S&P at the
time of purchase, which may be in default with respect to payment of principal
or interest. Also, longer maturity bonds tend to fluctuate more in price as
interest rates change than do short-term bonds, providing both opportunity and
risk.

Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities.

Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin

10
<PAGE>

requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.

Distribution and performance information

Dividends and capital gains distributions

The Fund intends to distribute any dividends from its net investment income and
any net realized capital gains after utilization of capital loss carryforwards,
if any, in December. An additional distribution may be made if necessary. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. According to preference,
shareholders may receive distributions in cash or have them reinvested in
additional shares of the Fund. If the investment is in the form of a retirement
plan, all dividends and capital gains distributions must be reinvested into the
shareholder's account.

Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable distributions are
taxable as ordinary income. A portion of dividends from ordinary income may
qualify for the dividends-received deduction for corporations.

Shareholders may be able to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the Fund to
foreign countries.

The Fund sends detailed tax information to its shareholders about the amount and
type of its distributions by January 31 of the following year.

Performance information

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature, or shareholder reports. All performance
figures are historical, show the performance of a hypothetical investment and
are not intended to indicate future performance. "Total return" is the change in
value of an investment in the Fund for a specified period. The "average annual
total return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year and
the life of the Fund as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.

11
<PAGE>

Purchases

<TABLE>

<S> <C>
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 and check
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:

The Scudder Funds Scudder Shareholder
P.O. Box 2291 Services Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612

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 or lower minimums. See appropriate
shares plan literature.

Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete
Scudder Funds." Fund name, to the 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 Please see Transaction information--Purchasing shares--
By AutoBuy or By telephone order for more details.

o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.

</TABLE>

12
<PAGE>

Exchanges and redemptions

<TABLE>
<S> <C> <C>
Exchanging Minimum investments: $1,000 to establish a new account; $100 to exchange among
shares existing accounts

o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).

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
telephone number.

Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:

The Scudder Funds Scudder Shareholder Services 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------

Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $50,000 sent to your address of record.

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
telephone 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.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan

</TABLE>

13
<PAGE>

Fund organization

The Fund is a diversified series of Scudder Global Fund, Inc. (the
"Corporation"), an open-end, management investment company registered under the
Investment Company Act of 1940, (the "1940 Act"). The Corporation was organized
as a Maryland corporation in May 1986.

The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Fund is not required to hold and has no current intention
of holding annual shareholder meetings, although special meetings may be called
for purposes such as electing or removing Directors, changing fundamental
investment policies or approving an investment management agreement.
Shareholders will be assisted in communicating with other shareholders in
connection with removing a Director as if Section 16(c) of the 1940 Act were
applicable.

Investment adviser

The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Board of Directors. The
Directors have overall responsibility for the management of the Fund under
Maryland law.

For the fiscal year ended October 31, 1995, the Adviser received an investment
management fee of 1.10% of average daily net assets on an annual basis. The fee
is payable monthly, provided the Fund will make such interim payments as may be
requested by the Adviser not to exceed 75% of the amount of the fee then accrued
on the books of the Fund and unpaid.

The fee is higher than that charged to most other funds. However, management of
the Fund involves analyzing companies, markets and economies throughout the
world and the management fee is not necessarily higher than the fees charged to
funds with similar investment objectives and policies.

All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment services.

Scudder, Stevens & Clark, Inc., is located at 345 Park Avenue, New York, New
York.

Transfer agent

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.

Underwriter

Scudder Investor Services, Inc., a 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 Relations is a telephone
information service provided by Scudder Investor Services, Inc.

Custodian

Brown Brothers Harriman & Co. is the Fund's custodian.

Fund accounting agent

Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.

Transaction information

Purchasing shares

Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")

By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the

14
<PAGE>

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. 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. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:

The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552

Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).

The account will be established once the application and money order are
received in good order.

You may also make additional investments of $100 or more to your existing
account by wire.

By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. You must
include with your payment the order number given at the time the order is
placed. A confirmation with complete purchase information is sent shortly after
your order is received. If payment by check or wire is not received within 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.

By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.

To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. "AutoBuy" requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day.

If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.

15
<PAGE>

Transaction information (cont'd)

By exchange. Your new account will have the same registration and address as
your existing account.

The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts.

Please call 1-800-225-5163 for more information, including information about the
transfer of special account features.

You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.

Redeeming shares

The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.

By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-225-5163 for more information.

Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.

You can also make redemptions from your Scudder fund account on SAIL 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.

By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.

To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.

"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.

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

16
<PAGE>

corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.

Telephone transactions

Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.

Share price

Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.

Trading in securities on European and Far Eastern securities exchanges is
normally completed before the close of regular trading on the Exchange. Trading
on these foreign exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on which there is no
regular trading on the Exchange. If events materially affecting the value of the
Fund's portfolio securities occur between the time when these foreign exchanges
close and the time when the Fund's net asset value is calculated, such
securities will be valued at fair value as determined by the Corporation's Board
of Directors.

Processing time

All purchase and redemption requests received in good order by the Fund's
transfer agent 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
Investor Relations 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 business 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

17
<PAGE>

Transaction information (cont'd)

other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period.

Minimum balances

Shareholders should maintain a share balance worth at least $1,000, which amount
may be changed by the Board of Directors. Scudder retirement plans have similar
or lower minimum share balance requirements. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
sub-minimum accounts, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. The Fund will mail the proceeds of the redeemed account
to the shareholder.

The shareholder may restore the share balance to $1,000 or more during the
60-day notice period and must maintain it at no lower than that minimum to avoid
involuntary redemption.

Third party transactions

If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.

Redemption-in-kind

The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Corporation has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.

Shareholder benefits

Experienced professional management

Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.

A team approach to investing

Scudder Global Small Company Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.

18
<PAGE>

Lead Portfolio Manager Gerald J. Moran has set the Fund's investment strategy
and overseen its daily operation since the Fund was introduced in 1991. Mr.
Moran joined Scudder's equity research and management area in 1968 as an analyst
and has focused on small company stocks since 1982 and has been a portfolio
manager since 1985. Elizabeth Allan, Portfolio Manager, who joined the team in
1994, concentrates on the Fund's Pacific Basin investments. Ms. Allan, who has
been a portfolio manager at Scudder since 1991, joined the firm in 1987 as a
member of the portfolio management team of a Scudder closed-end mutual fund
concentrating its investments in Asia. Joan Gregory, Portfolio Manager, joined
the team in 1994 and focuses on stock selection, a role she has played since she
joined Scudder in 1992. Ms. Gregory has been involved with investment in global
and international stocks as an assistant portfolio manager since 1989. Sewall
Hodges, Portfolio Manager, joined Scudder in 1995 and the team in 1996. Mr.
Hodges, who has ten years in global analysis and portfolio management, focuses
on the Fund's stock selection and research.

SAIL(TM)--Scudder Automated Information Line

For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. 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, growth,
tax-free and growth and income 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 Perspectives, 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.

19
<PAGE>

Shareholder benefits (cont'd)

T.D.D. service for the hearing impaired

Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.

Scudder tax-advantaged retirement plans

Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.

- - Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their taxable
income, and all investment earnings accrue on a tax deferred basis. The
Scudder No-Fee IRA charges no annual custodial fee.

- - 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.

- - Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.

- - 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.

- - SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.

- - Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.

Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.

The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.

20
<PAGE>

Directors and Officers

Edmond D. Villani*
Chairman of the Board and Director

Nicholas Bratt*
President and Director

Daniel Pierce*
Vice President and Director

Paul Bancroft III
Director; Venture Capitalist and Consultant

Sheryle J. Bolton
Director

Thomas J. Devine
Director; Consultant

William H. Gleysteen, Jr.
Director; Consultant

William H. Luers
Director; President, The Metropolitan Museum of Art

Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation

Robert W. Lear
Honorary Director; Executive-in-Residence,
Columbia University Graduate School of Business

Adam M. Greshin*
Vice President

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Douglas M. Loudon*
Vice President

Gerald J. Moran*
Vice President

M. Isabel Saltzman*
Vice President

Cornelia M. Small*
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.

21
<PAGE>

Investment products and services

<TABLE>

<C> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond 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 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 Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan 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>

22
<PAGE>

How to contact Scudder
<TABLE>

<C> <C> <C>
Account Service and Information: Please address all correspondence to:

For existing account Scudder Investor The Scudder Funds
service and transactions Relations P.O. Box 2291
1-800-225-5163 Boston, Massachusetts
02107-2291
For personalized Scudder Automated
information about your Information Line
Scudder accounts; 1-800-343-2890
exchanges and (SAIL)
redemptions; or
information on any
Scudder fund

Investment Information: Or Stop by a Scudder Funds Center:

To receive information Scudder Investor Many shareholders enjoy the personal, one-on-one
about the Scudder funds, Relations service of the Scudder Funds Centers. Check for a
for additional applications Funds Center near you--they can be found in the
and prospectuses, or for 1-800-225-2470 following cities:
investment questions

For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution Services Boston Portland, OR
1-800-323-6105 Chicago San Diego
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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 Relations 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>

This prospectus sets forth concisely the information about Scudder Global Bond
Fund, a series of Scudder Global Fund, Inc., an open-end management investment
company, that a prospective investor should know before investing. Please retain
it for future reference.

If you require more detailed information, a Statement of Additional Information
dated March 1, 1996, 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.

Contents--see page 4.

Scudder
Global Bond
Fund

Prospectus
March 1, 1996

A pure no-load(TM) (no sales charges) mutual fund series which seeks total
return with an emphasis on current income by investing principally in high-grade
bonds denominated in foreign currencies and the U.S. dollar. Capital
appreciation is a secondary objective.

<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 Bond Fund (the "Fund"). By reviewing
this table and those in other mutual funds' prospectuses, you can compare the
Fund's fees and expenses with those of other funds. With Scudder's pure
no-load(TM) funds, you pay no commissions to purchase or redeem shares, or to
exchange from one fund to another. As a result, all of your investment goes to
work for you.

1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.

Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE

2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributed its net investment income, expressed as a percentage
of the Fund's average daily net assets for the fiscal year ended
October 31, 1995.

Investment management fee (after waiver) 0.55%**
12b-1 fees NONE
Other expenses 0.45%
-----
Total Fund operating expenses 1.00%**
=====

Example

Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders. (As noted above, the Fund has no redemption
fees of any kind.)

1 Year 5 Years 10 Years 3 Years
------ ------- -------- -------
$10 $32 $55 $122

** Until February 28, 1997, the Adviser has agreed to waive a portion of its
fee to the extent necessary so that the total annualized expenses of the
Fund do not exceed 1.00% of average daily net assets. If the Adviser had
not done so, Fund expenses would have been: investment management fee
0.75%, other expenses 0.45%, and total operating expenses 1.20% for the
fiscal year ended October 31, 1995. To the extent that expenses fall below
1.00% during the fiscal year, the Adviser reserves the right to recoup,
during the fiscal year incurred, amounts waived during the period, but only
to the extent that the Fund's expenses do not exceed 1.00%.

On December 27, 1995, the Fund adopted its present name and objectives. Prior to
that date, the Fund was known as Scudder Short Term Global Income Fund and its
objective was high current income. Expense information for the period ended
October 31, 1995 should not be considered representative of the present Fund
under its current objectives.

2
<PAGE>

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.

FOR THE PERIOD
MARCH 1, 1991
(COMMENCEMENT
YEARS ENDED OCTOBER 31, OF OPERATIONS)
------------------------------------------ TO OCTOBER 31,
1995 1994 1993 1992 1991
------------------------------------------ ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . $10.78 $11.68 $11.84 $12.01 $12.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . . . . .80 .87 .95 1.08 .76
Net realized and unrealized gain (loss) on
investment transactions. . . . . . . . . . . . . . . . . . . (.25) (.90) (.14) (.17) .01
------ ------ ------ ------ ------
Total from investment operations . . . . . . . . . . . . . . . . .55 (.03) .81 .91 .77
------ ------ ------ ------ ------
Less distributions from:
Net investment income . . . . . . . . . . . . . . . . . . . . (.36) (.02) (.95) (1.08) (.76)
Net realized gains on investments . . . . . . . . . . . . . . -- -- (.02) -- --
Tax return of capital . . . . . . . . . . . . . . . . . . . . (.44) (.85) -- -- --
------ ------ ------ ------ ------
Total distributions. . . . . . . . . . . . . . . . . . . . . . . (.80) (.87) (.97) (1.08) (.76)
------ ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . . . . . . $10.53 $10.78 $11.68 $11.84 $12.01
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . . . . 5.43 (.25) 7.14 7.83 6.65**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . . . . . . 357 560 1,041 1,369 205
Ratio of operating expenses, net to average daily
net assets (%) (a). . . . . . . . . . . . . . . . . . . . . . 1.00 1.00 1.00 1.00 1.00*
Ratio of net investment income to average daily
net assets (%). . . . . . . . . . . . . . . . . . . . . . . . 7.73 7.76 8.10 8.94 9.97*
Portfolio turnover rate (%). . . . . . . . . . . . . . . . . . . 182.8 272.4 259.8 274.2 26.1*
(a) Reflects a per share amount of management fee not
imposed by the Adviser. . . . . . . . . . . . . . . . . . . $ .02 $ .02 $ .01 $ .03 $ .06
Operating expense ratio including management fee
and other expenses not imposed (%). . . . . . . . . . . . . 1.20 1.15 1.11 1.23 1.89*
</TABLE>

* Annualized
** Not annualized

On December 27, 1995, the Fund adopted its present name and objectives. Prior to
that date, the Fund was known as Scudder Short Term Global Income Fund and its
objective was high current income. Financial information for the period ended
October 31, 1995 should not be considered representative of the present Fund
under its current objectives.
3
<PAGE>

A message from Scudder's chairman

/s/Daniel Pierce

Scudder Global Bond Fund

Investment objectives

o total return, with an emphasis on current income by investing principally
in high-grade bonds denominated in foreign currencies and the U.S. dollar

o capital appreciation is a secondary objective

Investment characteristics

o easy access to worldwide interest rate and currency cycles through a
portfolio of debt securities denominated in foreign currencies and the U.S.
dollar

Contents

Investment objectives and policies 5
Investments 5
Global bond investing 6
Why invest in the Fund? 7
International investment experience 7
Special risk considerations 7
Additional information about policies
and investments 8
Distribution and performance information 13
Purchases 14
Exchanges and redemptions 15
Fund organization 16
Transaction information 17
Shareholder benefits 21
Directors and Officers 24
Investment products and services 25
How to contact Scudder 26

4
<PAGE>

Investment objectives and policies

Scudder Global Bond Fund (the "Fund"), a non-diversified series of Scudder
Global Fund, Inc., provides investors with a convenient way to invest in a
managed portfolio of debt securities denominated in foreign currencies and the
U.S. dollar. The Fund's objective is to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in foreign
currencies and the U.S. dollar. As a secondary objective, the Fund will seek
capital appreciation.

Except as otherwise indicated, the Fund's investment objectives and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objectives. If there is
a change in investment objectives, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objectives will be
met.

Investments

To achieve its objectives, the Fund will invest principally in a managed
portfolio of high-grade intermediate- and long-term bonds denominated in the
U.S. dollar and foreign currencies, including bonds denominated in the European
Currency Unit (ECU). (Intermediate-term bonds generally have maturities between
three and eight years, and long-term bonds generally have maturities of greater
than eight years.) Portfolio investments will be selected on the basis of, among
other things, yields, credit quality, and the fundamental outlooks for currency
and interest rate trends in different parts of the globe, taking into account
the ability to hedge a degree of currency or local bond price risk.

At least 65% of the Fund's investments will consist of high-grade debt
securities, which are those rated in one of the three highest rating categories
of one of the major U.S. rating services or, if unrated, considered to be of
equivalent quality in local currency terms as determined by the Fund's
investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"). These
securities are rated AAA, AA or A by Standard & Poor's ("S&P") or Aaa, Aa, or A
by Moody's Investors Service, Inc. ("Moody's").

The Fund may also invest up to 15% of its net assets in debt securities rated
BBB by S&P or Baa by Moody's and lower, or unrated securities considered to be
of equivalent quality by the Adviser. The Fund will not invest in any securities
rated B or lower. (See "Risk Factors.")

The Fund's investments may include:

o Debt securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities

o Debt securities issued or guaranteed by a foreign national government,
its agencies, instrumentalities or political subdivisions

o Debt securities issued or guaranteed by supranational organizations (e.g.,
European Investment Bank, Inter-American Development Bank or the World
Bank)

o Corporate debt securities

o Bank or bank holding company debt securities

o Other debt securities, including those convertible into common stock

The Fund may invest in zero coupon securities, mortgage and asset-backed
securities and may engage in strategic transactions. The Fund may purchase
securities which are not publicly offered. If such securities are purchased,
they may be subject to restrictions which may make them illiquid. Please see
"Additional information about policies and investments--Investment
restrictions."

5
<PAGE>

Investments (cont'd)

The Fund intends to select its investments from a number of country and market
sectors. It may invest substantially in the issuers of one or more countries and
will have investments in debt securities of issuers from a minimum of three
different countries.

Under normal market conditions, the Fund will invest at least 15% of its total
assets in U.S. dollar-denominated securities, issued domestically or abroad. For
temporary defensive or emergency purposes, however, the Fund may invest without
limit in U.S. debt securities, including short-term money market securities. It
is impossible to predict for how long such alternative strategies will be
utilized.

Global bond investing

Opening of foreign markets

In recent years, opportunities for investment in global bond markets have become
more significant. Foreign currency-denominated bond markets have grown faster
than the U.S. dollar-denominated bond market in terms of U.S. dollar market
value and now represent more than half of the value of the world's developed
bond markets. Participants in these markets have grown in number thereby
providing better liquidity. Finally, a number of global bond markets have
reduced barriers to entry to foreign investors by deregulation and by reducing
their withholding taxes.

Globalization of capital flows

Simultaneous with the opening of foreign markets, barriers to global capital
flows have been reduced or eliminated, freeing investment funds to seek the
highest expected returns. Thus, market conditions in one economy influence
market conditions elsewhere, through the channel of global capital flows. The
Fund provides a convenient vehicle to participate in global bond markets, some
of which may outperform U.S. dollar-denominated bond markets in U.S. dollar
terms during certain periods of time.

Global participation

Although the Fund is non-diversified under the Investment Company Act of 1940
(the "1940 Act"), investing in the Fund can provide global diversity to an
investor's existing portfolio of U.S. dollar-denominated bonds ("U.S. bonds"),
thereby potentially reducing volatility or risk over time. Historically, returns
of global bond markets have often diverged from returns generated by U.S. bond
markets. These divergences stem not only from fluctuating exchange rates, but
also from foreign interest rates not always moving in the same direction or
having the same magnitude as interest rates in the U.S. Investment in the Fund
may provide the global bond portion of an investor's diversification program.

Investment opportunity

A global income portfolio composed of both international and U.S. bonds is able
to take advantage of a far wider range of investment opportunities than one that
is restricted to U.S. dollar securities and may, at times, provide higher
investment returns. For example, global bonds may provide higher current income
than U.S. bonds and/or the local price of global bonds can appreciate more than
U.S. bonds. Fluctuations in foreign currencies relative to the U.S. dollar can
potentially benefit investment returns. Of course, in each case, at any time the
opposite may also be true.

6
<PAGE>

Why invest in the Fund?

Scudder Global Bond Fund is designed for investors seeking total return with an
emphasis on current income from a portfolio of high-grade bonds denominated in
foreign currencies and the U.S. dollar. The Fund is appropriate for investors
who can accept the various risks associated with investing in global bonds.

The Fund provides an easy, efficient and relatively low cost way of investing in
global bonds. Direct investment in global securities is usually impractical for
most individual and smaller institutional investors. Investors often find it
difficult to purchase and sell global bonds, to obtain current information about
foreign entities, to hold securities in safekeeping and to convert the value of
their investment from foreign currencies into U.S. dollars. The Fund manages
these concerns for the investor. With a single investment in the Fund, a
shareholder can benefit from the potential income and capital protection and
appreciation associated with a professionally managed portfolio of high-grade
global bonds. The Adviser has extensive experience investing in global markets
and handling trading, custody and currency transactions around the world.

International investment experience

The Adviser has been a leader in international investment management and trading
for over 40 years. Its investment company clients include Scudder International
Fund, Inc., which was incorporated in Canada in 1953 as the first foreign
investment company registered with the United States Securities and Exchange
Commission, Scudder International Bond Fund, which invests internationally,
Scudder Global Fund and Scudder Global Small Company Fund, which invest
worldwide, The Japan Fund, Inc., which invests primarily in securities of
Japanese companies, Scudder Latin America Fund, which invests in Latin American
issuers, Scudder Pacific Opportunities Fund, which invests in issuers located in
the Pacific Basin, with the exception of Japan, Scudder Emerging Markets Income
Fund, which invests in debt securities issued in emerging markets and Scudder
Greater Europe Growth Fund, which invests in equity securities of European
companies. The Adviser also manages the assets of eight closed-end investment
companies investing in foreign securities: The Argentina Fund, Inc., The Brazil
Fund, Inc., The First Iberian Fund, Inc., The Korea Fund, Inc., The Latin
America Dollar Income Fund, Inc., Scudder New Asia Fund, Inc., Scudder New
Europe Fund, Inc. and Scudder World Income Opportunities Fund, Inc.

Special risk considerations

The Fund is intended for investors who can accept the risks associated with
investing in global bonds. Because of the Fund's long-term investment
objectives, investors should not rely on an investment in the Fund for their
short-term financial needs and should not view the Fund as a vehicle for playing
short-term swings in the global bond and foreign exchange markets. Shares of the
Fund alone should not be regarded as a complete investment program. Also,
investors should be aware that investing in global bonds may involve a higher
degree of risk than investing only in U.S. bonds.

7
<PAGE>

Special risk considerations (cont'd)

Investments in foreign securities involve special considerations due to more
limited information, higher transaction costs, different accounting standards,
thinner trading markets and the likely impact of foreign taxes on the yield from
debt securities. They may also entail certain risks, such as the possibility of
one or more of the following: imposition of dividend or interest withholding or
confiscatory taxes, currency blockages or transfer restrictions, expropriation,
nationalization or other adverse political or economic developments, less
government supervision and regulation of securities exchanges, brokers and
listed companies, and the difficulty of enforcing obligations in other
countries. Purchases of foreign securities are usually made in foreign
currencies and, as a result, the Fund will incur currency conversion costs and
may be affected favorably or unfavorably by changes in the value of foreign
currencies against the U.S. dollar. Further, it may be more difficult for the
Fund's agents to keep currently informed about corporate actions which may
affect the prices of portfolio securities. Communications between the U.S. and
foreign countries may be less reliable than within the U.S., thus increasing the
risk of delayed settlements of portfolio transactions or loss of certificates
for portfolio securities. The Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility and repatriation of assets.

Since the Fund's investments are primarily denominated in foreign currencies,
exchange rates are likely to have a significant impact on total Fund
performance. For example, a fall in the U.S. dollar's value relative to the
Japanese yen will increase the U.S. dollar value of a Japanese bond held in the
portfolio, even though the price of that bond in yen terms remains unchanged.
Conversely, if the U.S. dollar rises in value relative to the yen, the U.S.
dollar value of a Japanese bond will fall. Investors should be aware that
exchange rate movements can be significant and endure for long periods of time.

The Adviser attempts to manage exchange rate and interest rate risks through
active portfolio management. The Adviser's techniques include management of
currency, bond market and maturity exposure and security selection which will
vary based on available yields and the Adviser's outlook for the interest rate
cycle in various countries and changes in foreign currency exchange rates. In
any of the markets in which the Fund invests, longer maturity bonds tend to
fluctuate more in price as interest rates change than shorter-term
instruments--again providing both opportunity and risk.

Total return from investment in the Fund will consist of income after expenses,
bond price gains (or losses) in terms of the local currency and currency gains
(or losses). For tax purposes, realized gains and losses on currency are
regarded as ordinary income and loss and could, under certain circumstances,
have an impact on distributions. The value of the Fund's portfolio will
fluctuate in response to various economic factors, the most important of which
are fluctuations in foreign currency exchange rates and interest rates. Please
see "Additional information about policies and investments-- Risk factors."

Additional information about policies and investments

Investment restrictions

The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.

The Fund may not borrow money except as a temporary measure for extraordinary or

8
<PAGE>

emergency purposes or except in connection with reverse repurchase agreements
and may not make loans except through the lending of portfolio securities, the
purchase of debt securities or through repurchase agreements.

In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 10% of its total assets in securities which are not readily marketable, in
restricted securities, or in repurchase agreements maturing in more than seven
days.

A complete description of these and other policies and restrictions is contained
under "The Fund's Investment Objectives and Policies" in the Fund's Statement of
Additional Information.

Repurchase agreements

The Fund may enter into repurchase commitments with any party deemed
creditworthy by the Adviser, including foreign banks and broker/dealers, if the
transaction is entered into for investment purposes and the counterparty's
creditworthiness is at least equal to that of issuers of securities which the
Fund may purchase.

When-issued securities

The Fund may purchase securities on a when-issued or forward delivery basis, for
payment and delivery at a later date. The price and yield are generally fixed on
the date of commitment to purchase. During the period between purchase and
settlement, no interest accrues to the Fund. At the time of settlement, the
market value of the security may be more or less than the purchase price.

Short-term investments

To protect against adverse movements of interest rates and for liquidity, the
Fund may also purchase short-term obligations denominated in U.S. and foreign
currencies such as, but not limited to, bank deposits, bankers' acceptances,
certificates of deposit, commercial paper, short-term government, government
agency, supranational agency and corporate obligations, and repurchase
agreements.

Indexed securities

The Fund may invest in indexed securities, the value of which is linked to
currencies, interest rates, commodities, indices or other financial indicators
("reference instruments"). The interest rate or (unlike most fixed-income
securities) the principal amount payable at maturity of an indexed security may
be increased or decreased, depending on changes in the value of the reference
instrument. Indexed securities may be positively or negatively indexed, so that
appreciation of the reference instrument may produce an increase or a decrease
in the interest rate or value at maturity of the security. In addition, the
change in the interest rate or value at maturity of the security may be some
multiple of the change in the value of the reference instrument. Thus, in
addition to the credit risk of the security's issuer, the Fund will bear the
market risk of the reference instrument.

Dollar roll transactions

The Fund may enter into dollar roll transactions with selected banks and
broker/dealers. Dollar roll transactions are treated as reverse repurchase
agreements for purposes of the Fund's borrowing restrictions and consist of the
sale by the Fund of mortgage-backed securities, together with a commitment to
purchase similar, but not identical, securities at a future date, at the same
price. In addition, the Fund is paid a fee as consideration for entering into
the commitment to purchase. Dollar rolls may be renewed after

9
<PAGE>

Additional information about policies and investments (cont'd)

cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security.

Convertible securities

Portfolio turnover

Economic and market conditions may necessitate more active trading, resulting in
a higher portfolio turnover rate for the Fund. A higher rate involves greater
transaction costs to the Fund and may result in the realization of net capital
gains, which would be taxable to shareholders when distributed. Under normal
investment conditions, the Fund's portfolio turnover rate is expected to exceed
200%.

Mortgage and other asset-backed securities

The Fund may invest in mortgage-backed securities, which are securities
representing interests in pools of mortgage loans. These securities provide
shareholders with payments consisting of both interest and principal as the
mortgages in the underlying mortgage pools are paid off.

The timely payment of principal and interest on mortgage-backed securities
issued or guaranteed by the Government National Mortgage Association ("GNMA") is
backed by GNMA and the full faith and credit of the U.S. Government. These
guarantees, however, do not apply to the market value or yield of
mortgage-backed securities or to the value of Fund shares. Also, GNMA and other
mortgage-backed securities may be purchased at a premium over the maturity value
of the underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs. In addition, the Fund may invest in mortgage-backed
securities issued by other issuers, such as the Federal National Mortgage
Association (FNMA), which are not guaranteed by the U.S. Government. Moreover,
the Fund may invest in debt securities which are secured with collateral
consisting of mortgage-backed securities and in other types of mortgage-related
securities.

The Fund may also invest in securities representing interests in pools of
certain other consumer loans, such as automobile loans or credit card
receivables. In some cases, principal and interest payments are partially
guaranteed by a letter of credit from a financial institution.

Strategic Transactions and derivatives

The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of the Fund's
portfolio or to enhance potential gain. These strategies may be executed through
the use of derivative contracts. Such strategies are generally accepted as a
part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments may change
over time as new instruments and strategies are developed or regulatory changes
occur.

10
<PAGE>

sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").

Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. Some Strategic Transactions may
also be used to enhance potential gain although no more than 5% of the Fund's
assets will be committed to Strategic Transactions entered into for non-hedging
purposes. Any or all of these investment techniques may be used at any time and
in any combination, and there is no particular strategy that dictates the use of
one technique rather than another, as use of any Strategic Transaction is a
function of numerous variables including market conditions. The ability of the
Fund to utilize these Strategic Transactions successfully will depend on the
Adviser's ability to predict pertinent market movements, which cannot be
assured. The Fund will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide hedging, risk management or portfolio
management purposes and not for speculative purposes. Please refer to "Risk
factors--Strategic Transactions and derivatives" for more information.

Risk factors

Bonds. The Fund will invest no more than 15% of its net assets in debt
securities rated below investment-grade or in unrated securities of equivalent
quality as determined by the Adviser. The Fund will not invest in debt
securities rated B or lower. Securities rated below investment-grade are
commonly referred to as "junk bonds" and involve greater price volatility and
higher degrees of speculation with respect to the payment of principal and
interest than higher quality fixed-income securities. The market prices of such
lower-rated debt securities may decline significantly in periods of general
economic difficulty. In addition, the trading market for those securities is
generally less liquid than for higher-rated securities and the Fund may have
difficulty disposing of these securities at the time it wishes to do so. The
lack of a liquid secondary market for certain securities may also make it more
difficult for a Fund to obtain accurate market quotations for purposes of
valuing its portfolio and calculating its net asset value.

Non-diversified investment company. As a "non-diversified" investment company,
the Fund may invest a greater proportion of its assets in the securities of a
smaller number of issuers and therefore may be subject to greater market and
credit risk than a more broadly diversified portfolio.

11
<PAGE>

Additional information about policies and investments (cont'd)

Some repurchase commitment transactions may not provide the Fund with collateral
marked-to-market during the term of the commitment.

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.

Illiquid investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time- consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.

Dollar roll transactions. If the broker/dealer to whom the Fund sells the
securities becomes insolvent, the Fund's right to purchase or repurchase the
securities may be restricted; the value of the securities may change adversely
over the term of the dollar roll; the securities that the Fund is required to
repurchase may be worth less than the securities that the Fund originally held,
and the return earned by the Fund with the proceeds of a dollar roll may not
exceed transaction costs.

Mortgage and other asset-backed securities. Unscheduled or early payments on the
underlying mortgages may shorten the securities' effective maturities and lessen
their growth potential. The Fund may agree to purchase or sell these securities
with payment and delivery taking place at a future date. A decline in interest
rates may lead to a faster rate of repayment of the underlying mortgages, and
expose the Fund to a lower rate of return upon reinvestment. To the extent that
such mortgage-backed securities are held by the Fund, the prepayment right of
mortgagors may limit the increase in net asset value of the Fund because the
value of the mortgage-backed securities held by the Fund may not appreciate as
rapidly as the price of non-callable debt securities. Asset-backed securities
are subject to the risk of prepayment and the risk that the underlying loans
will not be repaid.

12
<PAGE>

otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.

Distribution and performance information

Dividends and capital gains distributions

The Fund's dividends from net investment income are declared daily and
distributed monthly. The Fund intends to distribute net realized capital gains
after utilization of capital loss carryforwards and net currency gains, if any,
in December to prevent application of a federal excise tax. Any dividends or
capital gains distributions declared in October, November or December with a
record date in such a month and paid during the following January will be
treated by shareholders for federal income tax purposes as if received on
December 31 of the calendar year declared. According to preference, shareholders
may receive distributions in cash or have them reinvested in additional shares
of the Fund. If an investment is in the form of a retirement plan, all dividends
and capital gains distributions must be reinvested into the shareholder's
account.

Generally, dividends from net investment income are taxable to investors as
ordinary income. Certain realized gains or losses on the sale or retirement of
international bonds held by the Fund, to the extent attributable to fluctuations
in currency exchange rates, as well as certain other gains or losses
attributable to exchange rate fluctuations, must be treated as ordinary income
or loss. Such income or loss may increase or decrease (or possibly eliminate)
the Fund's income available for distribution to shareholders. If, under the
rules governing the tax treatment of foreign currency gains and losses, the
Fund's income available for distribution is decreased or eliminated, all or a
portion of the dividends declared by the Fund may be treated for federal income
tax purposes as a nontaxable return of capital distribution. Generally, a
shareholder's tax basis in Fund shares will be reduced to the extent that an
amount distributed to the shareholder is treated as a return of capital. The
Fund may reduce its daily dividend to lessen the effect of these rules. If the
Fund's income is increased under the foreign currency taxation rules, the Fund
intends to declare additional distributions of such income in December.

(Continued on page 16)

13
<PAGE>

<TABLE>
<CAPTION>
Purchases
<S> <C> <C> <C>

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 and check
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:

The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
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 shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.

Make checks
payable o By Mail Send a check with a Scudder investment slip, or with a letter of
to "The Scudder instruction including your account number and the complete Fund name, to
Funds." the 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 Please see Transaction information--Purchasing shares--By AutoBuy for more details.

o By Automatic You may arrange to make investments on a regular basis through automatic
Investment Plan deductions from your bank checking account. Please call 1-800-225-5163
($50 minimum) for more information and an enrollment form.
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
Exchanges and redemptions
<S> <C> <C> <C>

Exchanging Minimum investments: $1,000 to establish a new shares account; $100 to exchange among
shares existing accounts

Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder Services 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
- ------------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
Shares 8 a.m. to 8 p.m. eastern time or to access SAIL(TM),
Scudder's Automated Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or redemption
proceeds of up to $50,000 sent to your address of record.

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. Call
Withdrawal 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>

15
<PAGE>

Distribution and performance
information (cont'd)

(Continued from page 13)

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. Shareholders may be able to claim a credit or deduction on
their income tax returns for their pro rata portions of qualified taxes paid by
the Fund to foreign countries.

The Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of each year.

Performance information

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. The "SEC yield" of the Fund is an
annualized expression of the net income generated by the Fund over a specified
30-day (one month) period, as a percentage of the Fund's share price on the last
day of that period. This yield is calculated according to methods required by
the Securities and Exchange Commission (the "SEC"), and therefore may not equate
to the level of income paid to shareholders. "Total return" is the change in
value of an investment in the Fund for a specified period. The "average annual
total return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year and
the life of the Fund as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.

Fund organization

The Fund is a non-diversified series of Scudder Global Fund, Inc. (the
"Corporation"), an open-end, management investment company registered under the
1940 Act. The Corporation was organized as a Maryland corporation in May 1986.

The Fund changed its objective and its name, from Scudder Short Term Global
Income Fund, on December 27, 1995.

The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Corporation is not required to hold and has no current
intention of holding annual shareholder meetings, although special meetings may
be called for purposes such as electing or removing Directors, changing
fundamental investment policies or approving an investment advisory contract.
Shareholders will be assisted in communicating with other shareholders in
connection with removing a Director as if Section 16(c) of the 1940 Act were
applicable.

Investment adviser

16
<PAGE>

The Adviser receives monthly an investment advisory fee for its services. The
fee is graduated so that increases in the Fund's net assets may result in a
lower annual fee rate and decreases in the Fund's net assets may result in a
higher annual fee rate. The fee is payable monthly, provided that the Fund will
make such interim payments as may be requested by the Adviser not to exceed 75%
of the amount of the fee then accrued on the books of the Fund and unpaid. The
Adviser has agreed not to impose all or a portion of its investment management
fee and to take other action, to the extent necessary, to maintain the
annualized expenses of the Fund at not more than 1.00% of average daily net
assets of the Fund until February 28, 1997.

For the fiscal year ended October 31, 1995, under its prior name and investment
objective, the Adviser received an investment management fee of 0.55% of the
Fund's average daily net assets on an annual basis.

The fee is higher than that charged many bond funds which invest primarily in
U.S. debt securities. However, management of the Fund involves analyzing market,
credit and currency relationships in a number of economies throughout the world.

All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.

Scudder, Stevens & Clark, Inc., is located at 345 Park Avenue, New York, New
York.

Transfer agent

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.

Underwriter

Custodian

Brown Brothers Harriman & Co. is the Fund's custodian.

Fund accounting agent

Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.

Transaction information

Purchasing shares

By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. 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.

17
<PAGE>

Transaction information (cont'd)

The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552

Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).

The account will be established once the application and money order are
received in good order.

You may also make additional investments of $100 or more to your existing
account by wire.

To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the New York Stock Exchange ("the Exchange"), shares will be purchased at the
net asset value per share calculated at the close of trading on the day of your
call. "AutoBuy" requests received after the close of regular trading on the
Exchange will begin their processing and be purchased at the net asset value
calculated the following business day.

By exchange. Your new account will have the same registration and address as
your existing account.

The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.

You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.

Redeeming shares

The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.

You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.

18
<PAGE>

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.

"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.

Telephone transactions

Share price

19
<PAGE>

Transaction information (cont'd)

Processing time

All purchase and redemption requests must be received in good order by the
Fund's transfer agent. Those requests received by the close of regular trading
on the Exchange are executed at the net asset value per share calculated at the
close of trading that day. Purchase and redemption requests received after the
close of regular trading on the Exchange will be executed the following business
day. Purchases made by federal funds wire before noon eastern time will begin
earning income that day; all other purchases received before the close of
regular trading on the Exchange will begin earning income the next business day.
Redeemed shares will earn income on the day on which the redemption request is
executed.

If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.

The Fund will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).

Short-term trading

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

20
<PAGE>

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

Redemption-in-kind

Shareholder benefits

Experienced professional management

A team approach to investing

Scudder Global 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 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 Adam M. Greshin assumed responsibility for the Fund's
day-to-day management and investment strategies in November 1995. Mr. Greshin
joined Scudder in 1986 as an international bond analyst and is Product Leader
for Scudder's global and international fixed-income investing. Portfolio Manager
Margaret D. Hadzima is Chairperson of Scudder's Global Bond Strategy Committee
and Director of Global Bond Research and Global Bond Investment. Ms. Hadzima,
who joined Scudder in 1973 and the team in 1995, plays an active role in setting
the Fund's overall bond strategy.

SAIL(TM)--Scudder Automated Information Line

21
<PAGE>

Shareholder benefits (cont'd)

Investment flexibility

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

Shareholder reports

In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.

Newsletters

Scudder Funds Centers

T.D.D. service for the hearing impaired

22
<PAGE>

Scudder tax-advantaged retirement plans

o 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.

o 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.

o 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.

o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.

o 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.

o 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.

23
<PAGE>

Directors and Officers

Edmond D. Villani*
Chairman of the Board and Director

Nicholas Bratt*
President and Director

Daniel Pierce*
Vice President and Director

Paul Bancroft III
Director; Venture Capitalist and Consultant

Sheryle J. Bolton
Director; Consultant

Thomas J. Devine
Director; Consultant

William H. Gleysteen, Jr.
Director; Consultant

William H. Luers
Director; President, The Metropolitan Museum of Art

Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation

Robert W. Lear
Honorary Director; Executive-in-Residence,
Columbia University Graduate School of Business

Adam M. Greshin*
Vice President

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Douglas M. Loudon*
Vice President

Gerald J. Moran*
Vice President

M. Isabel Saltzman*
Vice President

Cornelia M. Small*
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.

24
<PAGE>

Investment products and services

<S> <C>
The Scudder Family of Funds Income

Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond 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 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 Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan 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)++
- -------------------------------------------------------------------------------------------------------------------------
<FN>
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.
</FN>
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
How to contact Scudder

Account Service and Information: Please address all correspondence to:

For existing account service Scudder Investor Relations The Scudder Funds
and transactions 1-800-225-5163 P.O. Box 2291
Boston, Massachusetts
02107-2291
For personalized information Scudder Automated
about your Scudder accounts; Information Line (SAIL)
exchanges and redemptions; or 1-800-343-2890
information on any Scudder fund

Investment Information: Or Stop by a Scudder Funds Center:

To receive information about Scudder Investor Relations Many shareholders enjoy the personal, one-on-one
the Scudder funds, for 1-800-225-2470 service of the Scudder Funds Centers. Check for a
additional applications and Funds Center near you--they can be found in the
prospectuses, or for following cities:
investment questions

For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution Services Boston Portland, OR
1-800-323-6105 Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale

</TABLE>

Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.

26
<PAGE>

This prospectus sets forth concisely the information about Scudder Emerging
Markets Income Fund, a series of Scudder Global Fund, Inc., an open-end
management investment company, that a prospective investor should know before
investing. Please retain it for future reference.

THE FUND INVESTS PREDOMINANTLY IN LOWER QUALITY BONDS, COMMONLY REFERRED TO AS
JUNK BONDS. BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO
THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. PURCHASERS SHOULD CAREFULLY
ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND.

Contents--see page 4.

Scudder
Emerging Markets
Income Fund

Prospectus
March 1, 1996

A pure no-load(TM) (no sales charges) mutual fund seeking to provide high
current income and, secondarily, long-term capital appreciation through
investment primarily in high-yielding debt securities issued in emerging
markets.

<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 Emerging Markets Income Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.

1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.

Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE

Investment management fee 1.00%
12b-1 fees NONE
Other expenses 0.68%
----
Total Fund operating expenses 1.68%**
====

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
------ ------- ------- --------
$17 $53 $91 $199

* You may redeem by writing or calling the Fund. If you wish to receive
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."

** Until February 29, 1996, the Adviser waived a portion of its investment
management fee to the extent necessary so that the total annualized
expenses of the Fund did not exceed 1.50% of average daily net assets.

2
<PAGE>

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.

FOR THE PERIOD
YEAR DECEMBER 31, 1993
ENDED (COMMENCEMENT
OCTOBER 31, OF OPERATIONS) TO
1995 OCTOBER 31, 1994
- --------------------------------------------------------------------------------------------------

Less distributions from net investment income. . . . . . . . . . (1.11) (.51)
------- -------
Net asset value, end of period . . . . . . . . . . . . . . . . . $ 10.26 $ 11.05
======= =======

Total Return (%) . . . . . . . . . . . . . . . . . . . . . . . . 3.46 (3.54)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) . . . . . . . . . . . . . 169 95
Ratio of operating expenses, net to average daily net assets (%) (a) 1.50 1.50*
Ratio of net investment income to average daily net assets (%) . 12.83 9.17*
Portfolio turnover rate (%). . . . . . . . . . . . . . . . . . . 302.2 180.6*
(a)Reflects a per share amount of management fee not imposed
by the Adviser. . . . . . . . . . . . . . . . . . . . . . . . $ .02 $ .05
Operating expense ratio including management fee
not imposed (%) . . . . . . . . . . . . . . . . . . . . . . . 1.68 2.23*

* Annualized
* * Not annualized

</TABLE>

3
<PAGE>

A message from Scudder's chairman

Scudder Emerging Markets Income Fund

Investment objectives

o high current income and, secondarily, long-term capital appreciation
through investment primarily in high-yielding debt securities issued in
emerging markets

Investment characteristics

o an actively managed portfolio of lower quality bonds issued by governments
and corporations in Latin America and other emerging markets

o focus on higher-yielding, below investment-grade debt securities

o primarily invested in U.S. dollar-denominated securities to reduce currency
risk

o daily liquidity at current net asset value

Contents

Investment objectives and policies 5

Why invest in the Fund? 7

International investment experience 8

Additional information about policies
and investments 9

Special risk considerations 11

Distribution and performance information 15

Purchases 16

Exchanges and redemptions 17

Fund organization 18

Transaction information 18

Shareholder benefits 22

Directors and Officers 25

Appendix 26

Investment products and services 28

How to contact Scudder 29

4
<PAGE>

Investment objectives and policies

Scudder Emerging Markets Income Fund (the "Fund"), a non-diversified series of
Scudder Global Fund, Inc., has dual investment objectives. The Fund's primary
investment objective is to provide investors with high current income. As a
secondary objective, the Fund seeks long-term capital appreciation. In pursuing
these goals, the Fund invests primarily in high-yielding debt securities issued
by governments and corporations in emerging markets. Many nations in Latin
America and other developing regions of the world have undertaken sweeping
political and economic changes that favor increased business activity and demand
for capital. In the opinion of the Fund's investment adviser, Scudder, Stevens &
Clark, Inc. (the "Adviser"), these changes present attractive investment
opportunities, both in terms of income and appreciation potential, for long-term
investors.

Special investment considerations

The Fund involves above-average bond fund risk and can invest entirely in high
yield/high risk bonds. It is designed as a long-term investment and not for
short-term trading purposes, and should not be considered a complete investment
program. While designed to provide a high level of current income, the Fund may
not be appropriate for all income investors. The Fund should not be viewed as a
substitute for a money market or short-term bond fund. The Fund invests in lower
quality securities of emerging market issuers, some of which have in the past
defaulted on certain of their financial obligations. Investments in emerging
markets can be volatile. The Fund's share price and yield can fluctuate daily in
response to political events, changes in the perceived creditworthiness of
emerging nations, fluctuations in interest rates and, to a certain extent,
movements in foreign currencies. Please refer to "Special risk considerations"
for further information.

Investment policies

In seeking high current income and, secondarily, long-term capital appreciation,
the Fund invests, under normal market conditions, at least 65% of its total
assets in debt securities issued by governments, government-related entities and
corporations in emerging markets, or the return on which is derived primarily
from emerging markets. The Fund considers "emerging markets" to include any
country that is defined as an emerging or developing economy by any one of the
following: the International Bank for Reconstruction and Development (i.e., the
World Bank), the International Finance Corporation or the United Nations or its
authorities.

o the issuer is organized under the laws of an emerging market country;

5
<PAGE>

Investment objectives and policies (cont'd)

o the issuer's principal securities trading market is in an emerging market;
or

o at least 50% of the issuer's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years is derived
from (directly or indirectly from subsidiaries) assets or activities
located in emerging markets.

Although the Fund may invest in a wide variety of high-yielding debt
obligations, under normal conditions it must invest at least 50% of its assets
in sovereign debt securities issued or guaranteed by governments,
government-related entities and central banks based in emerging markets
(including participations in and assignments of portions of loans between
governments and financial institutions); government owned, controlled or
sponsored entities located in emerging markets; entities organized and operated
for the purpose of restructuring investment characteristics of instruments
issued by government or government-related entities in emerging markets; and
debt obligations issued by supranational organizations such as the Asian
Development Bank and the Inter-American Development Bank, among others.

The Fund may also consider for purchase any debt securities issued by commercial
banks and companies in emerging markets. The Fund may invest in both fixed- and
floating-rate issues. Debt instruments held by the Fund take the form of bonds,
notes, bills, debentures, convertible securities, warrants, bank obligations,
short-term paper, loan participations, loan assignments and trust interests. The
Fund may invest regularly in "Brady Bonds," which are debt securities issued
under the framework of the Brady Plan as a mechanism for debtor countries to
restructure their outstanding bank loans. Most "Brady Bonds" have their
principal collaterized by zero coupon U.S. Treasury bonds.

To reduce currency risk, the Fund invests at least 65% of its assets in U.S.
dollar-denominated debt securities. Therefore, no more than 35% of the Fund's
assets may be invested in debt securities denominated in foreign currencies.

The Fund is not restricted by limits on weighted average portfolio maturity or
the maturity of an individual issue. Debt securities in which the Fund may
invest may have stated maturities from overnight to 30 years. The weighted
average maturity of the Fund's portfolio is actively managed and will vary from
period to period based upon the Adviser's assessment of economic and market
conditions, taking into account the Fund's investment objectives.

In addition to maturity, the Fund's investments are actively managed in terms of
geographic, industry and currency allocation. In managing the Fund's portfolio,
the Adviser takes into account such factors as the credit quality of issuers,
changes in and levels of interest rates, projected economic growth rates,
capital flows, debt levels, trends in inflation, anticipated movements in
foreign currencies and government initiatives.

While the Fund is not "diversified" for purposes of the Investment Company Act
of 1940, (the "1940 Act") it intends to invest in a minimum of three countries
at any one time and will not commit more than 40% of its assets to issuers in a
single country.

6
<PAGE>

"junk bonds") are predominantly speculative with respect to the capacity to pay
interest and repay principal in accordance with their terms and generally
involve a greater risk of default and more volatility in price than securities
in higher rating categories, such as investment-grade U.S. bonds. On occasion,
the Fund may invest up to 5% of its net assets in non-performing securities
whose quality is comparable to securities rated as low as D by S&P or C by
Moody's. During the fiscal year ended October 31, 1995, the average monthly
dollar-weighted market value of the bonds in the Fund's portfolio was rated as
follows: 10.0% A, 1.73% BBB, 45.84% BB and 42.43% B. The bonds are rated by
Moody's or S&P, or of equivalent quality as determined by the Adviser. A large
portion of the Fund's bond holdings may trade at substantial discounts from face
value. Please refer to "Special risk considerations--High yield/high risk
securities" for more information.

However, for temporary, defensive or emergency purposes, the Fund may invest
without limit in U.S. debt securities, including short-term money market
securities. It is impossible to predict for how long such alternative strategies
will be utilized. In addition, the Fund may engage in strategic transactions.
The Fund will borrow only to enhance liquidity and to provide for redemptions
and distributions. The Fund may also acquire shares of closed-end investment
companies that invest primarily in emerging market debt securities. To the
extent the Fund invests in such closed-end investment companies, shareholders
will incur certain duplicative fees and expenses, including investment advisory
fees. See "Additional information about policies and investments" and "Special
risk considerations" for more information about these investment techniques.

Why invest in the Fund?

The Fund is designed as a convenient, relatively low cost way for investors to
participate in an actively managed portfolio of high-yielding emerging market
debt securities. The Adviser believes that emerging bond markets will continue
to expand with the economic growth in Latin America and other developing
regions, and that securities in these markets will continue to provide an
attractive combination of high current income and appreciation potential for the
long-term investor.

In recent years, many emerging markets around the world have reduced
government's role in economic and personal affairs and instituted other changes
to stimulate business investment and growth. Autocratic political regimes have,
in many cases, been replaced by more democratic institutions. Centrally
controlled economies have given way, in whole or significant part, to
free-market systems. In support of these changes, countries in Latin America and
elsewhere have reduced tax rates and budget deficits, made strides in getting
inflation under control and stabilizing exchange rates, and have eliminated or
reduced trade barriers. Added to these important steps, developing economies
have improved communications and transportation systems; liberalized capital
markets; and privatized utilities, oil companies, banks and other state-owned
industries. Although the pace and success in accomplishing these objectives vary
significantly from country to country, these reforms have, in general, helped to
reverse flight of capital, build confidence among both local and foreign
investors, and stimulate economic expansion.

7
<PAGE>

Why invest in the Fund? (cont'd)

The Adviser believes that for these favorable trends to continue, however, the
emerging economies of Latin America, Asia, Africa, the Middle East and Europe
will need a steady flow of capital to continue to build infrastructure,
complement domestic savings, support currency reserves, expand plant and
equipment, and maintain competitiveness on a global basis. Much of this capital
should come from the public and private debt markets. The world fixed-income
markets are vital to the future growth of emerging economies. These markets can
present attractive opportunities for investors in the form of high yields, which
emerging economies need to offer to attract capital, and the potential for
capital appreciation, which can result from improving creditworthiness of
emerging market issuers, declining interest rates and other factors.

In addition to an attractive return potential, the Fund can provide diversity to
a domestic investment portfolio because the emerging debt markets do not always
move in the same manner as U.S. stock and bond markets. The Fund can also
provide a way to benefit from the growth and improving economic fundamentals of
developing nations for those investors who cannot tolerate the degree of
volatility associated with emerging market common stocks.

Direct investment in foreign securities, especially the emerging markets, is
usually impractical for an individual investor. Investors, on their own, may
find it difficult to analyze investment opportunities abroad as well as trade
and hold foreign securities. The Fund offers professional management and
administrative convenience to shareholders wishing to participate in this
relatively new asset class.

International investment experience

The Adviser has been a leader in international investment management for over 40
years. Its investment company clients include Scudder International Fund, which
invests primarily in foreign securities and was initially incorporated in Canada
in 1953 as the first foreign investment company registered with the United
States Securities and Exchange Commission, Scudder International Bond Fund,
which invests internationally, Scudder Global Fund, Scudder Global Bond Fund and
Scudder Global Small Company Fund, which invest worldwide, The Japan Fund, Inc.,
which invests primarily in securities of Japanese companies, Scudder Latin
America Fund, which invests in Latin American issuers, Scudder Pacific
Opportunities Fund, which invests in issuers located in the Pacific Basin, with
the exception of Japan and Scudder Greater Europe Growth Fund, which invests
primarily in the equity securities of European companies. The Adviser also
manages the assets of eight closed-end investment companies investing in foreign
securities: The Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian
Fund, Inc., The Korea Fund, Inc., The Latin America Dollar Income Fund, Inc.,
Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc. and Scudder World
Income Opportunities Fund, Inc. As of October 31, 1995, the Adviser was
responsible for managing more than $20 billion of foreign securities, including
approximately $3 billion invested in Latin American and other emerging market
debt securities. In an effort to control risk and enhance return, the Adviser
conducts its own credit analysis and assigns its own credit risk ratings.

8
<PAGE>

Additional information about policies and investments

Investment restrictions

The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.

The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.

The Fund may not invest more than 25% of its total assets in securities of
companies in the same industry.

In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 15% of its net assets, in the aggregate, in securities which are not
readily marketable, restricted securities and repurchase agreements maturing in
more than seven days. The Fund may not invest more than 10% of its total assets
in restricted securities.

A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.

Portfolio turnover rate

Recent economic and market conditions have necessitated more active trading,
resulting in a higher portfolio turnover rate for the Fund. A higher rate
involves greater transaction costs to the Fund and may result in the realization
of net capital gains, which would be taxable to shareholders when distributed.

Brady Bonds

The Fund may invest in Brady Bonds, which are securities created through the
exchange of existing commercial bank loans to public and private entities in
certain emerging markets for new bonds in connection with debt restructurings
under a debt restructuring plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings
have been implemented to date in Argentina, Bulgaria, Brazil, Costa Rica,
Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay and Venezuela.

Brady Bonds have been issued only recently, and for that reason do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (but primarily the dollar) and are actively traded
in over-the-counter secondary markets. Dollar- denominated, collateralized Brady
Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds.

Brady Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity, (these uncollateralized
amounts constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds with
respect to commercial bank loans by public and private entities, investments in
Brady Bonds may be viewed as speculative.

Indexed securities

Loan participations and assignments

The Fund may invest in fixed- and floating-rate loans arranged through private
negotiations

9
<PAGE>

Additional information about policies and investments (cont'd)

between an issuer of emerging market debt instruments and one or more financial
institutions ("lenders"). Generally, the Fund's investments in loans are
expected to take the form of loan participations and assignments of portions of
loans from third parties.

When investing in a participation, the Fund will typically have the right to
receive payments only from the lender to the extent the lender receives payments
from the borrower, and not from the borrower itself. Likewise, the Fund
typically will be able to enforce its rights only through the lender, and not
directly against the borrower. As a result, the Fund will assume the credit risk
of both the borrower and the lender that is selling the participation.

When the Fund purchases assignments from lenders, it will acquire direct rights
against the borrower, but these rights and the Fund's obligations may differ
from, and be more limited than those held by the assigning lender.

Loan participations and assignments may be illiquid. Please refer to "Special
risk considerations--Illiquid investments" for more information.

Convertible securities

The Fund may invest in convertible securities which may offer higher income than
the common stocks into which they are convertible. The convertible securities in
which the Fund may invest consist of bonds, notes, debentures and preferred
stocks which may be converted or exchanged at a stated or determinable exchange
ratio into underlying shares of common stock. The Fund may be required to permit
the issuer of a convertible security to redeem the security, convert it into the
underlying common stock or sell it to a third party. Thus, the Fund may not be
able to control whether the issuer of a convertible security chooses to convert
that security. If the issuer chooses to do so, this action could have an adverse
effect on the Fund's ability to achieve its investment objectives.

When-issued securities

Repurchase agreements

As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/ dealers. Under
a repurchase agreement the Fund acquires securities, subject to the seller's
agreement to repurchase them at a specified time and price. The Fund may enter
into repurchase commitments with any party deemed creditworthy by the Adviser,
including foreign banks and broker/dealers, if the transaction is entered into
for investment purposes and the counterparty's creditworthiness is at least
equal to that of issuers of securities which the Fund may purchase.

Strategic Transactions and derivatives

The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of the Fund's
portfolio or to enhance potential gain. These strategies may be executed through
the use of derivative contracts. Such strategies are generally accepted as a
part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments may change
over time as new instruments and strategies are developed or regulatory changes
occur.

10
<PAGE>

Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. Some Strategic Transactions may
also be used to enhance potential gain although no more than 5% of the Fund's
assets will be committed to Strategic Transactions entered into for non-hedging
purposes. Any or all of these investment techniques may be used at any time and
in any combination, and there is no particular strategy that dictates the use of
one technique rather than another, as use of any Strategic Transaction is a
function of numerous variables including market conditions. The ability of the
Fund to utilize these Strategic Transactions successfully will depend on the
Adviser's ability to predict pertinent market movements, which cannot be
assured. The Fund will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Strategic
Transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide hedging, risk management or portfolio
management purposes and not for speculative purposes. Please refer to "Special
risk considerations--Strategic Transactions and derivatives" for more
information.

Special risk considerations

Indexed securities. Indexed securities may be positively or negatively indexed,
so that appreciation of the reference instrument may produce an increase or a
decrease in the interest rate or value of the security at maturity. In addition,
the change in the interest rate or value of the security at maturity may be some
multiple of the change in the value of the reference instrument. Thus, in
addition to the credit risk of the security's issuer, the Fund will bear the
market risk of the reference instrument.

Foreign securities. Investments in foreign securities involve special
considerations, due to more limited information, higher brokerage costs,
different accounting standards, thinner trading markets and the likely impact of
foreign taxes on the yield from debt securities. They may also entail certain
other risks, such as the possibility of one or more of the following: imposition
of dividend or interest withholding or confiscatory taxes; currency blockages or
transfer restrictions; expropriation, nationalization,

11
<PAGE>

Special risk considerations (cont'd)

military coups or other adverse political or economic developments; less
government supervision and regulation of securities exchanges, brokers and
listed companies; and the difficulty of enforcing obligations in other
countries. Further, it may be more difficult for the Fund's agents to keep
currently informed about corporate actions which may affect the prices of
portfolio securities. Communications between the U.S. and foreign countries may
be less reliable than within the U.S., increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Certain markets may require payment for securities before delivery.
The Fund's ability and decisions to purchase and sell portfolio securities may
be affected by laws or regulations relating to the convertibility of currencies
and repatriation of assets. Some countries restrict the extent to which
foreigners may invest in their securities markets.

The Fund invests in securities denominated in currencies of foreign countries.
Accordingly, changes in the value of these currencies against the U.S. dollar
will result in corresponding changes in the U.S. dollar value of the Fund's
assets denominated in those currencies.

Some foreign countries also may have managed currencies, which are not free
floating against the U.S. dollar. In addition, there is risk that certain
foreign countries may restrict the free conversion of their currencies into
other currencies. Further, it generally will not be possible to reduce the
Fund's foreign currency risk through hedging. Any devaluations in the currencies
in which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund's net asset value.

Investing in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Fund is uninvested and no
return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. Costs
associated with transactions in foreign securities are generally higher than
costs associated with transactions in U.S. securities. Such transactions also
involve additional costs for the purchase or sale of foreign currency.

12
<PAGE>

affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.

Throughout the last decade many emerging markets have experienced and continue
to experience high rates of inflation. In certain countries inflation has at
times accelerated rapidly to hyperinflationary levels, creating a negative
interest rate environment and sharply eroding the value of outstanding financial
assets in those countries. Increases in inflation could have an adverse effect
on the Fund's non-dollar denominated securities and on the issuers of debt
obligations generally.

Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments
position. The securities markets, values of securities, yields and risks
associated with securities markets in different countries may change
independently of each other.

Investment in sovereign debt can involve a high degree of risk. Holders of
sovereign debt (including the Fund) may be requested to participate in the
rescheduling of such debt and to extend further loans to governmental entities.
There is no bankruptcy proceeding by which sovereign debt on which governmental
entities have defaulted may be collected in whole or in part. Securities traded
in certain emerging European securities markets may be subject to risks due to
the inexperience of financial intermediaries, the lack of modern technology and
the lack of a sufficient capital base to expand business operations.
Additionally, former Communist regimes of a number of Eastern European countries
had expropriated a large amount of property, the claims on which have not been
entirely settled. There can be no assurance that the Fund's investments in
Eastern Europe would not also be expropriated, nationalized or otherwise
confiscated. Finally, any change in the leadership or policies of Eastern
European countries, or the countries that exercise a significant influence over
those countries, may halt the expansion of or reverse the liberalization of
foreign investment policies now occurring and adversely affect existing
investment opportunities. For a more complete description of the risks of
investing in emerging markets, including Latin America, please refer to the
Fund's Statement of Additional Information.

High yield/high risk securities. The Fund may invest in debt securities which
are rated below investment-grade (hereinafter referred to as "lower rated
securities") or which are unrated, but deemed equivalent to those rated below
investment-grade by the Fund's Adviser. The lower the ratings of such debt
securities, the greater their risks render them like equity securities. These
debt instruments generally offer a higher current yield than that available from
higher grade issues, but typically involve greater risk. Lower rated and unrated
securities are especially subject to adverse changes in general economic
conditions, to changes in the financial condition of their issuers, and to price
fluctuation in response to changes in interest rates. During periods of economic
downturn or rising interest rates, issuers of these instruments may experience
financial stress that could adversely affect their ability to make payments of
principal and interest and increase the possibility of default. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of these securities
especially in a market characterized by only a small amount of trading.
Perceived credit quality in this market can change suddenly and unexpectedly,
and may not fully reflect the actual risk posed by a particular lower rated or
unrated security. For a more complete description of the risks of high
yield/high risk securities, please refer to the Fund's Statement of Additional
Information.

13
<PAGE>

Special risk considerations (cont'd)

Illiquid investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.

Convertible securities. While convertible securities generally offer lower
yields than non-convertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities generally entail less credit risk than the issuer's common stock.

Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of securities, before being able to sell the
securities. Some repurchase commitment transactions may not provide the Fund
with collateral marked-to-market during the term of the commitment.

14
<PAGE>

Distribution and performance information

Dividends and capital gains distributions

The Fund intends to distribute dividends from its net investment income
quarterly in March, June, September and December. The Fund intends to distribute
net realized capital gains after utilization of capital loss carryforwards, if
any, in December to prevent application of a federal excise tax. Any dividends
or capital gains distributions declared in October, November or December with a
record date in such a month and paid during the following January will be
treated by shareholders for federal income tax purposes as if received on
December 31 of the calendar year declared. According to preference, shareholders
may receive distributions in cash or have them reinvested in additional shares
of the Fund. If an investment is in the form of a retirement plan, all dividends
and capital gains distributions must be reinvested into the shareholder's
account.

Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Certain realized gains or losses on the sale or retirement of
foreign bonds held by the Fund, to the extent attributable to fluctuations in
currency exchange rates, as well as certain other gains or losses attributable
to exchange rate fluctuations, must be treated as ordinary income or loss. Such
income or loss may increase or decrease the Fund's income available for
distribution to shareholders. If, under the rules governing the tax treatment of
foreign currency gains and losses, the Fund's income available for distribution
is decreased, a portion of the dividends declared by the Fund may be treated for
federal income tax purposes as a nontaxable return of capital distribution.
Generally, a shareholder's tax basis in Fund shares will be reduced to the
extent that an amount distributed to the shareholder is treated as a return of
capital.

The Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.

Performance information

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. The "SEC yield" of the Fund is an
annualized expression of the net income generated by the Fund over a specified
30-day (one month) period as a percentage of the Fund's share price on the last
day of that period. This yield is calculated according to methods required by
the Securities and Exchange Commission (the "SEC"), and therefore may not equate
to the level of income paid to shareholders. "Total return" is the change in
value of an investment in the Fund for a specified period. The "average annual
total return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year and
the life of the Fund. "Cumulative total return" represents the cumulative change
in value of an investment in the Fund for various periods. All types of total
return calculations assume that all dividends and capital gains distributions
during the period were reinvested. "Capital change" measures return from
capital, including reinvestment of any capital gains distributions but does not
include the reinvestment of dividends. Performance will vary based upon, among
other things, changes in market conditions and the level of the Fund's expenses.

15
<PAGE>
Purchases
<TABLE>

<S> <C> <C> <C>
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 and check
payable to "The
Scudder Funds."
by regular mail to: or by express, registered,
or certified mail to:

The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612

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 shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.

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 Please see Transaction information--Purchasing shares--
By AutoBuy or By telephone order for more details.

16
<PAGE>

Exchanges and redemptions

<TABLE>

<S> <C> <C>
Exchanging Minimum investments: $1,000 to establish a new account; $100 to exchange among
shares existing accounts

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
telephone number.

Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:

Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m.eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $50,000 sent to your address of record.

o By Mail Send your instructions for redemption to the appropriate address or fax
or Fax number above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime
telephone 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.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>

17
<PAGE>

Fund organization

Scudder Emerging Markets Income Fund is a non-diversified series of Scudder
Global Fund, Inc. (the "Corporation"), an open-end, management investment
company registered under the 1940 Act. The Corporation was organized as a
Maryland corporation in May 1986.

The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Fund is not required to and has no current intention of
holding annual shareholder meetings, although special meetings may be called for
purposes such as electing or removing Directors, changing fundamental investment
policies or approving an investment management contract. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Director as if Section 16(c) of the 1940 Act were applicable.

Investment adviser

The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage its daily investment and business
affairs subject to the policies established by the Board of Directors. The
Directors have overall responsibility for the management of the Fund under
Maryland law.

The Fund pays the Adviser an annual fee of 1.00% of the Fund's average daily net
assets. The Adviser had agreed to maintain the annualized expenses of the Fund
at not more than 1.50% of the average daily net assets of the Fund until
February 29, 1996. Accordingly, for the fiscal year ended October 31, 1995, the
Adviser received an investment management fee of 0.82% of the Fund's average
daily net assets.

The fee is payable monthly, provided that the Fund will make interim payments as
may be requested by the Adviser not to exceed 75% of the amount of the fee then
accrued on the books of the Fund and unpaid.

All of the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.

Scudder, Stevens & Clark, Inc. is located at
345 Park Avenue, New York, New York.

Transfer agent

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.

Underwriter

Custodian

Brown Brothers Harriman & Co. is the Fund's custodian.

Fund accounting agent

Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.

Transaction information

Purchasing shares

18
<PAGE>

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. 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.

Your wire instructions must also include:

- -- the name of the fund in which the money is to be invested,

- -- the account number of the fund, and

- -- the name(s) of the account holder(s).

The account will be established once the application and money order are
received in good order.

You may also make additional investments of $100 or more to your existing
account by wire.

By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.

By exchange. Your new account will have the same registration and address as
your existing account.

19
<PAGE>

Transaction information (cont'd)

You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.

Redeeming shares

The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.

You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.

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.

"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.

20
<PAGE>

For more information, please call 1-800-225-5163.

Telephone transactions

Share price

Processing time

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
Investor Relations by calling 1-800-225-5163.

Short-term trading

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

21
<PAGE>

Transaction information (cont'd)

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

Third party transactions

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

A team approach to investing

Scudder Emerging Markets Income Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.

22
<PAGE>

Lead Portfolio Manager Susan E. Gray assumed responsibility for the Fund's
investment strategies and day-to-day management in 1996. Ms. Gray, who has over
six years of investment experience in emerging markets, joined the Fund's team
in 1994 and has worked at Scudder since 1987. M. Isabel Saltzman, Portfolio
Manager, assists with the development and execution of investment strategy. Ms.
Saltzman, who joined Scudder in 1990, has been involved in foreign finance and
investing since 1979 and contributes special expertise in Latin America.

SAIL(TM)--Scudder Automated Information Line

Investment flexibility

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

Shareholder reports

In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.

Newsletters

Scudder Funds Centers

T.D.D. service for the hearing impaired

23
<PAGE>

Scudder tax-advantaged retirement plans

o 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.

o 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.

o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.

o 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.

o 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.

24
<PAGE>

Directors and Officers

Edmond D. Villani*
Chairman of the Board and Director

Nicholas Bratt*
President and Director

Daniel Pierce*
Vice President and Director

Paul Bancroft III
Director; Venture Capitalist and Consultant

Sheryle J. Bolton
Director; Consultant

Thomas J. Devine
Director; Consultant

William H. Gleysteen, Jr.
Director; Consultant

William H. Luers
Director; President, The Metropolitan Museum of Art

Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor,
Columbia University Graduate School of Business

Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation

Adam Greshin*
Vice President

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Douglas M. Loudon*
Vice President

Gerald J. Moran*
Vice President

M. Isabel Saltzman*
Vice President

Cornelia M. Small*
Vice President

David S. Lee*
Vice President and Assistant Treasurer

Thomas F. McDonough*
Vice President and Secretary

Pamela A. McGrath*
Vice President and 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.

25
<PAGE>

Appendix

The following is a description of the ratings given by S&P and Moody's to
corporate and municipal bonds.

S&P:

Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest
and repay principal is extremely strong. Debt rated AA has a very strong
capacity to pay interest and repay principal and differs from the highest rated
issues only in small degree. Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.

Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighted by large uncertainties or major exposures to adverse conditions.

Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating. Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.

Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

Moody's:

26
<PAGE>

fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.

Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated
B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.

Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

27
<PAGE>
<TABLE>
<CAPTION>

Investment products and services

<S> <C>

The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond 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 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 Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan 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>

28
<PAGE>

How to contact Scudder

<TABLE>

<S> <C>
Account Service and Information: Please address all correspondence to:

For existing account Scudder Investor The Scudder Funds
service and transactions Relations P.O. Box 2291
Boston, Massachusetts
1-800-225-5163 02107-2291

For personalized Scudder Automated
information about your Information Line (SAIL)
Scudder accounts;
exchanges and 1-800-343-2890
redemptions; or
information on any
Scudder fund

Investment Information: Or Stop by a Scudder Funds Center:

For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution 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*,
institutional cash management service for corpo- funds designed to meet the broad investment
rations, non-profit organizations and trusts which management and service needs of banks and
utilizes certain portfolios of Scudder Fund, Inc.* other institutions, call: 1-800-854-8525.
($100,000 minimum), call: 1-800-541-7703.

Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND

A Pure No-Load(TM) (No Sales Charges) Diversified Mutual Fund Series Which
Seeks Above-Average Capital Appreciation over the Long Term by
Investing Primarily in the Equity Securities of Small
Companies Located Throughout the World

and

SCUDDER GLOBAL BOND FUND

A Pure No-Load(TM) (No Sales Charges) Non-Diversified Mutual Fund Series
Which Seeks Total Return with an Emphasis on Current Income
by Investing Principally in High-Grade Bonds Denominated
in Foreign Currencies and the U.S. Dollar
and, Secondarily, Capital Appreciation

and

SCUDDER EMERGING MARKETS INCOME FUND

A Pure No-Load(TM) (No Sales Charges) Non-Diversified Mutual Fund Series Which
Seeks High Current Income and, Secondarily,
Long-Term Capital Appreciation Through Investment
Primarily in High-Yielding Debt Securities
Issued in Emerging Markets

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

March 1, 1996

- --------------------------------------------------------------------------------

This combined Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectuses of Scudder Global Small Company
Fund, Scudder Global Bond Fund and Scudder Emerging Markets Income Fund, each
dated March 1, 1996, 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 OF CONTENTS
<TABLE>
Page

<S> <C>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.........................................................................1
General Investment Objective and Policies of Scudder Global Small Company Fund...............................1
General Investment Objectives and Policies of Scudder Global Bond Fund.......................................2
General Investment Objectives and Policies of Scudder Emerging Markets Income Fund...........................3
Risk Factors.................................................................................................5
Special Investment Considerations of Scudder Emerging Markets Income Fund...................................12
Specialized Investment Techniques of the Funds..............................................................13
Investment Restrictions.....................................................................................29

PURCHASES............................................................................................................32
Additional Information About Opening an Account.............................................................32
Additional Information About Making Subsequent Investments..................................................32
Additional Information About Making Subsequent Investments by AutoBuy.......................................32
Checks......................................................................................................33
Wire Transfer of Federal Funds..............................................................................33
Share Price.................................................................................................33
Share Certificates..........................................................................................34
Other Information...........................................................................................34

EXCHANGES AND REDEMPTIONS............................................................................................34
Exchanges...................................................................................................34
Redemption by Telephone.....................................................................................35
Redemption by AutoSell......................................................................................36
Redemption by Mail or Fax...................................................................................36
Redemption-in-Kind..........................................................................................36
Other Information...........................................................................................37

FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................37
The Pure No-Load(TM) Concept................................................................................37
Dividend and Capital Gain Distribution Options..............................................................38
Diversification.............................................................................................39
Scudder Funds Centers.......................................................................................39
Reports to Shareholders.....................................................................................39
Transaction Summaries.......................................................................................39

THE SCUDDER FAMILY OF FUNDS..........................................................................................39

SPECIAL PLAN ACCOUNTS................................................................................................42
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for
Corporations and Self-Employed Individuals.............................................................43
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals..............................................................................43
Scudder IRA: Individual Retirement Account.................................................................43
Scudder 403(b) Plan.........................................................................................44
Automatic Withdrawal Plan...................................................................................44
Group or Salary Deduction Plan..............................................................................45
Automatic Investment Plan...................................................................................45
Uniform Transfers/Gifts to Minors Act.......................................................................45

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................45

PERFORMANCE INFORMATION..............................................................................................46
Average Annual Total Return.................................................................................46
Cumulative Total Return.....................................................................................47
Total Return................................................................................................47

i
<PAGE>
TABLE OF CONTENTS (continued)
Page

Capital Change..............................................................................................48
SEC Yields of Global Bond Fund and Emerging Markets Income Fund.............................................48
Comparison of Portfolio Performance.........................................................................48

ORGANIZATION OF THE FUNDS............................................................................................53

INVESTMENT ADVISER...................................................................................................54
Personal Investments by Employees of the Adviser............................................................57

DIRECTORS AND OFFICERS...............................................................................................57

REMUNERATION.........................................................................................................60

DISTRIBUTOR..........................................................................................................61

TAXES................................................................................................................62

PORTFOLIO TRANSACTIONS...............................................................................................66
Brokerage Commissions.......................................................................................66
Portfolio Turnover..........................................................................................67

NET ASSET VALUE......................................................................................................68

ADDITIONAL INFORMATION...............................................................................................69
Experts.....................................................................................................69
Other Information...........................................................................................69

FINANCIAL STATEMENTS.................................................................................................70

APPENDIX
</TABLE>
ii
<PAGE>

THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES

(See "Investment objective and policies," "Special risk considerations"
and "Additional information about policies and investments"
in each Fund's prospectus.)

Scudder Global Fund, Inc., a Maryland corporation of which Scudder
Global Small Company Fund ("Global Small Company Fund"), Scudder Global Bond
Fund ("Global Bond Fund") and Scudder Emerging Markets Income Fund ("Emerging
Markets Income Fund") are series, is referred to herein as the "Corporation."
Each Fund is a pure no-load(TM), open-end management investment company which
continuously offers and redeems its shares at net asset value. Each Fund is a
company of the type commonly known as a mutual fund. Global Small Company Fund
is a diversified series of the Corporation. Global Bond Fund and Emerging
Markets Income Fund are non-diversified series of the Corporation. These series
sometimes are jointly referred to herein as the "Funds."

Changes in portfolio securities are made on the basis of investment
considerations, and it is against the policy of management to make changes for
trading purposes. No Fund can guarantee a gain or eliminate the risk of loss and
the net asset value of each Fund's shares will increase or decrease with changes
in the market price of that Fund's investments.

Foreign securities such as those that may be purchased by a Fund may be
subject to foreign government taxes which could reduce the yield, if any, on
such securities, although a shareholder of that Fund may, subject to certain
limitations, be entitled to claim a credit or deduction for U.S. federal income
tax purposes for his or her proportionate share of such foreign taxes paid by
the Fund. (See "TAXES.")

Because of each Fund's investment considerations discussed herein and
their investment policies, investment in shares of a Fund is not intended to
provide a complete investment program for an investor. The value of each Fund's
shares when sold may be higher or lower than when purchased.

The following objectives and policies, except as otherwise stated, are
not fundamental and may be changed without a shareholder vote. There can be no
assurance that each Fund will achieve its investment objective.

General Investment Objective and Policies of Scudder Global Small Company Fund

Global Small Company Fund seeks above-average capital appreciation over
the long term by investing primarily in the equity securities of small companies
located throughout the world. The Fund is designed for investors looking for
above-average appreciation potential (when compared with the overall domestic
stock market as reflected by Standard & Poor's 500 Composite Price Index) and
the benefits of investing globally, but who are willing to accept above-average
stock market risk, the impact of currency fluctuation and little or no current
income.

In pursuit of its objective, the Fund generally invests in small,
rapidly growing companies which offer the potential for above-average returns
relative to larger companies, yet are frequently overlooked and thus undervalued
by the market. The Fund has the flexibility to invest in any region of the
world. It can invest in companies based in emerging markets, typically in the
Far East, Latin America and Eastern Europe, as well as in firms operating in
developed economies, such as those of the United States, Japan and Western
Europe.

The Fund's investment adviser, Scudder, Stevens & Clark, Inc. (the
"Adviser"), invests the Fund's assets in companies it believes offer
above-average earnings, cash flow or asset growth potential. It also invests in
companies which may receive greater market recognition over time. The Adviser
believes that these factors offer significant opportunity for long-term capital
appreciation. The Adviser evaluates investments for the Fund from both a
macroeconomic and microeconomic perspective, using fundamental analysis,
including field research. The Adviser analyzes the growth potential and relative
value of possible investments. When evaluating an individual company, the
Adviser takes into consideration numerous factors, including the depth and
quality of management; a company's product line, business strategy and
competitive position; research and development efforts; financial strength,
including degree of leverage; cost structure; revenue and earnings growth
potential; price-earnings ratios and other stock valuation measures.
Secondarily, the Adviser weighs the attractiveness of the country and region in
which a company is located.
<PAGE>

While the Fund's Adviser believes that smaller, lesser-known companies
can offer greater growth potential than larger, more established firms, the
former also involve greater risk and price volatility. To help reduce risk, the
Fund expects, under usual market conditions, to diversify its portfolio widely
by company, industry and country. Under normal circumstances, the Fund invests
at least 65% of its total assets in the equity securities of small companies.
The Fund intends to allocate investments among at least three countries at all
times, one of which may be the United States.

The Fund selects its portfolio investments primarily from companies
whose individual equity market capitalizations would place them (at the time of
purchase) in the same size range as companies in approximately the lowest 20% of
market capitalization of companies that have equity securities listed on a U.S.
national securities exchange or traded in the NASDAQ system. Based on this
policy and recent U.S. share prices, the companies held by the Fund typically
will have individual equity market capitalizations of between approximately $50
million and $1.4 billion (although the Fund will be free to invest in smaller
capitalization issues that satisfy the Fund's size standard). Furthermore, at
least 50% of the assets represented by such companies will be in approximately
the lowest 10% of market capitalization of U.S. equity securities as described
above. At current prices this lowest 10% equates to no more than $550 million in
market capitalization.

Because the Fund applies a U.S. size standard on a global basis, a
small company investment outside the U.S. might rank above the lowest 20% by
market capitalization in local markets and, in fact, might in some countries
rank among the largest companies in terms of capitalization.

The equity securities in which the Fund may invest consist of common
stocks, preferred stocks (either convertible or nonconvertible), rights and
warrants. These securities may be listed on the U.S. or foreign securities
exchanges or traded over-the-counter. For capital appreciation purposes, the
Fund may purchase notes, bonds, debentures, government securities and zero
coupon bonds (any of which may be convertible or nonconvertible). The Fund may
invest in foreign securities and American Depositary Receipts which may be
sponsored or unsponsored. The Fund may also invest in closed-end investment
companies holding foreign securities, enter into repurchase agreements and
engage in strategic transactions. For temporary defensive purposes, the Fund
may, during periods in which conditions in securities markets warrant, invest
without limit in cash and cash equivalents. More information about investment
techniques is provided under "Specialized Investment Techniques of the Funds."

Small Company Risk. The Adviser believes that smaller companies often have sales
and earnings growth rates which exceed those of larger companies, and that such
growth rates may in turn be reflected in more rapid share price appreciation
over time. However, investing in smaller company stocks involves greater risk
than is customarily associated with investing in larger, more established
companies. For example, smaller companies can have limited product lines,
markets, or financial and managerial resources. Smaller companies may also be
dependent on one or a few key persons, and may be more susceptible to losses and
risks of bankruptcy. Also, the securities of smaller companies may be thinly
traded (and therefore have to be sold at a discount from current market prices
or sold in small lots over an extended period of time). Transaction costs in
smaller company stocks may be higher than those of larger companies.

General Investment Objectives and Policies of Scudder Global Bond Fund

Global Bond Fund provides investors with a convenient way to invest in
a managed portfolio of debt securities denominated in foreign currencies and the
U.S. dollar. The Fund's objective is to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in foreign
currencies and the U.S. dollar. As a secondary objective, the Fund will seek
capital appreciation.

To achieve its objectives, the Fund will invest principally in a
managed portfolio of high-grade intermediate- and long-term bonds denominated in
the U.S. dollar and foreign currencies, including bonds denominated in the
European Currency Unit (ECU). (Intermediate-term bonds generally have maturities
between three and eight years, and long-term bonds generally have maturities of
greater than eight years.) Portfolio investments will be selected on the basis
of, among other things, yields, credit quality, and the fundamental outlooks for
currency and interest rate trends in different parts of the globe, taking into
account the ability to hedge a degree of currency or local bond price risk.

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At least 65% of the Fund's investments will consist of high-grade debt
securities, which are those rated in one of the three highest rating categories
of one of the major U.S. rating services or, if unrated, considered to be of
equivalent quality in local currency terms as determined by the Adviser. These
securities are rated AAA, AA or A by Standard & Poor's ("S&P") or Aaa, Aa, or A
by Moody's Investors Service, Inc. ("Moody's").

The Fund may also invest up to 15% of its net assets in debt securities
rated BBB by S&P or Baa by Moody's and lower, or unrated securities considered
to be of equivalent quality by the Adviser. The Fund will not invest in any
securities rated B or lower. (See "Specialized Investment Techniques of the
Funds.")

The Fund's investments may include:

- Debt securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities
- Debt securities issued or guaranteed by a foreign national
government, its agencies, instrumentalities or political subdivisions
- Debt securities issued or guaranteed by supranational
organizations (e.g., European Investment Bank, Inter-American
Development Bank or the World Bank)
- Corporate debt securities
- Bank or bank holding company debt securities
- Other debt securities, including those convertible into common stock

The Fund may invest in zero coupon securities, mortgage and
asset-backed securities and may engage in strategic transactions. The Fund may
purchase securities which are not publicly offered. If such securities are
purchased, they may be subject to restrictions which may make them illiquid. See
"Investment Restrictions."

The Fund intends to select its investments from a number of country and
market sectors. It may invest substantially in the issuers of one or more
countries and will have investments in debt securities of issuers from a minimum
of three different countries.

Under normal conditions, the Fund will invest at least 15% of its total
assets in U.S. dollar-denominated securities, issued domestically or abroad. For
temporary defensive or emergency purposes, however, the Fund may invest without
limit in U.S. debt securities, including short-term money market securities. It
is impossible to predict for how long such alternative strategies will be
utilized.

General Investment Objectives and Policies of Scudder Emerging Markets
Income Fund

Emerging Markets Income Fund's primary investment objective is to
provide investors with high current income. As a secondary objective, the Fund
seeks long-term capital appreciation. In pursuing these goals, the Fund invests
primarily in high-yielding debt securities issued by governments and
corporations in emerging markets. Many nations in Latin America and other
developing regions of the world have undertaken sweeping political and economic
changes that favor increased business activity and demand for capital. In the
opinion of the Adviser, these changes present attractive investment
opportunities, both in terms of income and appreciation potential, for long-term
investors.

The Fund involves above-average bond fund risk and can invest entirely
in high yield/high risk bonds. It is designed as a long-term investment and not
for short-term trading purposes, and should not be considered a complete
investment program. While designed to provide a high level of current income,
the Fund may not be appropriate for all income investors. The Fund should not be
viewed as a substitute for a money market or short-term bond fund. The Fund
invests in lower quality securities of emerging market issuers, some of which
have in the past defaulted on certain of their financial obligations.
Investments in emerging markets can be volatile. The Fund's share price and
yield can fluctuate daily in response to political events, changes in the
perceived creditworthiness of emerging nations, fluctuations in interest rates
and, to a certain extent, movements in foreign currencies. The securities in
which the Fund may invest are further described below, and under "Investment
objectives and policies" and "Additional information about policies and
investments" in Emerging Markets Income Fund's prospectus.

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<PAGE>

include any country that is defined as an emerging or developing economy by any
one of the following: the International Bank for Reconstruction and Development
(i.e., the World Bank), the International Finance Corporation or the United
Nations or its authorities.

While the Fund takes a global approach to portfolio management, the
Adviser expects to weight its investments toward countries in Latin America,
specifically Argentina, Brazil, Mexico and Venezuela. Latin America, and these
four countries in particular, offers the largest and most liquid debt markets of
the emerging nations around the globe. In addition to Latin America, the Adviser
may pursue investment opportunities in Asia, Africa, the Middle East and the
developing countries of Europe, primarily in Eastern Europe. The Fund deems an
issuer to be located in an emerging market if (i) the issuer is organized under
the laws of an emerging market country; (ii) the issuer's principal securities
trading market is in an emerging market; or (iii) at least 50% of the issuer's
non-current assets, capitalization, gross revenue or profit in any one of the
two most recent fiscal years is derived from (directly or indirectly from
subsidiaries) assets or activities located in emerging markets.

The Fund may also consider for purchase any debt securities issued by
commercial banks and companies in emerging markets. The Fund may invest in both
fixed- and floating-rate issues. Debt instruments held by the Fund take the form
of bonds, notes, bills, debentures, convertible securities, warrants, bank
obligations, short-term paper, loan participations, loan assignments and trust
interests. The Fund may invest regularly in "Brady Bonds," which are debt
securities issued under the framework of the Brady Plan as a mechanism for
debtor countries to restructure their outstanding bank loans. Most "Brady Bonds"
have their principal collateralized by zero coupon U.S. Treasury bonds.

To reduce currency risk, the Fund invests at least 65% of its assets in
U.S. dollar-denominated debt securities. Therefore, no more than 35% of the
Fund's assets may be invested in debt securities denominated in foreign
currencies.

The Fund is not restricted by limits on weighted average portfolio
maturity or the maturity of an individual issue. Debt securities in which the
Fund may invest may have stated maturities from overnight to 30 years. The
weighted average maturity of the Fund's portfolio is actively managed and may
vary from period to period based upon the Adviser's assessment of economic and
market conditions, taking into account the Fund's investment objectives.

In addition to maturity, the Fund's investments are actively managed in
terms of geographic, industry and currency allocation. In managing the Fund's
portfolio, the Adviser takes into account such factors as the credit quality of
issuers, changes in and levels of interest rates, projected economic growth
rates, capital flows, debt levels, trends in inflation, anticipated movements in
foreign currencies, and government initiatives.

While the Fund is not "diversified" for purposes of the Investment
Company Act of 1940 (the "1940 Act"), it intends to invest in a minimum of three
countries at any one time and will not commit more than 40% of its assets to
issuers in a single country.

By focusing on fixed-income instruments issued in emerging markets, the
Fund invests predominantly in debt securities that are rated below
investment-grade, or unrated but equivalent to those rated below
investment-grade by internationally recognized rating agencies such as S&P or
Moody's. Debt securities rated below BBB by S&P or below Baa by Moody's are
considered to be below investment-grade. These types of high yield/high risk
debt obligations (commonly referred to as "junk bonds") are predominantly
speculative with respect to the capacity to pay interest and repay principal in
accordance with their terms and generally involve a greater risk of default and
more volatility in price than securities in higher rating categories, such as
investment-grade U.S. bonds. On occasion, the Fund may invest up to 5% of its
net assets in non-performing securities whose quality is comparable to
securities rated as low as D by S&P or C by Moody's. A large portion of the
Fund's bond holdings may trade at substantial discounts from face value.

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<PAGE>

The Fund may invest up to 35% of its total assets in securities other
than debt obligations issued in emerging markets. These holdings include debt
securities and money market instruments issued by corporations and governments
based in developed markets including up to 20% of total assets in U.S.
fixed-income instruments. However, for temporary, defensive or emergency
purposes, the Fund may invest without limit in U.S. debt securities, including
short-term money market securities. It is impossible to predict for how long
such alternative strategies will be utilized. In addition, the Fund may engage
in strategic transactions for hedging purposes and to enhance potential gain.
The Fund may invest up to 15% of its net assets, in the aggregate, in securities
which are not readily marketable, restricted securities and repurchase
agreements maturing in more than seven days. The Fund may not invest more than
10% of its total assets in restricted securities. The Fund may also acquire
shares of closed-end investment companies that invest primarily in emerging
market debt securities. To the extent the Fund invests in such closed-end
investment companies, shareholders will incur certain duplicative fees and
expenses, including investment advisory fees.

Risk Factors

Foreign Securities. Global Small Company Fund is intended to provide individual
and institutional investors with an opportunity to invest a portion of their
assets in a diversified portfolio of securities of U.S. and foreign companies
located worldwide and is designed for long-term investors who can accept
international investment risk. Global Bond Fund and Emerging Markets Income Fund
are intended to provide individuals and institutional investors with an
opportunity to invest a portion of their assets in a managed group of debt
instruments denominated in a range of currencies and issued by various entities
such as governments, their agencies, instrumentalities and political
subdivisions, supranational organizations, corporations and banks. Each Fund is
designed for investors who can accept currency and other forms of international
investment risk. The Adviser believes that allocation of each Fund's assets on a
global basis decreases the degree to which events in any one country, including
the U.S., will affect an investor's entire investment holdings. In the period
since World War II, many leading foreign economies have grown more rapidly than
the U.S. economy and from time to time have had interest rate levels that had a
higher real return than the U.S. bond market. Consequently, the securities of
foreign issuers have provided attractive returns relative to the returns
provided by the securities of U.S. issuers, although there can be no assurance
that this will be true in the future.

Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
affect a Fund's performance favorably or unfavorably. As foreign companies are
not generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than that of the
New York Stock Exchange, and securities of some foreign issuers are less liquid
and more volatile than securities of domestic issuers. Similarly, volume and
liquidity in most foreign bond markets is less than that in the U.S. market and
at times, volatility of price can be greater than in the U.S. Further, foreign
markets have different clearance and settlement procedures and in certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of a Fund are uninvested and no return is earned thereon. The inability of a
Fund to make intended security purchases due to settlement problems could cause
the Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems either could result in losses to
a Fund due to subsequent declines in value of the portfolio security or, if a
Fund has entered into a contract to sell the security, could result in possible
liability to the purchaser. Fixed commissions on some foreign securities
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Adviser will endeavor to achieve the most favorable net results on
each Fund's portfolio transactions. Further, a Fund may encounter difficulties
or be unable to pursue legal remedies and obtain judgment in foreign courts.
There is generally less government supervision and regulation of business and
industry practices, securities exchanges, brokers and listed companies than in
the U.S. It may be more difficult for a Fund's agents to keep currently informed
about corporate actions such as stock dividends or other matters which may
affect the prices of portfolio securities. Communications between the U.S. and
foreign countries may be less reliable than within the U.S., thus increasing the
risk of delayed settlements of portfolio transactions or loss of certificates
for portfolio securities. In addition, with respect to certain foreign
countries, there is the possibility of nationalization, expropriation, the
imposition of confiscatory or withholding taxation, political, social or

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economic instability, or diplomatic developments which could affect U.S.
investments in those countries. Investments in foreign securities may also
entail certain risks, such as possible currency blockages or transfer
restrictions, and the difficulty of enforcing rights in other countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. The Adviser seeks to mitigate the risks to each Fund
associated with the foregoing considerations through investment variation and
continuous professional management.

For Emerging Markets Income Fund, 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 Fund managers seek to mitigate
the risks associated with these considerations through active professional
management.

Eastern Europe. Investments in companies domiciled in Eastern European countries
may be subject to potentially greater risks than those of other foreign issuers.
These risks include (i) potentially less social, political and economic
stability; (ii) the small current size of the markets for such securities and
the low volume of trading, which result in less liquidity and in greater price
volatility; (iii) certain national policies which may restrict a Fund's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented economy; and (vii) the possibility that
recent favorable economic developments in Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries, or in
the countries of the former Soviet Union. Global Small Company Fund may invest
up to 5% of its total assets in the securities of issuers domiciled in Eastern
European countries.

Investments in such countries involve risks of nationalization,
expropriation and confiscatory taxation. The Communist governments of a number
of East European countries expropriated large amounts of private property in the
past, in many cases without adequate compensation, and there may be no assurance
that such expropriation will not occur in the future. In the event of such
expropriation, a Fund could lose a substantial portion of any investments it has
made in the affected countries. Further, no accounting standards exist in East
European countries. Finally, even though certain East European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to a Fund's shareholders.

Foreign Currencies. Investments in foreign securities usually will involve
currencies of foreign countries. Moreover, a Fund may temporarily hold funds in
bank deposits in foreign currencies during the completion of investment programs
and may purchase forward foreign currency contracts, foreign currency futures
contracts and options on such contracts. Because of these factors, the value of
the assets of a Fund as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and a Fund may incur costs in connection with conversions between
various currencies. Although the Funds' custodian values each Fund's assets
daily in terms of U.S. dollars, none of the Funds intends to convert its
holdings of foreign currencies into U.S. dollars on a daily basis. A Fund will
do so from time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. A Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into forward or
futures contracts to purchase or sell foreign currencies.

Because a Fund normally will be invested in both U.S. and foreign
securities markets, changes in the Fund's share price may have a low correlation
with movements in the U.S. markets. A Fund's share price will reflect the
movements of both the different stock and bond markets in which it is invested
and of the currencies in which the investments are denominated; the strength or
weakness of the U.S. dollar against foreign currencies may account for part of
the Fund's investment performance. U.S. and foreign securities markets do not
always move in step with each other, and the total returns from different
markets may vary significantly. The Funds invest in many securities markets
around the world in an attempt to take advantage of opportunities wherever they
may arise.

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Investing in Emerging Markets. Most emerging securities markets may have
substantially less volume and are subject to less government supervision than
U.S. securities markets. Securities of many issuers in emerging markets may be
less liquid and more volatile than securities of comparable domestic issuers. In
addition, there is less regulation of securities exchanges, securities dealers,
and listed and unlisted companies in emerging markets than in the U.S.

Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions. Delays in
settlement could result in temporary periods when a portion of the assets of a
Fund is uninvested and no cash 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 could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Costs associated with transactions in foreign
securities are generally higher than costs associated with transactions in U.S.
securities. Such transactions also involve additional costs for the purchase or
sale of foreign currency.

Foreign investment in certain emerging market debt obligations is
restricted or controlled to varying degrees. These restrictions or controls may
at times limit or preclude foreign investment in certain emerging markets debt
obligations and increase the costs and expenses of a Fund. Certain emerging
markets require prior governmental approval of investments by foreign persons,
limit the amount of investment by foreign persons in a particular company, limit
the investment by foreign persons only to a specific class of securities of a
company that may have less advantageous rights than the classes available for
purchase by domiciliaries of the countries and/or impose additional taxes on
foreign investors. Certain emerging markets may also restrict investment
opportunities in issuers in industries deemed important to national interest.

Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. A Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments.

In the course of investment in emerging market debt obligations, a Fund
will be exposed to the direct or indirect consequences of political, social and
economic changes in one or more emerging markets. Political changes in emerging
market countries may affect the willingness of an emerging market country
governmental issuer to make or provide for timely payments of its obligations.
The country's economic status, as reflected, among other things, in its
inflation rate, the amount of its external debt and its gross domestic product,
also affects its ability to honor its obligations. While the Fund manages its
assets in a manner that will seek to minimize the exposure to such risks, and
will further reduce risk by owning the bonds of many issuers, there can be no
assurance that adverse political, social or economic changes will not cause a
Fund to suffer a loss of value in respect of the securities in the Fund's
portfolio.

The risk also exists that an emergency situation may arise in one or
more emerging markets as a result of which trading of securities may cease or
may be substantially curtailed and prices for a Fund's securities in such
markets may not be readily available. The Corporation may suspend redemption of
its shares for any period during which an emergency exists, as determined by the
Securities and Exchange Commission (the "SEC"). Accordingly if a Fund believes
that appropriate circumstances exist, it will promptly apply to the SEC for a
determination that an emergency is present. During the period commencing from a
Fund's identification of such condition until the date of the SEC action, the
Fund's securities in the affected markets will be valued at fair value
determined in good faith by or under the direction of the Corporation's Board of
Directors.

Volume and liquidity in most foreign bond markets are less than in the
U.S. and securities of many foreign companies are less liquid and more volatile
than securities of comparable U.S. companies. Fixed commissions on foreign
securities exchanges are generally higher than negotiated commissions on U.S.
exchanges, although each Fund endeavors to achieve the most favorable net
results on its portfolio transactions. There is generally less government
supervision and regulation of business and industry practices, securities
exchanges, brokers, dealers and listed companies than in the U.S. Mail service
between the U.S. and foreign countries may be slower or less reliable than
within the U.S., thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. In addition, with
respect to certain emerging markets, there is the possibility of expropriation

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<PAGE>

or confiscatory taxation, political or social instability, or diplomatic
developments which could affect the Fund's investments in those countries.
Moreover, individual emerging market economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. The chart below sets forth the risk ratings of
selected emerging market countries' sovereign debt securities.

Sovereign Risk Ratings for Selected Emerging Market Countries as of 2/23/96
(Source: J.P. Morgan Securities, Inc., Emerging Markets Research)

Country Moody's Standard & Poor's

Chile Baa1 A-
Turkey Ba3 B+
Mexico Ba2 BB
Czech Republic Baa1 A
Hungary Ba1 BB+
Colombia Baa3 BBB-
Venezuela Ba2 B+
Morocco NR NR
Argentina B1 BB-
Brazil B1 B+
Poland Baa3 BB
Ivory Coast NR NR

A Fund may have limited legal recourse in the event of a default with
respect to certain debt obligations it holds. If the issuer of a fixed-income
security owned by a Fund defaults, the Fund may incur additional expenses to
seek recovery. Debt obligations issued by emerging market country governments
differ from debt obligations of private entities; remedies from defaults on debt
obligations issued by emerging market governments, unlike those on private debt,
must be pursued in the courts of the defaulting party itself. A Fund's ability
to enforce its rights against private issuers may be limited. The ability to
attach assets to enforce a judgment may be limited. Legal recourse is therefore
somewhat diminished. Bankruptcy, moratorium and other similar laws applicable to
private issuers of debt obligations may be substantially different from those of
other countries. The political context, expressed as an emerging market
governmental issuer's willingness to meet the terms of the debt obligation, for
example, is of considerable importance. In addition, no assurance can be given
that the holders of commercial bank debt may not contest payments to the holders
of debt obligations in the event of default under commercial bank loan
agreements. With four exceptions, (Panama, Cuba, Costa Rica and Yugoslavia), no
sovereign emerging markets borrower has defaulted on an external bond issue
since World War II.

Income from securities held by a Fund could be reduced by a withholding
tax on the source or other taxes imposed by the emerging market countries in
which the Fund makes its investments. A Fund's net asset value may also be
affected by changes in the rates or methods of taxation applicable to the Fund
or to entities in which the Fund has invested. The Adviser will consider the
cost of any taxes in determining whether to acquire any particular investments,
but can provide no assurance that the taxes will not be subject to change.

Many emerging markets have experienced substantial, and in some periods
extremely high rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, wage and price controls have been
imposed in certain countries. Of these countries, some, in recent years, have
begun to control inflation through prudent economic policies.

Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. Certain emerging market governmental issuers have
not been able to make payments of interest on or principal of debt obligations
as those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.

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Governments of many emerging market countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some of the
largest in any given country. As a result, government actions in the future
could have a significant effect on economic conditions in emerging markets,
which in turn, may adversely affect companies in the private sector, general
market conditions and prices and yields of certain of the securities in a Fund's
portfolio. Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other similar developments have occurred
frequently over the history of certain emerging markets and could adversely
affect a Fund's assets should these conditions recur.

The ability of emerging market country governmental issuers to make
timely payments on their obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance, and its access to
international credits and investments. An emerging market whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities. Increased
protectionism on the part of an emerging market's trading partners could also
adversely affect the country's exports and diminish its trade account surplus,
if any. To the extent that emerging markets receive payment for its exports in
currencies other than dollars or non-emerging market currencies, its ability to
make debt payments denominated in dollars or non-emerging market currencies
could be affected.

To the extent that an emerging market country cannot generate a trade
surplus, it must depend on continuing loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and on inflows of foreign investment. The access of emerging
markets to these forms of external funding may not be certain, and a withdrawal
of external funding could adversely affect the capacity of emerging market
country governmental issuers to make payments on their obligations. In addition,
the cost of servicing emerging market debt obligations can be affected by a
change in international interest rates since the majority of these obligations
carry interest rates that are adjusted periodically based upon international
rates.

Another factor bearing on the ability of emerging market countries to
repay debt obligations is the level of international reserves of the country.
Fluctuations in the level of these reserves affect the amount of foreign
exchange readily available for external debt payments and thus could have a
bearing on the capacity of emerging market countries to make payments on these
debt obligations.

Investing in Latin America. Investing in securities of Latin American issuers
may entail risks relating to the potential political and economic instability of
certain Latin American countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of
expropriation, nationalization or other confiscation by any country, a Fund
could lose its entire investment in any such country.

The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major securities
markets in the U.S. Disclosure and regulatory standards are in many respects
less stringent than U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of investors in such
markets.

The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to volume of
trading in the securities of U.S. issuers could cause prices to be erratic for
reasons apart from factors that affect the soundness and competitiveness of the
securities issuers. For example, limited market size may cause prices to be
unduly influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on in-depth fundamental analysis,
may decrease the value and liquidity of portfolio securities.

Each Fund may invest a portion of its assets in securities denominated
in currencies of Latin American countries. Accordingly, changes in the value of
these currencies against the U.S. dollar may result in corresponding changes in
the U.S. dollar value of the Fund's assets denominated in those currencies.

Some Latin American countries also may have managed currencies, which
are not free floating against the U.S. dollar. In addition, there is risk that
certain Latin American countries may restrict the free conversion of their
currencies into other currencies. Further, certain Latin American currencies may
not be internationally traded. Certain of these currencies have experienced a

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steep devaluation relative to the U.S. dollar. Any devaluations in the
currencies in which a Fund's portfolio securities are denominated may have a
detrimental impact on the Fund's net asset value.

The economies of individual Latin American countries may differ
favorably or unfavorably from the U.S. economy in such respects as the rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Certain Latin
American countries have experienced high levels of inflation which can have a
debilitating effect on an economy, although some have begun to control inflation
in recent years through prudent economic policies. Furthermore, certain Latin
American countries may impose withholding taxes on dividends payable to a Fund
at a higher rate than those imposed by other foreign countries. This may reduce
a Fund's investment income available for distribution to shareholders.

Certain Latin American countries such as Argentina, Brazil and Mexico
are among the world's largest debtors to commercial banks and foreign
governments. At times, certain Latin American countries have declared moratoria
on the payment of principal and/or interest on outstanding debt.

Latin America is a region rich in natural resources such as oil,
copper, tin, silver, iron ore, forestry, fishing, livestock and agriculture. The
region has a large population (roughly 300 million) representing a large
domestic market. Economic growth was strong in the 1960s and 1970s, but slowed
dramatically (and in some instances was negative) in the 1980s as a result of
poor economic policies, higher international interest rates, and the denial of
access to new foreign capital. Although a number of Latin American countries are
currently experiencing lower rates of inflation and higher rates of real growth
in gross domestic product than they have in the past, other Latin American
countries continue to experience significant problems, including high inflation
rates and high interest rates. Capital flight has proven a persistent problem
and external debt has been forcibly restructured. Political turmoil, high
inflation, capital repatriation restrictions, and nationalization have further
exacerbated conditions.

Governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some of the
largest in those countries. As a result, government actions in the future could
have a significant effect on economic conditions which may adversely affect
prices of certain portfolio securities. Expropriation, confiscatory taxation,
nationalization, political, economic or social instability or other similar
developments, such as military coups, have occurred in the past and could also
adversely affect a Fund's investments in this region.

Changes in political leadership, the implementation of market oriented
economic policies, such as privatization, trade reform and fiscal and monetary
reform are among the recent steps taken to renew economic growth. External debt
is being restructured and flight capital (domestic capital that has left home
country) has begun to return. Inflation control efforts have also been
implemented. Free Trade Zones are being discussed in various areas around the
region, the most notable being a free zone among Mexico, the U.S. and Canada and
another zone among four countries in the southernmost point of Latin America.
Currencies are typically weak, but most are now relatively free floating, and it
is not unusual for the currencies to undergo wide fluctuations in value over
short periods of time due to changes in the market.

Investing in the Pacific Basin. Economies of individual Pacific Basin countries
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, interest rate levels, and balance of payments
position. Of particular importance, most of the economies in this region of the
world are heavily dependent upon exports, particularly to developed countries,
and, accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values, and other
protectionist measures imposed or negotiated by the U.S. and other countries
with which they trade. These economies also have been and may continue to be
negatively impacted by economic conditions in the U.S. and other trading
partners, which can lower the demand for goods produced in the Pacific Basin.

With respect to the Peoples Republic of China and other markets in
which each Fund may participate, there is the possibility of nationalization,
expropriation or confiscatory taxation, political changes, government
regulation, social instability or diplomatic developments that could adversely
impact a Pacific Basin country or the Fund's investment in the debt of that
country.

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Foreign companies, including Pacific Basin companies, are not generally
subject to uniform accounting, auditing and financial reporting standards,
practices and disclosure requirements comparable to those applicable to U.S.
companies. Consequently, there may be less publicly available information about
such companies than about U.S. companies. Moreover, there is generally less
government supervision and regulation in the Pacific Basin than in the U.S.

Investing in Europe. Most Eastern European nations, including Hungary, Poland,
Czechoslovakia, and Romania have had centrally planned, socialist economies
since shortly after World War II. A number of their governments, including those
of Hungary, the Czech Republic, and Poland are currently implementing or
considering reforms directed at political and economic liberalization, including
efforts to foster multi-party political systems, decentralize economic planning,
and move toward free market economies. At present, no Eastern European country
has a developed stock market, but Poland, Hungary, and the Czech Republic have
small securities markets in operation. Ethnic and civil conflict currently rage
through the former Yugoslavia. The outcome is uncertain.

Both the European Community (the "EC") and Japan, among others, have
made overtures to establish trading arrangements and assist in the economic
development of the Eastern European nations. A great deal of interest also
surrounds opportunities created by the reunification of East and West Germany.
Following reunification, the Federal Republic of Germany has remained a firm and
reliable member of the EC and numerous other international alliances and
organizations. To reduce inflation caused by the unification of East and West
Germany, Germany has adopted a tight monetary policy which has led to weakened
exports and a reduced domestic demand for goods and services. However, in the
long-term, reunification could prove to be an engine for domestic and
international growth.

The conditions that have given rise to these developments are
changeable, and there is no assurance that reforms will continue or that their
goals will be achieved.

Portugal is a genuinely emerging market which has experienced rapid
growth since the mid-1980s, except for a brief period of stagnation over
1990-91. Portugal's government remains committed to privatization of the
financial system away from one dependent upon the banking system to a more
balanced structure appropriate for the requirements of a modern economy.
Inflation continues to be about three times the EC average.

Economic reforms launched in the 1980s continue to benefit Turkey in
the 1990s. Turkey's economy has grown steadily since the early 1980s, with real
growth in per capita Gross Domestic Product (the "GDP") increasing more than 6%
annually. Agriculture remains the most important economic sector, employing
approximately 55% of the labor force, and accounting for nearly 20% of GDP and
20% of exports. Inflation and interest rates remain high, and a large budget
deficit will continue to cause difficulties in Turkey's substantial
transformation to a dynamic free market economy.

Like many other Western economies, Greece suffered severely from the
global oil price hikes of the 1970s, with annual GDP growth plunging from 8% to
2% in the 1980s, and inflation, unemployment, and budget deficits rising
sharply. The fall of the socialist government in 1989 and the inability of the
conservative opposition to obtain a clear majority have led to business
uncertainty and the continued prospects for flat economic performance. Once
Greece has sorted out its political situation, it will have to face the
challenges posed by the steadily increasing integration of the EC, including the
progressive lowering of trade and investment barriers. Tourism continues as a
major industry, providing a vital offset to a sizable commodity trade deficit.

Securities traded in certain emerging European securities markets may
be subject to risks due to the inexperience of financial intermediaries, the
lack of modern technology and the lack of a sufficient capital base to expand
business operations. Additionally, former Communist regimes of a number of
Eastern European countries had expropriated a large amount of property, the
claims of which have not been entirely settled. There can be no assurance that
the Fund's investments in Eastern Europe would not also be expropriated,
nationalized or otherwise confiscated. Finally, any change in leadership or
policies of Eastern European countries, or countries that exercise a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and adversely affect
existing investment opportunities.

Investing in Africa. Africa is a continent of roughly 50 countries with a total
population of approximately 840 million people. Literacy rates (the percentage
of people who are over 15 years of age and who can read and write) are

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relatively low, ranging from 20% to 60%. The primary industries include crude
oil, natural gas, manganese ore, phosphate, bauxite, copper, iron, diamond,
cotton, coffee, cocoa, timber, tobacco, sugar, tourism and cattle.

Many of the countries are fraught with political instability. However,
there has been a trend over the past five years toward democratization. Many
countries are moving from a military style, Marxist, or single party government
to a multi-party system. Still, there remain many countries that do not have a
stable political process. Other countries have been enmeshed in civil wars and
border clashes.

Economically, the Northern Rim countries (including Morocco, Egypt and
Algeria) and Nigeria, Zimbabwe and South Africa are the wealthier countries on
the continent. The market capitalization of these countries has been growing
recently as more international companies invest in Africa and as local companies
start to list on the exchanges. However, religious and ethnic strife has been a
significant source of instability.

On the other end of the economic spectrum are countries, such as
Burkinafaso, Madagascar and Malawi, that are considered to be among the poorest
or least developed in the world. These countries are generally landlocked or
have poor natural resources. The economies of many African countries are heavily
dependent on international oil prices. Of all the African industries, oil has
been the most lucrative, accounting for 40% to 60% of many countries' GDP.
However, general decline in oil prices has had an adverse impact on many
economies.

Special Investment Considerations of Scudder Emerging Markets Income Fund

Brady Bonds. The Fund may invest in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to public and private
entities in certain emerging markets for new bonds in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt
restructurings have been implemented to date in Argentina, Bulgaria, Brazil,
Costa Rica, Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay and
Venezuela.

Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate
bonds or floating-rate bonds, are generally collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on these Brady Bonds generally are collateralized by
cash or securities in an amount that, in the case of fixed rate bonds, is equal
to at least one year of rolling interest payments or, in the case of floating
rate bonds, initially is equal to at least one year's rolling interest payments
based on the applicable interest rate at that time and is adjusted at regular
intervals thereafter. Brady Bonds are often viewed as having three or four
valuation components: the collateralized repayment of principal at final
maturity; the collateralized interest payments; the uncollateralized interest
payments; and any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and the history of defaults of countries issuing
Brady Bonds, with respect to commercial bank loans by public and private
entities, investments in Brady Bonds may be viewed as speculative.

Sovereign Debt. Investment in sovereign debt can involve a high degree of risk.
The governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the principal and/or interest when due in accordance
with the terms of such debt. A governmental entity's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
governmental entity's policy towards the International Monetary Fund, and the
political constraints to which a governmental entity may be subject.
Governmental entities may also be dependent on expected disbursements from
foreign governments, multilateral agencies and others abroad to reduce principal
and interest arrearages on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the governmental entity, which may further

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impair such debtor's ability or willingness to service its debts in a timely
manner. Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt (including the Fund) may be requested to participate
in the rescheduling of such debt and to extend further loans to governmental
entities. There is no bankruptcy proceeding by which sovereign debt on which
governmental entities have defaulted may be collected in whole or in part.

Loan Participations and Assignments. The Fund may invest in fixed- and
floating-rate loans ("Loans") arranged through private negotiations between an
issuer of emerging market debt instruments and one or more financial
institutions ("Lenders"). The Fund's investments in Loans in Latin America are
expected in most instances to be in the form of participations in Loans
("Participations") and assignments of portions of Loans ("Assignments") from
third parties. Participations typically will result in the Fund having a
contractual relationship only with the Lender and not with the borrower. The
Fund will have the right to receive payments of principal, interest and any fees
to which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the borrower. In connection with
purchasing Participations, the Fund generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement relating to the
Loan, nor any rights of set-off against the borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund will assume the credit risk
of both the borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Fund may be
treated as a general creditor of the Lender and may not benefit from any set-off
between the Lender and the borrower. The Fund will acquire Participations only
if the Lender interpositioned between the Fund and the borrower is determined by
the Adviser to be creditworthy.

When the Fund purchases Assignments from Lenders, it will acquire
direct rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and may be more limited than, those
held by the assigning Lender.

The Fund may have difficulty disposing of Assignments and
Participations. Because no liquid market for these obligations typically exists,
the Fund anticipates that these obligations could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market will
have an adverse effect on the Fund's ability to dispose of particular
Assignments or Participations when necessary to meet the Fund's liquidity needs
or in response to a specific economic event, such as a deterioration in the
creditworthiness of the borrower. The lack of a liquid secondary market for
Assignments and Participations may also make it more difficult for the Fund to
assign a value to those securities for purposes of valuing the Fund's portfolio
and calculating its net asset value.

Borrowing. The Fund is authorized to borrow money for purposes of liquidity and
to provide for redemptions and distributions. The Fund will borrow only when the
Adviser believes that borrowing will benefit the Fund after taking into account
considerations such as the costs of the borrowing. The Fund does not expect to
borrow for investment purposes, to increase return or leverage the portfolio.
Borrowing by the Fund will involve special risk considerations. Although the
principal of the Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding, thus increasing exposure to
capital risk.

Specialized Investment Techniques of the Funds

Debt Securities. If the Adviser determines that the capital appreciation on debt
securities is likely to exceed that of common stocks, Global Small Company Fund
may invest in debt securities of foreign and U.S. issuers. Portfolio debt
investments will be selected on the basis of capital appreciation potential, by
evaluating, among other things, potential yield, if any, credit quality, and the
fundamental outlooks for currency and interest rate trends in different parts of
the world, taking into account the ability to hedge a degree of currency or
local bond price risk. Global Small Company Fund may purchase "investment-grade"
bonds, which are those rated Aaa, Aa, A or Baa by Moody's 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 Small Company Fund may also invest up
to 5% of its net assets in debt securities which are rated below
investment-grade, that is, rated below Baa by Moody's or below BBB by S&P and in
unrated securities of equivalent quality.

Global Bond 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,

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<PAGE>

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 Bond Fund may invest up to 15% of its net assets in
securities rated below BBB or below Baa, but may not invest in securities rated
B or lower by Moody's and S&P or in equivalent unrated securities.

Emerging Markets Income 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. Emerging Markets Income Fund may also invest in securities
rated lower than Baa/BBB and in unrated securities judged to be of equivalent
quality as determined by the Adviser. The Fund may invest in debt securities
which are rated as low as C by Moody's or D by S&P. Such securities may be in
default with respect to payment of principal or interest.

The Adviser expects that a significant portion of Emerging Markets
Income Fund's investments will be purchased at a discount to par value. To the
extent developments in emerging markets result in improving credit fundamentals
and rating upgrades for countries in emerging markets, the Adviser believes that
there is the potential for capital appreciation as the improving fundamentals
become reflected in the price of the debt instruments. The Adviser also believes
that a country's sovereign credit rating (with respect to foreign currency
denominated issues) acts as a "ceiling" on the rating of all debt issuers from
that country. Thus, the ratings of private sector companies cannot be higher
than that of their home countries. The Adviser believes, however, that many
companies in emerging market countries, if rated on a stand alone basis without
regard to the rating of the home country, possess fundamentals that could
justify a higher credit rating, particularly if they are major exporters and
receive the bulk of their revenues in U.S. dollars or other hard currencies. The
Adviser seeks to identify such opportunities and benefit from this type of
market inefficiency.

High Yield/High Risk Securities. Below investment-grade securities (rated Ba and
lower by Moody's and BB and lower by S&P) or unrated securities of equivalent
quality, in which Global Small Company Fund may invest up to 5% of its net
assets, Global Bond Fund may invest up to 15% of its net assets and Emerging
Markets Income Fund may invest up to 100% of its net assets, carry a high degree
of risk (including the possibility of default or bankruptcy of the issuers of
such securities), generally involve greater volatility of price and risk of
principal and income, and may be less liquid, than securities in the higher
rating categories and are considered speculative. The lower the ratings of such
debt securities, the greater their risks render them like equity securities. See
the Appendix to this Statement of Additional Information for a more complete
description of the ratings assigned by ratings organizations and their
respective characteristics.

Economic downturns may 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 comparable 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 a Fund's
net asset value. In addition, investments in high yield zero coupon or
pay-in-kind bonds, rather than income-bearing high yield securities, may be more
speculative and may be subject to greater fluctuations in value due to changes
in interest rates.

The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of a
Fund to accurately value high yield securities in the Fund's portfolio and to
dispose of those securities. Adverse publicity and investor perceptions may
decrease the values and liquidity of high yield securities. These securities may
also involve special registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties.

Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high-yield security. For these reasons,
it is the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of a Fund's
investment objective by investment in such securities may be more dependent on
the Adviser's credit analysis than is the case for higher quality bonds. Should
the rating of a portfolio security be downgraded, the Adviser will determine
whether it is in the best interest of the Fund to retain or dispose of such
security.

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Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, new federal rules require
savings and loan institutions to gradually reduce their holdings of this type of
security. Also, Congress has from time to time considered legislation which
would restrict or eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such legislation may
significantly depress the prices of outstanding securities of this type. For
more information regarding tax issues related to high yield securities, see
"TAXES."

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. Emerging
Markets Income Fund and Global Bond Fund each limits its purchases of
convertible securities to debt securities convertible into common stock.

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)). Zero coupon securities 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 convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow 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 shorter maturities (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.

Illiquid Securities. Each Fund may occasionally purchase securities other than
in the open market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open market, the
securities so purchased are often "restricted securities" or "not readily
marketable," i.e., securities which cannot be sold to the public without

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registration under the Securities Act of 1933 (the "1933 Act") or the
availability of an exemption from registration (such as Rules 144 or 144A) or
because they are subject to other legal or contractual delays in or restrictions
on resale.

Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the 1933 Act. A Fund may be deemed to be an "underwriter" for
purposes of the 1933 Act when selling restricted securities to the public, and
in such event the Fund may be liable to purchasers of such securities if the
registration statement prepared by the issuer, or the prospectus forming a part
of it, is materially inaccurate or misleading.

Dollar Roll Transactions. Global 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 from the counterparty similar, but not
identical, securities at a future date, at the same price. The counterparty
receives all principal and interest payments, including prepayments, made on the
security while the counterparty is the holder. The Fund receives compensation
from the counterparty as consideration for entering into the commitment to
repurchase. The compensation is paid in the form of a fee or alternatively, a
lower price for the security upon its repurchase. Dollar rolls may be renewed
over a period of several months with a different repurchase and 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.

Global Bond Fund will not use such transactions for leveraging purposes
and, accordingly, will segregate cash, U.S. Government securities or other
liquid 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 either a fee or alternatively, a lower
price for the security upon its repurchase as consideration for agreeing to
repurchase the security, the Fund forgoes the right to receive all principal and
interest payments while the counterparty holds the security. These payments to
the counterparty may exceed the fee received by the Fund, thereby effectively
charging the Fund interest on its borrowing. Further, although the Fund can
estimate the amount of expected principal prepayment over the term of the dollar
roll, a variation in the actual amount of prepayment could increase or decrease
the cost of the Fund's borrowing.

The entry into dollar rolls involves potential risks of loss which are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Fund is able to purchase them.
Similarly, the Fund may be required to purchase securities in connection with a
dollar roll at a higher price than may otherwise be available on the open
market. Since, as noted above, the counterparty is required to deliver a
similar, but not identical security to the Fund, the security which the Fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Fund's use of the cash
that it receives from a dollar roll will provide a return that exceeds borrowing
costs.

The Directors of the Fund have adopted guidelines to ensure that the
securities received are substantially identical to those sold. To reduce the
risk of default, the Fund will engage in such transactions only with banks and
broker/dealers selected pursuant to such guidelines.

Repurchase Agreements. Each Fund may enter into repurchase agreements with
member banks of the Federal Reserve System, with any domestic or foreign
broker/dealer which is recognized as a reporting government securities dealer,
or for Global Small Company Fund, any foreign bank, if the repurchase agreement
is fully secured by government securities of the particular foreign
jurisdiction, if the creditworthiness of the bank or broker/dealer has been

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determined by the Adviser to be at least as high as that of other obligations
the Fund may purchase, or to be at least equal to that of issuers of commercial
paper rated within the two highest grades assigned by Moody's or S&P. In
addition, Global Bond Fund may enter into repurchase agreements with 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 the Fund may purchase.

A repurchase agreement provides a means for a Fund to earn income on
assets for periods as short as overnight. It is an arrangement under which a
Fund acquires a security ("Obligation") and the seller agrees, at the time of
sale, to repurchase the Obligation at a specified time and price. Obligations
subject to a repurchase agreement are held in a segregated account and the value
of such securities kept at least equal to the repurchase price on a daily basis.
The repurchase price may be higher than the purchase price, the difference being
income to the Fund, or the purchase and repurchase prices may be the same, with
interest at a stated rate due to the Fund together with the repurchase price
upon repurchase. In either case, the income to the Fund is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.

For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from a Fund to the seller of the Obligation subject to the repurchase
agreement and is therefore subject to that Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by a Fund subject to a repurchase agreement as being owned
by the Fund or as being collateral for a loan by the Fund to the seller. In the
event of the commencement of bankruptcy or insolvency proceedings with respect
to the seller of the Obligation before repurchase of the Obligation under a
repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the Obligation. If the court characterizes the transaction as a loan
and the Fund has not perfected a security interest in the Obligation, the Fund
may be required to return the Obligation to the seller's estate and be treated
as an unsecured creditor of the seller. As an unsecured creditor, the Fund would
be at risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for the Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the Obligation, in which
case a Fund may incur a loss if the proceeds to the Fund of the sale to a third
party are less than the repurchase price. To protect against such potential
loss, if the market value (including interest) of the Obligation subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Fund will direct the seller of the Obligation to deliver
additional securities so that the market value (including interest) of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
impose on the seller a contractual obligation to deliver additional securities.
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.

Repurchase Commitments. Global Bond Fund and Emerging Markets Income Fund may
enter into repurchase commitments with any party deemed creditworthy by the
Adviser, including foreign banks and broker/dealers, if the transaction is
entered into for investment purposes and the counterparty's creditworthiness is
at least equal to that of issuers of securities which a Fund may purchase. Such
transactions may not provide a Fund with collateral marked-to-market during the
term of the commitment.

Indexed Securities. Global Bond Fund and Emerging Markets Income 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 Funds 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

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amount payable or the interest rate of an indexed security may be a multiple of
the percentage change (positive or negative) in the value of the underlying
reference instrument(s).

Investment in indexed securities involves certain risks. In addition to
the credit risk of the security's issuer and the normal risks of price changes
in response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of reference
instruments. Further, in the case of certain indexed securities in which the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero, and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be more volatile than the reference instruments underlying indexed securities.

When-Issued Securities. Each Fund may from time to time purchase securities on a
"when-issued" or "forward delivery" basis for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
for the when-issued or forward delivery securities takes place at a later date.
During the period between purchase and settlement, no payment is made by a Fund
to the issuer and no interest accrues to the Fund. To the extent that assets of
a Fund are held in cash pending the settlement of a purchase of securities, the
Fund would earn no income; however, it is the Fund's intention to be fully
invested to the extent practicable and subject to the policies stated above.
While when-issued or forward delivery securities may be sold prior to the
settlement date, a Fund intends to purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons.
At the time a Fund makes the commitment to purchase a security on a when-issued
or forward delivery basis, it will record the transaction and reflect the value
of the security in determining its net asset value. At the time of settlement,
the market value of the when-issued or forward delivery securities may be more
or less than the purchase price. A Fund does not believe that its net asset
value or income will be adversely affected by its purchase of securities on a
when-issued or forward delivery basis.

Lending of Portfolio Securities. Each Fund may seek to increase its income by
lending portfolio securities. Under present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the SEC, such loans
may be made to member firms of the New York Stock Exchange (the "Exchange"), and
would be required to be secured continuously by collateral in cash, U.S.
Government securities or other high grade debt obligations maintained on a
current basis at an amount at least equal to the market value and accrued
interest of the securities loaned. A Fund would have the right to call a loan
and obtain the securities loaned on no more than five days' notice. During the
existence of a loan, a Fund would continue to receive the equivalent of the
interest paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans would be made only to firms deemed by the Adviser to be of good standing,
and when, in the judgment of the Adviser, the consideration which can be earned
currently from securities loans of this type justifies the attendant risk. If a
Fund determines to make securities loans, the value of the securities loaned
will not exceed 30% of the value of the Fund's total assets at the time any loan
is made.

Zero Coupon Securities. Global Bond 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

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(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 SEC no longer considers such privately stripped obligations to
be U.S. Government securities, as defined in 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").

Mortgage-Backed Securities and Mortgage Pass-Through Securities. Global Bond
Fund may also invest in mortgage-backed securities, which are interests in pools
of mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations as further described below. The
Fund may also invest in debt securities which are secured with collateral
consisting of mortgage-backed securities (see "Collateralized Mortgage
Obligations"), and in other types of mortgage-related securities.

A decline in interest rates may lead to a faster rate of repayment of
the underlying mortgages, and expose the Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by the
Fund, the prepayment right will tend to limit to some degree the increase in net
asset value of the Fund because the value of the mortgage-backed securities held
by the Fund may not appreciate as rapidly as the price of non-callable debt
securities.

Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by repayments of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of
fees or costs which may be incurred. Some mortgage-related securities (such as
securities issued by the Government National Mortgage Association) are described
as "modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.

The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the U.S. Government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages. These guarantees, however, do not apply to the market

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value or yield of mortgage-backed securities or to the value of Fund shares.
Also, GNMA securities often are purchased at a premium over the maturity value
of the underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.

Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers which include state
and federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA but are not backed by the full faith and credit of the U.S. Government.

FHLMC is a corporate instrumentality of the U.S. Government and was
created by Congress in 1970 for the purpose of increasing the availability of
mortgage credit for residential housing. Its stock is owned by the twelve
Federal Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the U.S.
Government.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Fund's investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or guarantee
arrangements. Global Bond Fund may buy mortgage-related securities without
insurance or guarantees, if through an examination of the loan experience and
practices of the originators/servicers and poolers, the Adviser determines that
the securities meet the Fund's quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.

Collateralized Mortgage Obligations ("CMO"s). Global Bond Fund may invest in
CMOs. A CMO is a hybrid between a mortgage-backed bond and a mortgage
pass-through security. Similar to a bond, interest and prepaid principal are
paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and their income
streams.

CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.

In a typical CMO transaction, a corporation issues multiple series,
(e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are
used to purchase mortgages or mortgage pass-through certificates ("Collateral").
The Collateral is pledged to a third party director as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B, and C bonds all bear current
interest. Interest on the Series Z Bond is accrued and added to principal and a
like amount is paid as principal on the Series A, B, or C Bond currently being
paid off. When the Series A, B, and C Bonds are paid in full, interest and
principal on the Series Z Bond begins to be paid currently. With some CMOs, the
issuer serves as a conduit to allow loan originators (primarily builders or
savings and loan associations) to borrow against their loan portfolios.

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FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations of
FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are made
semiannually, as opposed to monthly. The amount of principal payable on each
semiannual payment date is determined in accordance with FHLMC's mandatory
sinking fund schedule, which, in turn, is equal to approximately 100% of FHA
prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes
of bonds in the order of their stated maturities. Payment of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum
sinking fund obligation for any payment date are paid to the holders of the CMOs
as additional sinking fund payments. Because of the "pass-through" nature of all
principal payments received on the collateral pool in excess of FHLMC's minimum
sinking fund requirement, the rate at which principal of the CMOs is actually
repaid is likely to be such that each class of bonds will be retired in advance
of its scheduled maturity date.

If collection of principal (including prepayments) on the mortgage
loans during any semiannual payment period is not sufficient to meet FHLMC's
minimum sinking fund obligation on the next sinking fund payment date, FHLMC
agrees to make up the deficiency from its general funds.

Criteria for the mortgage loans in the pool backing the CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.

Other Mortgage-Backed Securities. The Adviser expects that governmental,
government-related or private entities may create mortgage loan pools and other
mortgage-related securities offering mortgage pass-through and
mortgage-collateralized investments in addition to those described above. The
mortgages underlying these securities may include alternative mortgage
instruments, that is, mortgage instruments whose principal or interest payments
may vary or whose terms to maturity may differ from customary long-term fixed
rate mortgages. Global Bond Fund will not purchase mortgage-backed securities or
any other assets which, in the opinion of the Adviser, are illiquid, in
accordance with the nonfundamental investment restriction on securities which
are not readily marketable discussed below. As new types of mortgage-related
securities are developed and offered to investors, the Adviser will, consistent
with Global Bond Fund's investment objective, policies and quality standards,
consider making investments in such new types of mortgage-related securities.

Other Asset-Backed Securities. The securitization techniques used to develop
mortgage-backed securities are now being applied to a broad range of assets.
Through the use of trusts and special purpose corporations, various types of
assets, including automobile loans, computer leases and credit card receivables,
are being securitized in pass-through structures similar to the mortgage
pass-through structures described above or in a structure similar to the CMO
structure. Consistent with the Fund's investment objectives and policies, Global
Bond Fund may invest in these and other types of asset-backed securities that
may be developed in the future. In general, the collateral supporting these
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments with interest rate fluctuations.

Several types of asset-backed securities have already been offered to
investors, including Certificates of Automobile ReceivablesSM ("CARSSM"). CARSSM
represent undivided fractional interests in a trust whose assets consist of a
pool of motor vehicle retail installment sales contracts and security interests
in the vehicles securing the contracts. Payments of principal and interest on
CARSSM are passed through monthly to certificate holders, and are guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the directors or originator of the
Corporation. An investor's return on CARSSM may be affected by early prepayment
of principal on the underlying vehicle sales contracts. If the letter of credit
is exhausted, the Corporation may be prevented from realizing the full amount
due on a sales contract because of state law requirements and restrictions
relating to foreclosure sales of vehicles and the obtaining of deficiency
judgments following such sales or because of depreciation, damage or loss of a
vehicle, the application of federal and state bankruptcy and insolvency laws, or
other factors. As a result, certificate holders may experience delays in
payments or losses if the letter of credit is exhausted.

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the benefit
of any security interest in the related assets. Credit card receivables are

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generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. There is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection, and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from default ensures ultimate payment of the obligations on at least a
portion of the assets in the pool. This protection may be provided through
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a
combination of such approaches. Global Bond Fund will not pay any additional or
separate fees for credit support. The degree of credit support provided for each
issue is generally based on historical information respecting the level of
credit risk associated with the underlying assets. Delinquency or loss in excess
of that anticipated or failure of the credit support could adversely affect the
return on an investment in such a security.

Global Bond Fund may also invest in residual interests in asset-backed
securities. In the case of asset-backed securities issued in a pass-through
structure, the cash flow generated by the underlying assets is applied to make
required payments on the securities and to pay related administrative expenses.
The residual in an asset-backed security pass-through structure represents the
interest in any excess cash flow remaining after making the foregoing payments.
The amount of residual cash flow resulting from a particular issue of
asset-backed securities will depend on, among other things, the characteristics
of the underlying assets, the coupon rates on the securities, prevailing
interest rates, the amount of administrative expenses and the actual prepayment
experience on the underlying assets. Asset-backed security residuals not
registered under the 1933 Act may be subject to certain restrictions on
transferability. In addition, there may be no liquid market for such securities.

The availability of asset-backed securities may be affected by
legislative or regulatory developments. It is possible that such developments
may require Global Bond Fund to dispose of any then existing holdings of such
securities.

Strategic Transactions and Derivatives. Each Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of fixed-income securities in each Fund's portfolio, or to
enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.

In the course of pursuing these investment strategies, each Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for a Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect a Fund's unrealized gains in the value of its
portfolio securities in each Fund's portfolio, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of fixed-income securities in a Fund's portfolio, or to establish a position in
the derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of a Fund's assets will be committed to
Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous

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variables including market conditions. The ability of a Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Each Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.

Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to a Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation a Fund can realize on its
investments or cause a Fund to hold a security it might otherwise sell. The use
of currency transactions can result in a Fund incurring losses as a result of a
number of factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets, a
Fund might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at the same time they tend to limit any potential gain
which might result from an increase in value of such position. Finally, the
daily variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been utilized.

General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."

A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, a Fund's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
the Fund the right to sell such instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. A Fund's purchase of a call option on a security, financial
future, index, currency or other instrument might be intended to protect a Fund
against an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. Each Fund
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.

With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.

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<PAGE>

A Fund's ability to close out its position as a purchaser or seller of
an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. Each
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. Each
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.

Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. Each Fund will engage in OTC option transactions only with U.S.
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers", or broker dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of A-1 from S&P or P-1 from
Moody's or an equivalent rating from any other nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit quality by the Adviser. The staff of the
SEC currently takes the position that OTC options purchased by a Fund, and
portfolio securities "covering" the amount of a Fund's obligation pursuant to an
OTC option sold by it (the cost of the sell-back plus the in-the-money amount,
if any) are illiquid, and are subject to the Fund's limitation on investing no
more than 10% of its assets in illiquid securities. Emerging Markets Income Fund
may invest up to 15% of its assets in illiquid securities.

If a Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.

Each Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by a Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though a Fund will receive the option premium to help protect it against
loss, a call sold by a Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold.

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<PAGE>

Each Fund may purchase and sell put options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, foreign
sovereign debt, corporate debt securities, equity securities (including
convertible securities) and Eurodollar instruments (whether or not it holds the
above securities in its portfolio), and on securities indices, currencies and
futures contracts other than futures on individual corporate debt and individual
equity securities. Each Fund will not sell put options if, as a result, more
than 50% of the Fund's assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to
futures and options thereon. In selling put options, there is a risk that the
Fund may be required to buy the underlying security at a disadvantageous price
above the market price.

General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by a Fund, as seller, to deliver to the buyer
the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.

Each Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires a Fund to deposit with a
financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If a Fund exercises an option on a futures contract it will be obligated to post
initial margin (and potential subsequent variation margin) for the resulting
futures position just as it would for any position. Futures contracts and
options thereon are generally settled by entering into an offsetting transaction
but there can be no assurance that the position can be offset prior to
settlement at an advantageous price, nor that delivery will occur.

No Fund will enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of a Fund's total assets (taken at current value); however, in
the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.

Options on Securities Indices and Other Financial Indices. Each Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.

Currency Transactions. Each Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency

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transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. A Fund may enter into currency transactions with Counterparties
which have received (or the guarantors of the obligations of which have
received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or that
have an equivalent rating from a NRSRO or are determined to be of equivalent
credit quality by the Adviser.

Each Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.

No Fund will enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging or cross hedging as described below.

Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.

To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, each Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of a Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
a Fund holds securities denominated in schillings and the Adviser believes that
the value of schillings will decline against the U.S. dollar, the Adviser may
enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that a Fund is engaging in proxy hedging. If a Fund
enters into a currency hedging transaction, a Fund will comply with the asset
segregation requirements described below.

Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.

Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate

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<PAGE>

transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.

Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. Each Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. Each Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by a Fund
with another party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate payments with respect
to a notional amount of principal. A currency swap is an agreement to exchange
cash flows on a notional amount of two or more currencies based on the relative
value differential among them and an index swap is an agreement to swap cash
flows on a notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling such cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase of
a floor entitles the purchaser to receive payments on a notional principal
amount from the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is a combination
of a cap and a floor that preserves a certain return within a predetermined
range of interest rates or values.

A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. Neither Fund will enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from an NRSRO or is determined to be of equivalent credit quality by the
Adviser. If there is a default by the Counterparty, a Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

Eurodollar Instruments. Each Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. A Fund might use Eurodollar futures contracts and options thereon to
hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.

Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.

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Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate liquid high
grade assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by a Fund to pay
or deliver securities or assets must be covered at all times by the securities,
instruments or currency required to be delivered, or, subject to any regulatory
restrictions, an amount of cash or liquid high grade securities at least equal
to the current amount of the obligation must be segregated with the custodian.
The segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by a Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate liquid high-grade
securities sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by a Fund on an index will require the Fund to own
portfolio securities which correlate with the index or to segregate liquid high
grade assets equal to the excess of the index value over the exercise price on a
current basis. A put option written by a Fund requires the Fund to segregate
liquid, high grade assets equal to the exercise price.

Except when a Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate liquid high grade assets equal to the amount of the Fund's
obligation.

OTC options entered into by a Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when a Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.

In the case of a futures contract or an option thereon, a Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.

With respect to swaps, a Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.

Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. Each Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, a Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if a Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.

Each Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. (See "TAXES.")

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Investment Restrictions

Unless specified to the contrary, the following restrictions are
fundamental policies and may not be changed with respect to each of the Funds
without the approval of a majority of the outstanding voting securities of such
Fund which, under the 1940 Act and the rules thereunder and as used in this
Statement of Additional Information, means the lesser of (1) 67% or more of the
voting securities of such Fund present at such meeting, if the holders of more
than 50% of the outstanding voting securities of such Fund are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of such Fund. Any nonfundamental policy of a Fund may be modified by the Fund's
Board of Directors without a vote of the Fund's shareholders.

Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, the Funds.

As a matter of fundamental policy, each Fund may not:

1. borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse
repurchase agreements provided that the Fund maintains asset
coverage of 300% for all borrowings;

2. purchase or sell real estate (except that the Fund may invest in
(i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or
interests therein, and that the Fund reserves freedom of action
to hold and to sell real estate acquired as a result of the
Fund's ownership of securities); or purchase or sell physical
commodities or contracts relating to physical commodities;

3. act as an underwriter of securities issued by others, except to
the extent that it may be deemed an underwriter in connection
with the disposition of portfolio securities of the Fund;

4. issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for
shares of the separate classes or series of the Corporation;
provided that collateral arrangements with respect to
currency-related contracts, futures contracts, options or other
permitted investments, including deposits of initial and
variation margin, are not considered to be the issuance of senior
securities for purposes of this restriction;

5. purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to
be invested in the securities of one or more issuers having their
principal business activities in the same industry, provided that
there is no limitation with respect to investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (for the purposes of this restriction,
telephone companies are considered to be in a separate industry
from gas and electric public utilities, wholly-owned finance
companies are considered to be in the same industry of their
parents if their activities are primarily related to financing
the activities of their parents and each foreign government, its
agencies or instrumentalities as well as supranational
organizations as a group, are each considered to be a separate
industry);

6. (Global Small Company Fund only) with respect to 75% of its total
assets taken at market value purchase more than 10% of the voting
securities of any one issuer, or invest more than 5% of the value
of its total assets in the securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of closed end
investment companies;

7. (Global Small Company Fund only) make loans to other persons,
except (a) loans of portfolio securities, provided collateral is
maintained at not less than 100% by marking to market daily, and
(b) to the extent the entry into repurchase agreements and the
purchase of debt securities in accordance with its investment
objective and investment policies may be deemed to be loans;

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8. (Global Bond Fund only) make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent the entry
into repurchase agreements and the purchase of debt securities in
accordance with its investment objectives and investment policies
may be deemed to be loans; or

9. (Emerging Markets Income Fund only) make loans to other persons,
except (a) loans of portfolio securities, and (b) to the extent
the entry into repurchase agreements, loan assignments and loan
participations and the purchase of debt securities in accordance
with its investment objective and investment policies may be
deemed to be loans.

As a matter of nonfundamental policy, each Fund may not:

(a) purchase or retain securities of any open-end investment company,
or securities of closed-end investment companies except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchases, or except when
such purchase, though not made in the open market, is part of a
plan of merger, consolidation, reorganization or acquisition of
assets; in any event the Fund may not purchase more than 3% of
the outstanding voting securities of another investment company,
may not invest more than 5% of its total assets in another
investment company, and may not invest more than 10% of its total
assets in other investment companies;

(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;

(c) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer, director
or trustee of the Fund or a member, officer, director or trustee
of the investment adviser of the Fund if one or more of such
individuals owns beneficially more than one-half of one percent
(1/2%) of the outstanding shares or securities or both (taken at
market value) of such issuer and such individuals owning more
than one-half of one percent (1/2%) of such shares or securities
together own beneficially more than 5% of such shares or
securities or both;

(d) (Global Small Company Fund and Global Bond Fund only) invest more
than 10% of its total assets in securities which are not readily
marketable, the disposition of which is restricted under Federal
securities laws, or in repurchase agreements not terminable
within 7 days, and the Fund will not invest more than 10% of its
total assets in restricted securities;

(e) (Emerging Markets Income Fund only) invest more than 15% of its
net assets in securities which are not readily marketable, the
disposition of which is restricted under Federal securities laws,
or in repurchase agreements not terminable within 7 days, and the
Fund will not invest more than 10% of its total assets in
restricted securities;

(f) purchase securities of any issuer with a record of less than
three years continuous operations, including predecessors, and in
equity securities which are not readily marketable except U.S.
Government securities, securities of such issuers which are rated
by at least one nationally recognized statistical rating
organization, municipal obligations and obligations issued or
guaranteed by any foreign government or its agencies or
instrumentalities, if such purchase would cause the investments
of the Fund in all such issuers to exceed 5% of the total assets
of the Fund taken at market value;

(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;

30
<PAGE>

(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 or sell real estate limited partnership interests;

(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. Each Fund has no
current intention of making loans of portfolio securities that
would amount to greater than 5% of its total assets;

(l) (Global Small Company Fund only) borrow money (including reverse
repurchase agreements) in excess of 5% of its total assets (taken
at market value) except for temporary or emergency purposes or
borrow other than from banks;

(m) (Global Bond Fund and Emerging Markets Income Fund only) borrow
money in excess of 5% of its total assets (taken at market
value), except for temporary or emergency purposes, or borrow
other than from banks; however, in the case of reverse repurchase
agreements, each Fund may invest in such agreements with other
than banks subject to total asset coverage of 300% for such
agreements and all borrowing;

(n) (Global Bond Fund only) purchase securities on margin or make
short sales, unless by virtue of its ownership of other
securities, it has the right to obtain securities equivalent in
kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions, except in
connection with arbitrage transactions, and except that the Fund
may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities;

(o) (Global Small Company Fund only) purchase securities on margin or
make short sales unless, by virtue of its ownership of other
securities, it has the right to obtain securities equivalent in
kind and amount to the securities sold at no added cost and, if
the right is conditional, the sale is made upon the same
conditions, except in connection with arbitrage transactions and
except that the Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities;

(p) (Global Small Company Fund only) purchase warrants if as a result
warrants taken at the lower of cost or market value would
represent more than 10% of the value of the Portfolio's net
assets or more than 2% of its net assets in warrants that are not
listed on the New York or American Stock Exchanges or on an
exchange with comparable listing requirements (for this purpose,
warrants attached to securities will be deemed to have no value);
or

(q) (Global Bond Fund only) purchase warrants if as a result warrants
taken at the lower of cost or market value would represent more
than 5% of the value of the Fund's net assets or more than 2% of
its net assets in warrants that are not listed on the New York or
American Stock Exchanges or on an exchange with comparable
listing requirements (for this purpose, warrants attached to
securities will be deemed to have no value).

If a percentage restriction on investment or utilization of assets as
set forth under "Investment Restrictions" and "Other Investment Policies" above
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value or the total cost of a Fund's assets will
not be considered a violation of the restriction.

31
<PAGE>

PURCHASES

(See "Purchases" and "Transaction Information" in a Fund's prospectus.)

Additional Information About Opening an Account

Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $1,000 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, or telephone.

Shareholders of other Scudder funds who have submitted an account
application and have certified a taxpayer identification number, clients having
a regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD,
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($1,000 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the taxpayer identification or social security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to State Street Bank, Attention: Mutual Funds, 225 Franklin Street,
Boston, MA 02110. The investor must give the Scudder fund name, account name and
the new account number. Finally, the investor must send the completed and signed
application to the Fund promptly.

The minimum initial purchase amount is less than $1,000 under certain
special plan accounts.

Additional Information About Making Subsequent Investments

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, and 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 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 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.

Additional Information About Making Subsequent Investments by AutoBuy

Shareholders, whose predesignated bank account of record is a
Member of the Automated Clearing House Network (ACH) and have elected to
participate in the AutoBuy program, may purchase shares of the Fund by
telephone. Through this service shareholders may purchase up to $250,000 but not
less than $250. To purchase shares at the net asset value per share calculated
on the day of your call by AutoBuy, shareholders should call before the close of
trading on the Exchange (normally 4 p.m. eastern time). Proceeds in the amount
of your purchase will be transferred from your bank checking account in two or
three business days following your call. For requests received by the close of
regular trading on the Exchange, shares will be purchased at the net asset value
per share calculated at the close of trading on the day of your call. AutoBuy
requests received after the close of regular trading on the Exchange will begin
their processing the following business day and will be purchased at the net
asset value per share calculated at the close of trading on the business day
following your call. If you purchase shares by AutoBuy and redeem them within
seven days of the purchase, the Fund may hold the redemption proceeds for a
period of up to seven business days. If you purchase shares and there are
insufficient funds in your bank account the purchase will be canceled and you
will be subject to any losses or fees incurred in the transaction. AutoBuy
transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.

32
<PAGE>

In order to request purchases by AutoBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoBuy may so indicate on the application.
Existing shareholders who wish to add AutoBuy to their account may do so by
completing an AutoBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.

The Fund 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 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.

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 the Corporation or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, the Corporation shall have the authority, as agent of the
shareholder, to redeem shares in the account to reimburse a Fund or the
principal underwriter for the loss incurred. Investors whose orders have been
canceled may be prohibited from, or restricted in, placing future orders in any
of the Scudder funds.

Wire Transfer of Federal Funds

To purchase shares of Global 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 the Fund prior to twelve
o'clock noon eastern time on that day. If you wish to make a purchase of
$500,000 or more you should notify the Fund's transfer agent, Scudder Service
Corporation (the "Transfer Agent") of such a purchase by calling 1-800-225-5163.
If either the federal funds or the account information is received after twelve
o'clock noon eastern time, but both the funds and the information are made
available before the close of regular trading on the Exchange (normally 4 p.m.
eastern time) on any business day, shares will be purchased at net asset value
determined on that day but will not receive the dividend; in such cases,
dividends commence on the next business day.

To obtain the net asset value determined as of the close of regular
trading on the Exchange on a selected day, your bank must forward federal funds
by wire transfer and provide the required account information so as to be
available to the Fund prior to the close of regular trading on the Exchange
(normally 4 p.m. eastern time).

The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, the Distributor pays 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 closed on certain holidays although the Exchange may
be open. These holidays are Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because State Street Bank 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 each day during
which the Exchange is open for trading. Orders received after the close of
regular trading on the Exchange will receive the next business day's net asset
value. If the order has been placed by a member of the NASD, other than the

33
<PAGE>

Distributor, it is the responsibility of that member broker, rather than a Fund,
to forward the purchase order to the Fund's Transfer Agent by the close of
regular trading on the Exchange.

Share Certificates

Due to the desire of the Corporation to afford ease of redemption,
certificates will not be issued to indicate ownership in a Fund.

Other Information

If purchases or redemptions of a Fund's shares are arranged and
settlement is made, at an investor's election through a member of the NASD other
than the Distributor, that member may, at its discretion, charge a fee for that
service.

The Board of Directors and the Distributor each has the right to limit
the amount of purchases by and to refuse to sell to any person, and each may
suspend or terminate the offering of shares of a Fund at any time.

The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g., from exempt organizations, certification of exempt status) will be
returned to the investor.

The Corporation may issue shares of each Fund at net asset value in
connection with any merger or consolidation with, or acquisition of the assets
of, any investment company (or series thereof) or personal holding company,
subject to the requirements of the 1940 Act.

EXCHANGES AND REDEMPTIONS

(See "Exchanges and Redemptions" and "Transaction information" in a
Fund's prospectus.)

Exchanges

Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may be
either an additional investment into an existing account or may involve opening
a new account in the other fund. When an exchange involves a new account, the
new account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $1,000. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration, tax
identification number, address, and account options/features as the account of
origin. Exchanges into an existing account must be for $100 or more. If the
account receiving the exchange proceeds is 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--Redeeming
shares--Signature guarantees" in a Fund's prospectus.

Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.

Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone 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.

34
<PAGE>

No commission is charged to the shareholder for any exchange described
above. An exchange into another Scudder fund is a redemption of shares, and
therefore may result in tax consequences (gain or loss) to the shareholder, and
the proceeds of such an exchange may be subject to backup withholding. (See
"TAXES.")

Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Corporation employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Corporation does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Corporation will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Corporation, 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 the Distributor 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 proceeds mailed to
their address of record. Shareholders may also request to have the proceeds
mailed or wired to their predesignated bank account. In order to request wire
redemptions by telephone, shareholders must have completed and returned to the
Transfer Agent the application, including the designation of a bank account to
which the redemption proceeds are to be sent.

(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section
on the application.

(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit-Sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption payments should
either return a Telephone Redemption Option Form (available upon
request) or send a letter identifying the account and specifying
the exact information to be changed. The letter must be signed
exactly as the shareholder's name(s) appears on the account. An
original signature and an original signature guarantee are
required for each person in whose name the account is registered.

Telephone redemption is not available with respect to shares
represented by share certificates or shares held in certain retirement accounts.

If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.

Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.

The Corporation employs procedures, including recording telephone
calls, testing a caller's identity, and sending written confirmation of
telephone transactions, designed to give reasonable assurance that instructions

35
<PAGE>

communicated by telephone are genuine, and to discourage fraud. To the extent
that the Corporation does not follow such procedures, it may be liable for
losses due to unauthorized or fraudulent telephone instructions. The Corporation
will not be liable for acting upon instructions communicated by telephone that
it reasonably believes to be genuine.

Redemption requests by telephone (technically a repurchase by agreement
between a Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.

Redemption by AutoSell

Shareholders, whose predesignated bank account of record is a
member of the Automated Clearing House Network (ACH) and who have elected to
participate in the AutoSell program, may redeem shares of the Fund by AutoSell.
To redeem shares by AutoSell, shareholders should call before the close of
regular trading on the Exchange. Redemptions must be for at least $250.
Redemption proceeds will be transferred to your bank checking account in two or
three business days following your call. Shares will be redeemed at the net
asset value per share calculated at the close of trading on the day of your
call. AutoSell requests after the close of regular trading on the Exchange will
begin their processing and be redeemed at the net asset value calculated as of
the close of regular trading on the Exchange the following business day.
AutoSell transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.

In order to request redemptions by AutoSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoSell may so indicate on the application.
Existing shareholders who wish to add AutoSell to their account may do so by
completing an AutoSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.

The Fund 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 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.

Redemption by Mail or Fax

In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor/executrix, certificates of corporate authority and waivers of tax
(required in some states when settling estates).

It is suggested that shareholders holding shares registered in other
than individual names contact the Transfer Agent prior to redemptions to ensure
that all necessary documents accompany the request. When shares are held in the
name of a corporation, trust, fiduciary, agent, attorney or partnership, the
Transfer Agent requires, in addition to the stock power, certified evidence of
authority to sign. These procedures are for the protection of shareholders and
should be followed to ensure prompt payment. Redemption requests must not be
conditional as to date or price of the redemption. Proceeds of a redemption will
be sent within five business days after receipt by the Transfer Agent of a
request for redemption that complies with the above requirements. Delays in
payment of more than seven days for shares tendered for repurchase or redemption
may result, but only until the purchase check has cleared.

The requirements for IRA redemptions are different from those 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

36
<PAGE>

the 1940 Act as a result of which the Corporation is obligated to redeem shares,
with respect to any one shareholder during any 90-day period, solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the relevant Fund at
the beginning of the period.

Other Information

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 although wire
charges may be applicable for redemption proceeds wired to an investor's bank
account. Redemption of shares, including an exchange into another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and the
proceeds of such redemptions may be subject to backup withholding. (See
"TAXES.")

Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustees or custodian of the Plan for the
requirements.

The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted for any reason, (c)
an emergency exists as a result of which disposal by a Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or (d) a governmental body
having jurisdiction over a Fund may by order of the SEC permit such a suspension
for the protection of the Corporation's shareholders; provided that applicable
rules and regulations of the SEC (or any succeeding governmental authority)
shall govern as to whether the conditions prescribed in (b), (c) or (d) exist.

If transactions at any time reduce a shareholder's account balance in a
Fund to below $1,000 in value, the Fund may notify the shareholder that, unless
the account balance is brought up to at least $1,000, the Fund will redeem all
shares and close the account by making payment to the shareholder. The
shareholder has sixty days to bring the account balance up to $1,000 before any
action will be taken by a Fund. (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 a Fund's prospectus.)

The Pure No-Load(TM) Concept

Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.

Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.

A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.

37
<PAGE>

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
YEARS Pure No-Load^TM 8.50% Load Fund Load Fund with with 0.25% 12b-1
Fund 0.75% 12b-1 Fee Fee
----- ---- --------------- --------------- ---
<C> <C> <C> <C> <C>

10 $25,937 $23,733 $24,222 $25,354

15 41,772 38,222 37,698 40,371

20 67,275 61,557 58,672 64,282
</TABLE>

Investors are encouraged to review the fee tables on page 2 of each
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.

Dividend and Capital Gain Distribution Options

Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of the same Fund. A change of instructions for the
method of payment must be received by the Transfer Agent at least five days
prior to a dividend record date. Shareholders may change their dividend option
either by calling 1-800-225-5163 or by sending written instructions to the
Transfer Agent. Please include your account number with your written request.
See "How to contact Scudder" in a Fund's Prospectus for the address.

Reinvestment is usually made at the closing net asset value determined
on the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of the relevant Fund.

Investors may also have dividends and distributions automatically
deposited in 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. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.

38
<PAGE>

Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.

Diversification

Your investment in Global Small Company Fund represents an interest in
a large, diversified portfolio of carefully selected securities. Diversification
may protect you against the possible risks of concentrating in fewer securities
or in a specific market sector.

Scudder Funds Centers

Investors may visit any of the Funds Centers maintained by the
Distributor listed in each Fund's prospectus. The Centers are designed to
provide individuals with services during any business day. Investors may pick up
literature or obtain assistance with opening an account, adding monies or
special options to existing accounts, making exchanges within the Scudder Family
of Funds, redeeming shares or opening retirement plans. Checks should not be
mailed to the Centers but should be mailed to "The Scudder Funds" at the address
listed under "How to contact Scudder" in each Fund's prospectus.

Reports to Shareholders

The Corporation issues to each Fund's shareholders semiannual and
annual financial statements audited by independent accountants, including a list
of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights. The Corporation presently
intends to distribute to each Fund's shareholders informal quarterly reports
during the intervening quarters, containing certain performance and investment
highlights of that Fund.

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 a Fund's prospectus.)

The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
Initial purchases in each Scudder fund must be at least $1,000 or $500 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower.

MONEY MARKET

Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.

Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and
U.S. Government guaranteed obligations with maturities of not more than
762 calendar days. The Fund intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this
may not be possible.

39
<PAGE>

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 Global Bond Fund seeks to provide total return with an emphasis
on current income by investing primarily in high-grade bonds
denominated in foreign currencies and the U.S. dollar. As a secondary
objective, the Fund will seek capital appreciation.

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 Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon
securities.

TAX FREE MONEY MARKET

Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.

Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.

Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.

TAX FREE

Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in investment-grade
municipal securities.

Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.

Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in
long-term municipal securities with an emphasis on high quality.

- ------------
* These funds are not available for sale in all states. For
information, contact Scudder Investor Services, Inc.

40
<PAGE>

Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.

Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.

Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.

Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.

Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.

Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state, municipal
and local government obligations.

Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.

GROWTH AND INCOME

Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.

Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.

GROWTH

Scudder Capital Growth Fund seeks to maximize long-term growth of
capital through a broad and flexible investment program emphasizing
common stocks.

Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.

Scudder Global Fund seeks long-term growth of capital primarily through
a diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S. and
foreign issuers. Income is an incidental consideration.

Scudder Global Small Company Fund seeks above-average capital
appreciation over the long term by investing primarily in the equity
securities of small companies located throughout the world.

- ------------
* These funds are not available for sale in all states. For
information, contact Scudder Investor Services, Inc.

41
<PAGE>

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 Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. 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
service representative of Scudder Investor Relations; easy telephone exchanges
into other Scudder funds; shares redeemable at net asset value at any time.

SPECIAL PLAN ACCOUNTS

(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in a Fund's prospectus.)

Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.

42
<PAGE>

Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.

None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.

Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals

Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.

Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals

Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.

Scudder IRA: Individual Retirement Account

Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue Code.

A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.

An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,250 for married couples if one spouse has earned income of no
more than $250). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.

The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)

43
<PAGE>

Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution

Starting
Age of Annual Rate of Return
---------------------
Contributions 5% 10% 15%
------------- -- --- ---
<S> <C> <C> <C>
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>

This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)

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
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.

Automatic Withdrawal Plan

Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Payments are mailed at the end
of each month. The check amounts may be based on the redemption of a fixed
dollar amount, fixed share amount, percent of account value or declining
balance. The Plan provides for income dividends and capital gains distributions,
if any, to be reinvested in additional shares. Shares are then liquidated as
necessary to provide for withdrawal payments. Since the withdrawals are in
amounts selected by the investor and have no relationship to yield or income,
payments received cannot be considered as yield or income on the investment and
the resulting liquidations may deplete or possibly extinguish the initial
investment. Requests for increases in withdrawal amounts or to change payee must
be submitted in writing, signed exactly as the account is registered and contain
signature guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in the Fund's prospectus. Any such requests must
be received by the Fund's transfer agent by the 15th of the month in which such
change is to take effect. An Automatic Withdrawal Plan may be terminated at any
time by the shareholder, the Corporation or its agent on written notice, and
will be terminated when all shares of the Fund under the Plan have been
liquidated or upon receipt by the Corporation of notice of death of the
shareholder.

An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.

44
<PAGE>

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.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

(See"Distribution and performance information--Dividends and
capital gains distributions" in a Fund's prospectus.)

Each Fund intends to follow the practice of distributing substantially
all of its investment company taxable income which includes any excess of net
realized short-term capital gains over net realized long-term capital losses.
Each Fund may follow the practice of distributing the entire excess of net
realized long-term capital gains over net realized short-term capital losses.
However, a Fund may retain all or part of such gain for reinvestment, after
paying the related federal taxes for which shareholders may then be able to
claim a credit against their federal tax liability. If a Fund does not
distribute the amount of capital gain and/or ordinary income required to be
distributed by an excise tax provision of the Code, the Fund may be subject to
that excise tax. In certain circumstances, a Fund may determine that it is in
the interest of shareholders to distribute less than the required amount. (See
"TAXES.")

45
<PAGE>

Global Small Company Fund intends to distribute investment company
taxable income and any net realized capital gains in December each year. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. Additional distributions
may be made if necessary.

Global Bond Fund intends to declare daily and distribute monthly
substantially all of its net investment income (excluding short-term capital
gains) resulting from Fund investment activity. Distributions, if any, of net
realized capital gains (short-term and long-term) will normally be made in
December. Distributions of certain realized gains or losses on the sale or
retirement of securities denominated in foreign currencies held by the Fund, to
the extent attributable to fluctuations in currency exchange rates, as well as
certain other gains or losses attributable to exchange rate fluctuations, are
treated as ordinary income or loss and will also normally be made in December.

Emerging Markets Income Fund intends to distribute investment company
taxable income (exclusive of net short-term capital gains in excess of net
long-term capital losses) quarterly in March, June, September and December each
year. Distributions, if any, of net realized capital gain during each fiscal
year will normally be made in December. Additional distributions may be made if
necessary.

All distributions will be made in shares of each 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 a Fund's prospectus.)

From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner:

Average Annual Total Return

Average Annual Total Return is the average annual compound rate of
return for, where applicable, the periods of one year, five years, ten years (or
such shorter periods as may be applicable dating from the commencement of a
Fund's operations), all ended on the last day of a recent calendar quarter.
Average annual total return quotations reflect changes in the price of a Fund's
shares and assume that all dividends and capital gains distributions during the
respective periods were reinvested in Fund shares. Average annual total return
is calculated by finding the average annual compound rates of return of a
hypothetical investment, over such periods, according to the following formula
(average annual total return is then expressed as a percentage):

T = (ERV/P)^1/n - 1
Where:

P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
n = number of years
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.

46
<PAGE>

Average Annual Total Return for periods ended October 31, 1995

One Year Life of the Fund

Global Small Company Fund 8.32% 10.70%^(1)
Global Bond Fund^* 5.43% 5.70%^(2)
Emerging Markets Income Fund 3.46% -.11%^(3)

^(1) For the period beginning September 10, 1991.
^(2) For the period beginning March 1, 1991.
^(3) For the period beginning December 31, 1993.
^* On December 27, 1995, the Fund adopted its present name and
objective. Prior to that date, the Fund was known as Scudder Short
Term Global Income Fund and its objective was high current income.
Financial information for the periods ended October 31, 1995 should
not be considered representative of the present Fund under its
current objectives.

Cumulative Total Return

Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
Total Return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative Total Return is calculated by finding the
cumulative rates of a return of a hypothetical investment over such periods,
according to the following formula (Cumulative Total Return is then expressed as
a percentage):

C = (ERV/P)-1
Where:

C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.

Cumulative Total Return for periods ended October 31, 1995

One Year Life of the Fund

Global Small Company Fund 8.32% 52.37%^(1)
Global Bond Fund^* 5.43% 29.58%^(2)
Emerging Markets Income Fund 3.46% -.20%^(3)

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.

47
<PAGE>

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.

SEC Yields of Global Bond Fund and Emerging Markets Income Fund

A Fund's yield is the net annualized yield based on a specified 30-day
(or one month) period assuming semiannual compounding of income. Yield is
calculated by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:

YIELD = 2[((a-b)/cd + 1)^6 - 1]

Where:

a = dividends and interest earned during the period,
including amortization of market premium or accretion
of market discount
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period

Calculation of a Fund's SEC yield does not take into account
"Section 988 Transactions." (See "TAXES.")

The SEC net annualized yield for the 30-day period ended October 31,
1995 was 6.92% for Global Bond Fund. On December 27, 1995, the Fund adopted its
present name and objective. Prior to that date, the Fund was known as Scudder
Short Term Global Income Fund and its objective was high current income.
Financial information for the periods ended October 31, 1995 should not be
considered representative of the present Fund under its current objectives.

The SEC net annualized yield for the 30-day period ended October 31,
1995 was 13.08% for Emerging Markets Income Fund.

Quotations of each Fund's performance are based on historical earnings
and are not intended to indicate future performance. An investor's shares when
redeemed may be worth more or less than their original cost. Performance of a
Fund will vary based on changes in market conditions and the level of the Fund's
expenses.

Comparison of Portfolio Performance

A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of a Fund with performance quoted with respect to other investment
companies or types of investments.

In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the NASDAQ OTC Composite Index, the NASDAQ
Industrials Index, the Russell 2000 Index, and statistics published by the Small
Business Administration.

Because some or all each Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar as against these
currencies may account for part that Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Funds. Such historical

48
<PAGE>

information is not indicative of future fluctuations in the value of the U.S.
dollar against these currencies. In addition, marketing materials may cite
country and economic statistics and historical stock market performance for any
of the countries in which either Fund invests, including, but not limited to,
the following: population growth, gross domestic product, inflation rate,
average stock market price-earnings ratios and the total value of stock markets.
Sources for such statistics may include official publications of various foreign
governments and exchanges.

From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations. In addition, a Fund's performance may also be
compared to the performance of broad groups of comparable mutual funds.
Unmanaged 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
International Finance Corporation's Latin America Investable
Total Return Index
Morgan Stanley Capital International World Index
J.P. Morgan Global Traded Bond Index
Salomon Brothers World Government Bond Index
NASDAQ Composite Index
Wilshire 5000 Stock Index

The following graph illustrates the historical risks and returns of
selected unmanaged indices which track the performance of various combinations
of United States and international securities for the ten year period ended
December 31, 1995; results for other periods may vary. The graph uses ten year
annualized international returns represented by the Morgan Stanley Capital
International Europe, Australia and Far East (EAFE) Index and ten year
annualized United States returns represented by the S&P 500 Index. Risk is
measured by the standard deviation in overall portfolio performance within each
index. Performance of an index is historical, and does not represent the
performance of a Fund, and is not a guarantee of future results.

49
<PAGE>
BAR CHART OMITTED
CHART TITLE

EFFICIENT FRONTIER
S&P 500 vs. MSCI EAFE Index (12/31/85-12/31/95)
-----------------------------------------------
CHART DATA
Total Return Standard Deviation
(Reward) (Portfolio Volatility-Risk)
-------- ---------------------------
100% Int'l MSCI EAFE 13.63 19.37
10 US/90 Int'l 13.92 18.14
20/80 14.18 17.02
30 U.S./70 Int'l 14.4 16.04
40/60 14.58 15.23
50 U.S./50Int'l 14.73 14.61
60/40 14.83 14.2
70 U.S./30 Int'l 14.9 14.03
80/20 14.92 14.1
90 U.S./10 Int'l 14.91 14.41
100% U.S. S&P 500 14.86 14.95

Source: Lipper Analytical Services, Inc. (Data as of 12/31/95)

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

50
<PAGE>

maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.

A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.

Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.

Scudder's Theme: Build Create Provide. Marketing and fund literature may refer
to Scudder's theme: "Build Create Provide." This theme intends to encapsulate
the composition of a sound investment philosophy, one through which Scudder can
help provide investors appropriate avenues for pursuing dreams. Individuals
recognize the need to build investment plans that are suitable and directed at
achieving one's financial goals. The desired result from planning and a
long-term commitment to it is the ability to build wealth over time. While there
are no guarantees in the pursuit of wealth through investing, Scudder believes
that a sound investment plan can enhance one's ability to achieve financial
goals that are clearly defined and appropriately approached. Wealth, while a
relative term, may be defined as the freedom to provide for those interests
which you hold most important -- your family, future, and/or your community.

Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Funds, including reprints of, or selections from, editorials or
articles about these Funds. Sources for Fund performance information and
articles about the Funds 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.

51
<PAGE>

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.

IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the performance of
the nation's money market funds, summarizing money market fund activity and
including certain averages as performance benchmarks, specifically "Donoghue's
Money Fund Average," and "Donoghue's Government Money Fund Average."

Ibbotson Associates, Inc., a company specializing in investment research and
data.

Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.

Investor's Daily, a daily newspaper that features financial, economic, and
business news.

Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.

Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.

The New York Times, a nationally distributed newspaper which regularly covers
financial news.

The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.

No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.

Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.

Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.

Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.

52
<PAGE>

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.

Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.

The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.

Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.

Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.

Worth, a national publication put out 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.

ORGANIZATION OF THE FUNDS

(See "Fund organization" in a Fund's prospectus.)

Each Fund is a separate series of Scudder Global Fund, Inc., a Maryland
corporation organized on May 15, 1986. Scudder Global Fund and Scudder
International Bond Fund are the other series of the Corporation. On December 6,
1995, shareholders of Scudder Short Term Global Income Fund approved the change
in name and investment objective and policies.

The authorized capital stock of the Corporation consists of 800 million
shares with $.01 par value, 100 million shares of which are allocated to Global
Small Company Fund, 300 million shares of which are allocated to Global Bond
Fund and 100 million shares of which are allocated to Emerging Markets Income
Fund. Each share of each series of the Corporation has equal voting rights as to
each other share of that series as to voting for Directors, redemption,
dividends and liquidation. Shareholders have one vote for each share held. All
shares issued and outstanding are fully paid and non-assessable, transferable,
and redeemable at net asset value at the option of the shareholder. Shares have
no pre-emptive or conversion rights.

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 a series into different classes permitting shares of different classes
to be distributed by different methods. Although shareholders of different
classes of a series would have an interest in the same portfolio of assets,
shareholders of any subsequently created classes may bear different expenses in
connection with different methods of distribution of their classes. The

53
<PAGE>

Directors have no present intention of taking the action necessary to effect the
division of shares into separate classes, nor of changing the method of
distribution of shares of a series.

Maryland corporate law provides that a Director of the Corporation
shall not be liable for actions taken in good faith, in a manner he or she
reasonably believes to be in the best interests of the Corporation and with the
care that an ordinarily prudent person in a like position would use under
similar circumstances. In so acting, a Director shall be fully protected in
relying in good faith upon the records of the Corporation and upon reports made
to the Corporation by persons selected in good faith by the Directors as
qualified to make such reports.

The Articles of Amendment and Restatement provide that the Directors of
the Corporation, to the fullest extent permitted by Maryland General Corporation
Law and the 1940 Act shall not be liable to the Corporation or its shareholders
for damages. As a result, Directors of the Corporation may be immune from
liability in certain instances in which they could otherwise be held liable. The
Articles and the By-Laws provide that the Corporation will indemnify its
Directors, officers, employees or agents against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Corporation to the fullest extent permitted by applicable
law. Nothing in the Articles or the By-Laws protects or indemnifies a Director,
officer, employee or agent against any liability to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.

No series of the Corporation shall be liable for the obligations of any
other series.

INVESTMENT ADVISER

(See "Fund organization--Investment adviser" in a Fund's prospectus.)

Scudder, Stevens & Clark, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Funds. This organization is one of the
most experienced investment management firms in the U.S. It was established as a
partnership in 1919 and pioneered the practice of providing investment counsel
to individual clients on a fee basis. In 1928 it introduced the first no-load
mutual fund to the public. In 1953, the Adviser introduced Scudder International
Fund, Inc., the first mutual fund available in the U.S. investing
internationally in securities of issuers in several foreign countries. The firm
reorganized from a partnership to a corporation on June 28, 1985.

The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives no
income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations. In addition, it manages Montgomery Street Income Securities,
Inc., Scudder California Tax Free Trust, Scudder Cash Investment Trust, Scudder
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 Securities Trust, Scudder State Tax Free
Trust, Scudder Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S.
Treasury Money Fund, Scudder Variable Life Investment Fund, Scudder World Income
Opportunities Fund, Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The
First Iberian Fund, Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The
Latin America Dollar Income Fund, Inc. Some of the foregoing companies or trusts
have two or more series.

The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets over $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
continuous studies of the factors that affect the position of various
industries, companies and individual securities. In this work, the Adviser
utilizes certain reports and statistics from a variety of sources, including
brokers and dealers who may execute portfolio transactions for each Fund and for
clients of the Adviser, but conclusions are based primarily on investigations
and critical analyses by the Adviser's own research specialists. The Adviser's
international investment management team travels the world, researching hundreds
of companies.

54
<PAGE>

Certain investments may be appropriate for a Fund and also for other
clients advised by the Adviser. Investment decisions for the Funds and other
clients are made with a view toward achieving their respective investment
objectives and after consideration of such factors as their current holdings,
availability of cash for investment and the size of their investments generally.
Frequently, a particular security may be bought or sold for only one client or
in different amounts and at different times for more than one but less than all
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the security. In addition, purchases
or sales of the same security may be made for two or more clients on the same
date. In such event, such transactions will be allocated among the clients in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by a Fund. Purchase and sale orders for a Fund may be combined
with those of other clients of the Adviser in the interest of achieving the most
favorable net results for that Fund.

The Investment Management Agreements (the "Agreements") for Global
Small Company Fund, Global Bond Fund and Emerging Markets Income Fund are dated
September 3, 1991, September 7, 1993 and December 29, 1993, respectively. The
continuance of the agreements was approved by the Directors on September 7, 1995
for Global Small Company Fund, Global Bond Fund, and Emerging Markets Income
Fund. Each Agreement will continue in effect until September 30, 1996 and from
year to year thereafter only if its continuance is approved annually by the vote
of a majority of those Directors who are not parties to each Agreement or
interested persons of the Adviser or the Corporation, cast in person at a
meeting called for the purpose of voting on such approval, and either by a vote
of the Directors or of a majority of the outstanding voting securities of the
respective Fund. Each Agreement may be terminated at any time without payment of
penalty by either party on sixty days written notice, and automatically
terminates in the event of its assignment.

Under each Agreement, the Adviser regularly provides a Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objective, policies and restrictions and determines what
securities shall be purchased, held or sold, and what portion of the Fund's
assets shall be held uninvested, subject always to the provisions of the
Corporation's Articles of Incorporation and By-Laws, of the 1940 Act and the
Internal Revenue Code of 1986 and to the Fund's investment objectives, policies
and restrictions, as each may be amended, and subject, further, to such policies
and instructions as the Board of Directors may from time to time establish.

Under each Agreement, the Adviser 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, custodian, accountants and others); preparing and making filings with
the SEC and other regulatory agencies; assisting in the preparation and filing
of the Fund's federal, state and local tax returns; preparing and filing the
Fund's federal excise tax returns; assisting with investor and public relations
matters; monitoring the valuation of securities and the calculation of net asset
value; monitoring the registration of shares of the Fund under applicable
federal and state securities laws; maintaining the Fund's books and records to
the extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting and
legal issues; establishing and monitoring the Fund's operating budget;
processing the payment of the Fund's bills; assisting the Fund in, and otherwise
arranging for, the payment of distributions and dividends and otherwise
assisting the Fund in the conduct of its business, subject to the direction and
control of the Directors.

The Adviser pays the compensation and expenses except those for
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 of the Adviser
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 these services, Global Small Company Fund pays the Adviser an
annual fee equal to 1.10% of the average daily net assets of such Fund. For the
fiscal year ended October 31, 1993, with respect to Global Small Company Fund,
the Adviser did not impose a portion of its management fee amounting to $494,930
and the portion imposed amounted to $573,589. For the fiscal year ended October
31, 1994, the Adviser did not impose a portion of its management fee amounting

55
<PAGE>

to $160,728 and the amount imposed amounted to $2,497,457. For the fiscal year
ended October 31, 1995, the management fee amounted to $2,573,030.

Global Bond Fund pays the Adviser an annual fee equal to 0.75 of 1.00%
of the first $1 billion of average daily net assets of such Fund and 0.70 of
1.00% of such net assets in excess of $1 billion. Prior to September 7, 1993,
Global Bond Fund paid a fee equal to 0.75 of 1.00% of average daily net assets
under an Agreement dated March 17, 1992. For the fiscal year ended October 31,
1993, with respect to Global Bond Fund, the Adviser did not impose a portion of
its management fee amounting to $1,221,474 and the portion imposed amounted to
$6,856,777. For the fiscal year ended October 31, 1994, the Adviser did not
impose a portion of its management fee amounting to $1,176,118 and the portion
imposed amounted to $4,625,076. For the fiscal year ended October 31, 1995, the
Adviser did not impose a portion of its management fee amounting to $844,364 and
the portion imposed amounted to $2,392,536.

Emerging Markets Income Fund pays the Adviser a fee equal to an annual
rate of 1.00% of the Fund's average daily net assets. For the fiscal period
December 31, 1993 (commencement of operations) to October 31, 1994, with respect
to Emerging Markets Income Fund, the Adviser did not impose a portion of its
management fee amounting to $364,316 and the portion imposed amounted to
$130,294. For the fiscal year ended October 31, 1995, the Adviser did not impose
a portion of its management fee amounting $223,375, and the portion imposed
amounted to $1,037,443.

The fee is payable monthly, provided each Fund will make such interim
payments as may be requested by the Adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid. The Adviser has
agreed, with respect to Global Bond Fund, not to impose all or a portion of its
management fee and to maintain the annualized expenses of the Fund at not more
than 1.00% of average daily net assets of each Fund until February 28, 1997. The
Adviser retains the ability to be repaid by the Fund if expenses fall below the
specified limit prior to the end of the fiscal year. These expense limitation
arrangements can decrease the Fund's expenses and improve its performance.

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; the calculation of net
asset value; taxes and governmental fees; the fees and expenses of the Transfer
Agent; the cost of preparing share certificates and any other expenses,
including expenses of issuance, redemption or repurchase of shares; the expenses
of and the fees for registering or qualifying securities for sale; the fees and
expenses of the Directors, officers and employees who are not affiliated with
the Adviser; the cost of printing and distributing reports and notices to
shareholders; and the fees and disbursements of custodians. A Fund may arrange
to have third parties assume all or part of the expenses of sale, underwriting
and distribution of shares of the Fund. Each Fund is also responsible for
expenses of shareholders' meetings, the cost of responding to shareholders'
inquiries, and 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 Adviser has agreed in each Agreement to reimburse a Fund for annual
expenses to the extent required by the lowest expense limitations imposed by any
states in which the Corporation is at the time offering a Fund's shares for
sale, although no payments are required to be made by the Adviser pursuant to
this reimbursement provision in excess of the annual fee paid by the Fund to the
Adviser. Management has been advised that the lowest of such limitations is
presently 2 1/2% of such net assets up to $30 million, 2% of the next $70
million of such net assets and 1 1/2% of such net assets in excess of that
amount. Certain expenses such as brokerage commissions, taxes, extraordinary
expenses and interest are excluded from such limitations, and other expenses may
be excluded from time to time. If reimbursement is required, it will be made as
promptly as practicable after the end of that Fund's fiscal year. However, no
fee will be imposed by the Adviser during any fiscal year which will cause
year-to-date expenses to exceed the cumulative pro-rata expense limitation at
the time of such payment.

Each Agreement also provides that the Corporation and a Fund may use
any name derived from the name "Scudder, Stevens & Clark" only as long as the
Agreement or any extension, renewal or amendment thereof remains in effect.

In reviewing the terms of each Agreement and in discussions with the
Adviser concerning such Agreement, the Directors who are not "interested
persons" of the Corporation have been represented by independent counsel at the
relevant Fund's expense.

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<PAGE>

Each Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.

Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.

None of the officers or Directors may have dealings with the Funds as
principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Funds.

Personal Investments by Employees of the Adviser

Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.

DIRECTORS AND OFFICERS

<TABLE>
<CAPTION>
Position with
Underwriter,
Scudder Investor
Name and Address Position with Corporation Principal Occupation** Services, Inc.
- ---------------- ------------------------- ---------------------- --------------
<S> <C> <C> <C>

Edmond D. Villani*#++ Chairman of the Board and President and Managing --
Director Director of Scudder,
Stevens & Clark, Inc.

Nicholas Bratt*#@++ President-Scudder Global Managing Director of --
Bond Fund, Scudder Scudder, Stevens & Clark,
International Bond Fund, Inc.
Scudder Global Small Company
Fund and Scudder Emerging
Markets Income Fund; and
Director

Daniel Pierce*+ Vice President and Director Chairman of the Board & Vice President,
Managing Director of Assistant Treasurer
Scudder, Stevens & Clark, and Director
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

57
<PAGE>
Position with
Underwriter,
Scudder Investor
Name and Address Position with Corporation Principal Occupation** Services, Inc.
- ---------------- ------------------------- ---------------------- --------------

Sheryle J. Bolton Director Consultant --
560 White Plains Road
Tarrytown, NY 10591

Thomas J. Devine Director Consultant --
641 Lexington Avenue 28th Floor
New York, NY 10022

William H. Gleysteen, Jr. Director Consultant; Formerly --
333 East 47th Street President, The Japan
New York, NY 10017 Society, Inc.

William H. Luers Director President, The --
1000 Fifth Avenue Metropolitan Museum of Art
New York, NY 10028

Robert G. Stone, Jr. Honorary Director Chairman of the Board & --
405 Lexington Avenue 39th Floor Director, Kirby
New York, NY 10174 Corporation (inland and
offshore marine
transportation and diesel
repairs)

Robert W. Lear Honorary Director Executive-in-Residence --
429 Silvermine Road Columbia University
New Canaan, CT 06840 Graduate School of Business

Adam Greshin+ Vice President Principal of Scudder, --
Stevens & Clark, Inc.

Jerard K. Hartman++ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.

William E. Holzer++@ President-Scudder Global Fund Managing Director of --
Scudder, Stevens & Clark,
Inc.

Thomas W. Joseph+ Vice President Principal of Scudder, Vice President,
Stevens & Clark, Inc. Treasurer, Assistant
Clerk and Director

David S. Lee+ Vice President and Assistant Managing Director of President, Assistant
Treasurer Scudder, Stevens & Clark, Treasurer and Director
Inc.

Douglas M. Loudon++ Vice President Managing Director of Senior Vice President
Scudder, Stevens & Clark,
Inc.

58
<PAGE>
Position with
Underwriter,
Scudder Investor
Name and Address Position with Corporation Principal Occupation** Services, Inc.
- ---------------- ------------------------- ---------------------- --------------

Thomas F. McDonough+ Vice President and Secretary Principal of Scudder, Clerk
Stevens & Clark, Inc.

Pamela A. McGrath+ Vice President and Treasurer Managing Director of --
Scudder, Stevens & Clark,
Inc.

Gerald J. Moran++ Vice President Principal of Scudder, --
Stevens & Clark, Inc.

Edward J. O'Connell++ Vice President and Assistant Principal of Scudder, Assistant Treasurer
Treasurer Stevens & Clark, Inc.

Juris Padegs++ Vice President and Assistant Managing Director of Vice President and
Secretary Scudder, Stevens & Clark, Director
Inc.

Kathryn L. Quirk++ Vice President and Assistant Managing Director of Vice President
Secretary Scudder, Stevens & Clark,
Inc.

M. Isabel Saltzman+ Vice President Principal of Scudder, --
Stevens & Clark, Inc.

Cornelia M. Small++ Vice President Managing Director of --
Scudder, Stevens & Clark,
Inc.

Coleen Downs Dinneen+ Assistant Secretary Vice President of Scudder, Assistant Clerk
Stevens & Clark, Inc.
<FN>

* Messrs. Villani, Bratt and Pierce are considered by the Corporation and its counsel
to be persons who are "interested persons" of the Adviser or of the Corporation
(within the meaning of the 1940 Act).
** Unless otherwise stated, all the Directors and officers have been associated with their
respective companies for more than five years, but not necessarily in the same capacity.
# Messrs. Villani and Bratt are members of the Executive Committee, which may exercise powers of the
Directors when they are not in session.
@ The President of a series shall have the status of Vice President of the Corporation.
+ Address: Two International Place, Boston, Massachusetts 02110
++ Address: 345 Park Avenue, New York, New York 10154
</FN>
</TABLE>

Certain accounts for which the Adviser acts as investment adviser owned
1,695,974 shares in the aggregate of Global Small Company Fund, or 11.45% of the
outstanding shares on January 31, 1996. The Adviser may be deemed to be the
beneficial owner of such shares of Global Small Company Fund, but disclaims any
beneficial ownership therein.

Certain accounts for which the Adviser acts as investment adviser owned
1,329,080 shares in the aggregate of Emerging Markets Income Fund, or 6.66% of
the outstanding shares on January 31, 1996. The Adviser may be deemed to be the
beneficial owner of such shares of Emerging Markets Income Fund, but disclaims
any beneficial ownership of them.

59
<PAGE>

As of January 31, 1996, 1,734,284 shares in the aggregate, 5.66% of the
outstanding shares of Global Bond Fund, were held in the name of Charles Schwab
& Co., Inc., who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.

As of January 31, 1996, 4,312,330 shares in the aggregate, 21.62% of
the outstanding shares of Emerging Markets Income Fund, were held in the name of
Charles Schwab & Co., Inc., who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.

As of January 31, 1996 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) 407,440 shares, or 2.75% of the shares of Global Small
Company Fund outstanding on such date.

As of January 31, 1996 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) 0.22% of the shares of Global Bond Fund outstanding on
such date.

As of January 31, 1996, all the Directors and officers as a group owned
beneficially (as the term is defined in Section 13(d) under the Securities
Exchange Act of 1934) 452,560 shares, or 2.27% of the shares of Emerging Markets
Income Fund outstanding on such date.

Except as stated above, to the best of the Corporation's knowledge, as
of January 31, 1996, no person owned beneficially more than 5% of each Fund's
outstanding shares.

The Directors and officers of the Corporation also serve in similar
capacities with other Scudder Funds.

REMUNERATION

Several of the officers and Directors of the Corporation may be
officers or employees of the Adviser, or of the Distributor, the Transfer Agent,
Scudder Trust Company or Scudder Fund Accounting Corporation from whom they
receive compensation, as a result of which they may be deemed to participate in
the fees paid by the Corporation. The Corporation pays no direct remuneration to
any officer of the Corporation. However, each of the Directors who is not
affiliated with the Adviser will be compensated for all expenses relating to
corporation business (specifically including travel expenses relating to
Corporation business). Each of these unaffiliated Directors receives an annual
Director's fee of $4,000 from a Fund plus $400 for attending each Directors'
meeting, audit committee meeting or meeting held for the purpose of considering
arrangements between the Corporation on behalf of a Fund and the Adviser or any
of its affiliates. Each unaffiliated Director also receives $150 per committee
meeting attended other than those set forth above. For the fiscal year ended
October 31, 1995, Directors' fees and expenses amounted to $46,658 for Global
Small Company Fund, $46,857 for Global Bond Fund and $54,889 for Emerging
Markets Income Fund.

The following Compensation Table provides in tabular form the following data:

Column (1) All Directors who receive compensation from the Corporation.

Column (2) Aggregate compensation received by a Director from all series of the
Corporation - Scudder Global Fund, Inc., which is comprised of Scudder Global
Fund, Scudder International Bond Fund, Scudder Global Bond Fund, Scudder Global
Small Company Fund and Scudder Emerging Markets Income Fund.

Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Fund Complex. Scudder Global Fund, Inc. does not pay its Directors
such benefits.

Column (5) Total compensation received by a Director from Scudder Global Fund,
Scudder International Bond Fund, Scudder Global Bond Fund, Scudder Global Small
Company Fund and Scudder Emerging Markets Income Fund, plus compensation
received from all funds managed by Scudder for which a Director serves. The

60
<PAGE>

total number of funds from which a Director receives such compensation is also
provided in column (5). Generally, compensation received by a Director for
serving on the board of a closed-end fund is greater than the compensation
received by a Director for serving on the board of an open-end fund.
<TABLE>
<CAPTION>

Compensation Table
for the year ended December 31, 1995

============================ ============================== =================== ================== ======================
(1) (2) (3) (4) (5)

Pension or Total Compensation
Retirement From Scudder Global
Benefits Accrued Estimated Annual Fund, Inc. and Fund
Name of Person, Aggregate Compensation from As Part of Fund Benefits Upon Complex Paid to
Position Scudder Global Fund, Inc.* Complex Expenses Retirement Director
============================ ============================== =================== ================== ======================
<S> <C> <C> <C> <C>
Paul Bancroft III, $51,000 N/A N/A $142,067
Director (15 funds)

Sheryle J. Bolton $3,815 N/A N/A $5,501
Director (7 funds)

Thomas J. Devine, $50,600 N/A N/A $146,267
Director (17 funds)

William H. Gleysteen, Jr., $51,000 $4,133 $3,000 $134,650
Director (12 funds)

William H. Luers, $51,000 N/A N/A $102,267
Director (10 funds)

Robert G. Stone, Jr., $48,200 $6,788 $6,000 $144,302
Honorary Director (15 funds)

<FN>

* Scudder Global Fund, Inc. consists of five Funds: Scudder Global Fund, Scudder
International Bond Fund, Scudder Global Bond Fund, Scudder Global Small Company Fund and
Scudder Emerging Markets Income Fund.
</FN>
</TABLE>

DISTRIBUTOR

The Corporation has an underwriting agreement with Scudder Investor
Services, Inc. (the "Distributor"), a Massachusetts corporation, which is a
subsidiary of the Adviser, a Delaware corporation. The Corporation's
underwriting agreement dated July 24, 1986 will remain in effect from year to
year thereafter only if its continuance is approved annually by a majority of
the members of the Directors who are not parties to such agreement or interested
persons of any such party and either by vote of a majority of the Directors or a
majority of the outstanding voting securities of the Corporation. The
underwriting agreement was most recently approved by the Directors on September
7, 1995.

Under the underwriting agreement, the Corporation is responsible for:
the payment of all fees and expenses in connection with the preparation and
filing with the SEC of the Corporation's registration statement and prospectus
and any amendments and supplements thereto, the registration and qualification
of shares for sale in the various states, including registering the Corporation
as a broker/dealer in various states as required; the fees and expenses of
preparing, printing and mailing prospectuses (see below for expenses relating to
prospectuses paid by the Distributor), notices, proxy statements, reports or
other communications (including newsletters) to shareholders of each Fund; the
cost of printing and mailing confirmations of purchases of shares and the
prospectuses accompanying such confirmations; any issue taxes or any initial
transfer taxes; any of shareholder toll-free telephone charges and expenses of
shareholder service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
any of the cost of computer terminals used by both the Corporation and the
Distributor.

61
<PAGE>

The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of Fund shares to
the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of each Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, any of the cost of toll-free telephone service and expenses of service
representatives, any of the cost of computer terminals, and of any activity
which is primarily intended to result in the sale of shares issued by the
Corporation.

NOTE: Although no Fund currently has a 12b-1 Plan and shareholder approval
would be required in order to adopt one, the underwriting agreement
provides that each Fund will also pay those fees and expenses permitted
to be paid or assumed by a Fund pursuant to a 12b-1 Plan, if any,
adopted by the Fund, notwithstanding any other provision to the
contrary in the underwriting agreement, and the Fund or a third party
will pay those fees and expenses not specifically allocated to the
Distributor in the underwriting agreement.

As agent, the Distributor currently offers each Fund's shares on a
continuous basis to investors in all states. The underwriting agreement provides
that the Distributor accepts orders for shares at net asset value as no sales
commission or load is charged to the investor. The Distributor has made no firm
commitment to acquire shares of the Corporation.

TAXES

(See "Distribution and performance information--Dividends and capital gains
distributions" and "Transaction information--Tax information,
Tax identification number" in a Fund's prospectus.)

Each of the Funds has elected to be treated as a regulated investment
company under Subchapter M of the Code, and has qualified as such since its
inception. Each Fund intends to continue to qualify for such treatment. Such
qualification does not involve governmental supervision or management of
investment practices or policy.

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 over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually its investment company taxable income
and net realized capital gains in the manner required under the Code. Global
Small Company Fund, Global Bond Fund and Emerging Markets Income Fund intend to
distribute at least annually all of their respective investment company taxable
income and net realized capital gains and therefore do not expect to pay federal
income tax, although in certain circumstances the Funds may determine that it is
in the interest of shareholders to distribute less than that amount.

Each Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires each Fund to distribute to shareholders during a calendar year an
amount equal to at least 98% of the Fund's ordinary income for the calendar
year, at least 98% of the excess of its capital gains over capital losses
(adjusted for certain ordinary losses) realized during the one-year period
ending October 31 during such year, and all ordinary income and capital gains
for prior years that were not previously distributed.

Investment company taxable income generally includes dividends,
interest, net short-term capital gains in excess of net long-term capital
losses, and certain foreign currency gains, if any, less expenses and certain
foreign currency losses, if any. Net realized capital gains for a fiscal year
are computed by taking into account any capital loss carryforward of the Fund.

As of October 31, 1995, Global Bond Fund had a net tax basis capital
loss carryforward of approximately $9,472,000 which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until October 31, 2002 ($4,463,000), and October 31, 2003 ($5,009,000), the
respective expiration dates, whichever occurs first.

As of October 31, 1995, Emerging Markets Income Fund had a net tax
basis capital loss carryforward of approximately $5,033,000 which may be applied
against any realized net taxable capital gains of each succeeding year until

62
<PAGE>

fully utilized or until October 31, 2002 ($1,611,000), and October 31, 2003
($3,422,000), the respective expiration dates, whichever occurs first.

If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by a Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a relative share of federal income taxes paid by
the Fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on Fund
shares by the difference between a pro rata share of such gains owned and the
individual tax credit.

Distributions of investment company taxable income are taxable to
shareholders as ordinary income.

Dividends from domestic corporations are expected to comprise some
portion of Global Small Company Fund's gross income. To the extent that such
dividends constitute any of the Fund's gross income, a portion of the income
distributions of the Fund will be eligible for the deduction for dividends
received by corporations. Shareholders will be informed of the portion of
dividends which so qualify. The dividends-received deduction is reduced to the
extent that either the Fund shares, or the underlying shares of stock held by
the Fund, with respect to which dividends are received, are treated as
debt-financed under federal income tax law and is eliminated if the shares are
deemed to have been held by the shareholders or the Fund, as the case may be,
for less than 46 days.

Since no portion of Emerging Markets Income Fund's or Global Bond
Fund's income is expected to be comprised of dividends from domestic
corporations, none of the Fund's income distributions is expected to be eligible
for the deduction for dividends received by corporations.

Distributions of the excess of net long-term capital gains over net
short-term capital losses which a Fund designates as "capital gains dividends"
are taxable to shareholders as long-term capital gains, regardless of the length
of time the shares of a Fund have been held by such shareholders. Such
distributions are not eligible for the dividends-received deduction. Any loss
realized upon the redemption of shares held at the time of redemption for six
months or less from the date of their purchase will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gain during such six-month period.

Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.

All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.

An individual may make a deductible IRA contribution of up to $2,000
or, if less, the amount of the individual's earned income for any taxable year
only if (i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,050 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.

63
<PAGE>

Distributions by a Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.

Dividend and interest income received by a Fund from sources outside
the U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains in respect of investments by foreign
investors.

Global Small Company Fund intends to qualify for and may make the
election permitted under Section 853 of the Code so that shareholders may
(subject to limitations) be able to claim a credit or deduction on their federal
income tax returns for, and will be required to treat as part of the amounts
distributed to them, their pro rata portion of qualified taxes paid by the Fund
to foreign countries (which taxes relate primarily to investment income). The
Fund may make an election under Section 853 of the Code, provided that more than
50% of the value of the total assets of the Fund at the close of the taxable
year consists of securities in foreign corporations. The foreign tax credit
available to shareholders is subject to certain limitations imposed by the Code.

Equity options (including options on stock and options on narrow-based
stock indices) written or purchased by Global Small Company Fund and
over-the-counter options on debt securities written or purchased by each Fund
will be subject to tax under Section 1234 of the Code. In general, no loss is
recognized by a Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend in the case of a lapse or sale of
the option on a Fund's holding period for the option and in the case of an
exercise of the option on a Fund's holding period for the underlying stock. The
purchase of a put option may constitute a short sale for federal income tax
purposes, causing an adjustment in the holding period of the underlying security
or substantially identical security in a Fund's portfolio. If a Fund writes a
put or call option, no gain is recognized upon its receipt of a premium. If the
option lapses or is closed out, any gain or loss is treated as a short-term
capital gain or loss. If a call option written by the Fund is exercised any
resulting gain or loss is a short-term or long-term capital gain or loss
depending on the holding period of the underlying security. The exercise of a
put option written by a Fund is not a taxable transaction for the Fund.

Many futures contracts (including foreign currency futures contracts)
entered into by a Fund, certain forward foreign currency contracts, and all
listed nonequity options written or purchased by a Fund (including options on
debt securities, options on futures contracts, options on securities indices and
options on broad-based stock indices) will be governed by Section 1256 of the
Code. Absent a tax election to the contrary, gain or loss attributable to the
lapse, exercise or closing out of any such position generally will be treated as
60% long-term and 40% short-term capital gain or loss, and on the last trading
day of a Fund's fiscal year, all outstanding Section 1256 positions will be
marked-to-market (i.e. treated as if such positions were closed out at their
closing price on such day), with any resulting gain or loss recognized as 60%
long-term and 40% short-term capital gain or loss. Under certain circumstances,
entry into a futures contract to sell a security may constitute a short sale for
federal income tax purposes, causing an adjustment in the holding period of the
underlying security or a substantially identical security in a Fund's portfolio.
Under Section 988 of the Code, discussed below, foreign currency gains or loss
from foreign currency related forward contracts, certain futures and similar
financial instruments entered into or acquired by a Fund will be treated as
ordinary income or loss.

Subchapter M requires that a Fund realize less than 30% of its annual
gross income from the sale or other disposition of stock, securities and certain
options, futures and forward contracts held for less than three months. A Fund's
options, futures and forward transactions may increase the amount of gains
realized by the Fund that are subject to this 30% limitation. Accordingly, the
amount of such transactions that a Fund may undertake may be limited.

Positions of Global Small Company Fund which consist of at least one
stock and at least one stock option or other position with respect to a related
security which substantially diminishes the Fund's risk of loss with respect to

64
<PAGE>

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." Mixed straddles are subject to the straddle rules of Section
1092 of the Code, and may result in the deferral of losses if the non-Section
1256 position is in an unrealized gain at the end of a reporting period.

Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time a Fund actually
collects such receivables, or pays such liabilities, generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain futures
contracts, forward contracts and options, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition are also treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of 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 a 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 a Fund which
must be distributed to shareholders in order to maintain the qualification of a
Fund as a regulated investment company and to avoid federal income tax at the
level of a Fund. Shareholders will be subject to income tax on such original
issue discount, whether or not they elect to receive their distributions in
cash.

If a Fund invests in stock of certain passive foreign investment
companies, that Fund may be subject to U.S. federal income taxation on a portion
of any "excess distribution" with respect to, or gain from the disposition of,
such stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the Fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of a 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 a 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 a 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, a Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses may
be recognized. The effect of the election would be to treat excess distributions
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively, a Fund may
elect to include as income and gain its share of the ordinary earnings and net
capital gain of certain foreign investment companies in lieu of being taxed in
the manner described above.

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

65
<PAGE>

distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.

Shareholders of each Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Corporation issues to
each shareholder a statement of the federal income tax status of all
distributions.

The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of a Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.

Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional information
in light of their particular tax situations.

PORTFOLIO TRANSACTIONS

(See "Fund organization--Investment adviser" in a Fund's prospectus.)

Brokerage Commissions

To the maximum extent feasible the Adviser places orders for portfolio
transactions through the Distributor which in turn places orders on behalf of a
Fund with other brokers and dealers. The Distributor receives no commission,
fees or other remuneration from the Funds for this service. Allocation of
brokerage is supervised by the Adviser.

Purchases and sales of fixed-income securities are generally placed by
the Adviser with primary market makers for these securities on a net basis,
without any brokerage commission being paid by a Fund. These transactions do,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made which will include an underwriting fee paid to
the underwriter. Portfolio transactions in debt securities may also be placed on
an agency basis, with a commission being charged.

The primary objective of the Adviser in placing orders for the purchase
and sale of securities for each Fund's portfolio is to obtain the most favorable
net results, taking into account such factors as price, commission (which is
negotiable in the case of U.S. national securities exchange transactions but
which is generally fixed in the case of foreign exchange transactions), size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) 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
broker/dealers who supply market quotations to the Scudder Fund Accounting Corp.
for appraisal purposes, or who supply research, market and statistical
information to the Funds or the Adviser. The term "research, market and

66
<PAGE>

statistical information" includes advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the availability
of securities or purchasers or sellers of securities; and 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 (to the extent applicable) in excess of that which another broker
might have charged for executing the same transaction solely on account of the
receipt of research, market or statistical information. The Adviser does not
place orders with brokers or dealers on the basis that the broker or dealer has
or has not sold a Fund's shares. Subject also to obtaining the most favorable
net results, the Adviser may place brokerage transactions through the Custodian
and a credit against the custodian fee due, equal to one-half of the commission
on any such transaction will be given on any such transaction. Except for
implementing the policy stated above, there is no intention to place portfolio
transactions with particular brokers or dealers or groups thereof. In effecting
transactions in over-the-counter securities, orders are placed with the
principal market makers for the security being traded unless, after exercising
care, it appears that more favorable results are available otherwise.

Although certain research, market and statistical information from
brokers and dealers can be useful to the Funds and to the Adviser, it is the
opinion of the Adviser that such information will only supplement its own
research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the Adviser
in providing services to clients other than the Funds, and not all such
information is used by the Adviser in connection with the Funds. Conversely,
such information provided to the Adviser by brokers and dealers through whom
other clients of the Adviser effect securities transactions may be useful to the
Adviser in providing services to the Funds.

In the fiscal years ended October 31, 1995, 1994 and 1993, Global Small
Company Fund paid brokerage commissions of $587,657, $730,119 and $507,871,
respectively. In the fiscal year ended October 31, 1995, the Fund paid brokerage
commissions of $30,528 (5% of the total brokerage commissions), resulting from
orders placed, consistent with the policy of seeking to obtain the most
favorable net results, for transactions placed with brokers and dealers who
provided supplementary research, market and statistical information to the
Corporation or Adviser. The amount of such transactions aggregated $12,393,937
(8% of all brokerage transactions). The balance of such brokerage was not
allocated to any particular broker or dealer or with regard to the
above-mentioned or any other special factors.

Under its prior investment objective in the fiscal year ended October
31, 1994, Global Bond Fund paid brokerage commissions of $357,605, which was not
allocated to any particular broker or dealer or with regard to the above
mentioned or any other special factors. In the fiscal years ended October 31,
1993 and 1995, Global Bond Fund paid no brokerage commissions.

For the fiscal period ended October 31, 1994, and for the fiscal year
ended October 31, 1995, Emerging Markets Income Fund paid no brokerage
commissions.

The Directors intend to review from time to time whether the recapture
for the benefit of a Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable.

Portfolio Turnover

Each Fund's average annual portfolio turnover rate (defined by the SEC
as the ratio of the lesser of sales or purchases to the monthly average value of
such securities owned during the year, excluding all securities with maturities
at the time of acquisition of one year or less). Purchases and sales are made
for a Fund's portfolio whenever necessary, in management's opinion, to meet the
Fund's objective. Under its prior investment objective, Global Bond Fund's
portfolio turnover rates for the fiscal years ended October 31, 1995 and 1994
were 182.8% and 272.4%, respectively. Global Small Company Fund's portfolio
turnover rates for the fiscal years ended October 31, 1995 and 1994 were 43.7%
and 45.8%, respectively. Emerging Markets Income Fund's portfolio turnover rate
for the fiscal year ended October 31, 1995 and for the fiscal period ended
October 31, 1994 was 302.2% and 180.6%, respectively.

Economic and market conditions may necessitate more active trading,
resulting in a higher portfolio turnover rate for Global Bond Fund and Emerging
Markets Income Fund. A higher rate involves greater transaction costs to a Fund

67
<PAGE>

and may result in the realization of net capital gains, which would be taxable
to shareholders when distributed. Under normal investment conditions, Global
Bond Fund's portfolio turnover rate is expected to exceed 200%.

NET ASSET VALUE

The net asset value of shares of each Fund is computed as of the close
of regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share is determined by dividing
the value of the total assets of a Fund, less all liabilities, by the total
number of shares outstanding.

An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system is
valued at its most recent sale price. Lacking any sales, the security is valued
at the high or "inside" bid quotation. The value of an equity security not
quoted on the NASDAQ System, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.

Debt securities, other than short-term securities, are valued at prices
supplied by each Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.

An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.

If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.

If, in the opinion of each Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.

Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.

68
<PAGE>

ADDITIONAL INFORMATION

Experts

The Financial Highlights of each Fund included in each Fund's
Prospectus and the Financial Statements incorporated by reference in this
Statement of Additional Information have been so included or incorporated by
reference in reliance on the report of Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109, independent accountants 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 such changes may be reflected in a
regular report to shareholders of the Fund. These transactions will reflect
investment decisions made by the Adviser in light of the investment objectives
and policies of each Fund, and such factors as its other portfolio holdings and
tax considerations should not be construed as recommendations for similar action
by other investors.

The CUSIP number of Global Small Company Fund is 811150-40-8.

The CUSIP number for Global Bond Fund is 811150-30-9.

The CUSIP number for Emerging Markets Income Fund is 811150-50-7.

Each Fund's fiscal year end is October 31.

The law firm of Dechert Price & Rhoads is counsel for the Funds.

Costs of $51,807 incurred by Global Small Company Fund in conjunction
with its organization are amortized over the five year period beginning
September 10, 1991.

Costs of $58,530 incurred by Global Bond Fund in conjunction with its
organization are amortized over the five year period beginning March 1, 1991.

Costs of $76,595.28 incurred by Emerging Markets Income Fund in
conjunction with its organization are amortized over the five year period
beginning December 31, 1993.

Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, is employed as custodian for the Funds. Brown Brothers Harriman & Co. has
entered into agreements with foreign subcustodians approved by the Directors of
the Corporation pursuant to Rule 17f-5 of the Investment Company Act.

Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts, 02210-4103, a subsidiary of the Adviser, computes net asset value
for the Funds.

Global Small Company Fund pays Scudder Fund Accounting Corporation an
annual fee equal to 0.065% of the first $150 million of average daily net
assets, 0.040% of such assets in excess of $150 million, 0.020% of such assets
in excess of $1 billion, plus holding and transaction charges for this service.
Scudder Fund Accounting Corporation charged Global Small Company Fund an
aggregate fee of $63,829 for the fiscal year ended October 31, 1995.

Global Bond Fund and Emerging Markets Income Fund each pays Scudder
Fund Accounting Corporation an annual fee equal to 0.08% of the first $150
million of average net assets, 0.06% of such assets in excess of $150 million
and 0.04% of such assets in excess of $1 billion.

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts
02107-2291, a subsidiary of the Adviser, is the transfer and dividend paying
agent for the Funds. Scudder Service Corporation also serves as shareholder
service agent and provides subaccounting and recordkeeping services for
shareholder accounts in certain retirement and employee benefit plans. Each Fund

69
<PAGE>

pays Scudder Service Corporation an annual fee for each account maintained as a
participant. The fee incurred by Global Small Company Fund, Global Bond Fund and
Emerging Markets Income Fund for the year ended October 31, 1995 amounted to
$516,797, $705,759 and $251,205, respectively. A portion of the fee for each
Fund is unpaid at October 31, 1995.

Annual service fees are paid by the Fund to Scudder Trust Company, an
affiliate of the Adviser, for certain retirement plan accounts. The fee incurred
by Global Small Company Fund, Global Bond Fund and Emerging Markets Income Fund
for the year ended October 31, 1995 amounted to $77,281, $15,235 and $8,976,
respectively.

The Directors of the Corporation have considered the appropriateness of
using this combined Statement of Additional Information for the Funds. There is
a possibility that a Fund might become liable for any misstatement, inaccuracy,
or incomplete disclosure in this Statement of Additional Information concerning
the other Fund.

The Funds' prospectuses and this combined Statement of Additional
Information omit certain information contained in the Registration Statement
which the Corporation has filed with the SEC under the 1933 Act and reference is
hereby made to the Registration Statement for further information with respect
to each Fund and the securities offered hereby. This Registration Statement is
available for inspection by the public at the SEC in Washington, D.C.

FINANCIAL STATEMENTS

Scudder Global Small Company Fund

The financial statements, including the Investment Portfolio of Global
Small Company Fund, together with the Report of Independent Accountants, and
Financial Highlights, are incorporated by reference and attached hereto on pages
11 through 30, inclusive, in the Annual Report to Shareholders of the Fund dated
October 31, 1995, and are deemed to be a part of this Statement of Additional
Information.

Scudder Global Bond Fund

The financial statements, including the Investment Portfolio of Global
Bond Fund, together with the Report of Independent Accountants, and Financial
Highlights, are incorporated by reference and attached hereto on pages 9 through
25, inclusive, in the Annual Report to Shareholders of the Fund dated October
31, 1995, and are deemed to be a part of this Statement of Additional
Information.

Scudder Emerging Markets Income Fund

The financial statements, including the Investment Portfolio of
Emerging Markets Income Fund, together with the Report of Independent
Accountants, and Financial Highlights, are incorporated by reference and
attached hereto on pages 10 through 23, inclusive, in the Annual Report to
Shareholders of the Fund dated October 31, 1995, and are deemed to be a part of
this Statement of Additional Information.

70
<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 outweighed by large uncertainties or major exposures to adverse conditions.

Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.

Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating. The rating CC typically is applied to debt subordinated
to senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

Moody's:

Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many

<PAGE>

favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.

Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during other good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

<PAGE>

This information must be preceded or accompanied by a current prospectus.

Portfolio changes should not be considered recommendations for action by
individual investors.

Scudder
Global Small
Company Fund

Annual Report
October 31, 1995

o For investors seeking above-average capital appreciation over the long term
by investing primarily in the equity securities of small companies located
throughout the world.

o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND

CONTENTS

2 In Brief

3 Letter from the Fund's Chairman

4 Performance Update

5 Portfolio Summary

6 Portfolio Management Discussion

11 Investment Portfolio

20 Financial Statements

23 Financial Highlights

24 Notes to Financial Statements

30 Report of Independent Accountants

31 Tax Information

32 Shareholder Meeting Results

33 Officers and Directors

34 Investment Products and Services

35 How to Contact Scudder

IN BRIEF

o For the year ended October 31, 1995, Scudder Global Small Company Fund
generated a total return of 8.32%, including a capital gain distribution of
$0.08 per share. The Fund's return reflects the fact that most
international markets failed to keep pace with the U.S. stock market over
the fiscal period.

o Investor enthusiasm for technology-related companies has been supported by
a rapid increase in the earnings generated by these businesses. Outstanding
performers in the U.S. technology sector included Atmel, a U.S.
semiconductor manufacturer specializing in the production of
high-performance, low voltage devices for portable computing and
communications applications. Outside the U.S., German software manufacturer
SAP AG, the Fund's largest position, has appreciated 614% since the Fund's
purchase, with a 136% gain coming in fiscal 1995.

o Going forward, we believe that U.S. companies will continue to push
aggressively for productivity gains, and we are constructive long-term on
the domestic market despite current high valuations. In Europe, the
possibility of widespread business reorganization is a leading principle
behind our continued investment focus on that region. Japan, by contrast,
remains an expensive and troubled country from an investment perspective.

2
<PAGE>

LETTER FROM THE FUND'S CHAIRMAN

Dear Shareholders,

Scudder Global Small Company Fund provided a positive total return of
8.32% for the annual period ended October 31, 1995. The Fund's return reflects
the fact that most international markets have failed to keep pace with the U.S.
stock market, which returned 26.44% for the same 12 months.

The outperformance of U.S. stocks suggests that a degree of caution is
warranted with respect to that market going forward. We expect U.S. valuations
relative to international markets to change in the coming months as our domestic
market peaks under pressure from slowing earnings growth and as several factors
combine to heighten demand for non-U.S. investments. Furthermore, we believe
economic cycles in many foreign markets are more favorable for equity investment
than in the United States, where the benefits of corporate restructuring have
been most fully realized. As always, smaller companies provide some of the best
opportunities for significant capital appreciation, and we are confident that
Scudder Global Small Company Fund is well-positioned to provide attractive
returns for its shareholders over time.

We would also like to take this opportunity to announce that on October
6, 1995, we introduced Scudder Small Company Value Fund, a pure no-load(TM)
mutual fund designed to seek long-term growth of capital through a disciplined,
value-oriented approach to investing in U.S. small stocks. For more information
about Scudder Small Company Value Fund and other investment products and
services, see page 34.

Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Global Small Company Fund

3
<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
PERFORMANCE UPDATE as of October 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER GLOBAL SMALL COMPANY FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,832 8.32% 8.32%
Life of
Fund* $15,237 52.37% 10.70%

MSCI WORLD INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,948 9.48% 9.48%
Life of
Fund* $14,412 44.12% 9.37%

* The Fund commenced operations on
September 10, 1991. Index comparisons
begin September 30, 1991.

A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:

Scudder Global Small Company Fund
Year Amount
- ----------------------
9/91* $10,000
10/91 $ 9,770
4/92 $10,107
10/92 $ 9,894
4/93 $11,558
10/93 $13,459
4/94 $13,496
10/94 $13,837
4/95 $13,090
10/95 $14,988

MSCI World Index
Year Amount
- ----------------------
9/91* $10,000
10/91 $10,159
4/92 $ 9,696
10/92 $ 9,628
4/93 $11,213
10/93 $12,228
4/94 $12,542
10/94 $13,163
4/95 $13,763
10/95 $14,412

The Morgan Stanley Capital International (MSCI) World Index is an
unmanaged capitalization-weighted measure of global stock markets
including the U.S., Canada, Europe, Australia, and the Far East.
Index returns assume dividends reinvested net of withholding tax
and, unlike Fund returns, do not reflect any fees or expenses.

- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------

A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.

YEARLY PERIODS ENDED OCTOBER 31

1991* 1992 1993 1994 1995
----------------------------------------
NET ASSET VALUE... $11.92 $12.05 $16.14 $16.27 $17.54
INCOME DIVIDENDS.. $ -- $ .02 $ .07 $ .18 $ --
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ -- $ .12 $ .15 $ .08
FUND TOTAL
RETURN (%)........ -.67 1.26 36.04 2.80 8.32
INDEX TOTAL
RETURN (%)........ 1.59 -5.23 27.01 7.65 9.48

All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not maintained the Fund's expenses, the average annual
total return for the one year and life of Fund periods would have been
lower.

4
<PAGE>

PORTFOLIO SUMMARY as of October 31, 1995
- ---------------------------------------------------------------------------
GEOGRAPHICAL (Excludes 11% Cash Equivalents)
- ---------------------------------------------------------------------------

Europe 39%
U.S. & Canada 32% The Fund's Japan position
Pacific Basin 12% has been reduced in favor of
Japan 11% the U.S., the Pacific Basin,
Latin America 6% and, in particular, Europe.
----
100%
====

A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.

- --------------------------------------------------------------------------
SECTORS (Excludes 11% Cash Equivalents)
- --------------------------------------------------------------------------
Technology 15%
Financial 13%
Health 11% The Fund's technology position
Manufacturing 10% has been trimmed, but is still
Service Industries 9% significant, partly as the result
Consumer Staples 9% of price appreciation of these
Consumer Discretionary 8% holdings.
Energy 6%
Durables 4%
Other 15%
----
100%
====

A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.

- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- --------------------------------------------------------------------------
1. SAP AG
German computer software manufacturer
2. ATMEL CORP.
U.S. developer and manufacturer of integrated circuits
3. ARAN ENERGY PLC
Oil and natural gas exploration in Ireland
4. THOMAS NELSON, INC.
U.S. publisher
5. BANK OF IRELAND PLC
Bank
6. STERLING SOFTWARE INC.
Computer software products in the U.S.
7. AUTOLIV AB
Swedish manufacturer of safety airbags for automobiles
8. JAPAN ASSOCIATED FINANCE CO.
Venture capital company
9. SERCO GROUP PLC
Facilities management company in the United Kingdom
10. TIBBETT AND BRITTEN GROUP PLC
British transportation services for manufacturing and
retail industries

German SAP AG has become a dominant provider of software applications
for businesses employing client-server technology.

- --------------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 11.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.

5
<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
PORTFOLIO MANAGEMENT DISCUSSION

Dear Shareholders,

For the year ended October 31, 1995, Scudder Global Small Company Fund
generated a total return of 8.32%. Net asset value per share rose from $16.27 to
$17.54 over the 12-month period. Included in the Fund's total return is a
capital gain distribution of $0.08 per share. The unmanaged Morgan Stanley
Capital International (MSCI) World Index, which has a higher weighting in large
capitalization stocks than your Fund, returned 9.48% for the same period.

U.S. Market Leads the Way

One year ago, the consensus outlook for U.S. stocks was negative.
Consensus opinion was proven wrong, however, as 1995 unfolded into one of the
best years for domestic equity performance in the last decade. During the Fund's
fiscal year, U.S. companies produced earnings gains in a slow-growth,
low-inflation economy, while interest rates reversed course and trended down
after rising for most of 1994. Cost cutting, increased global competitiveness,
the weak U.S. dollar, and the explosion in deployment of technology generated
exceptional profit growth in several sectors of the economy. In addition,
legislative efforts were undertaken to reduce personal income and capital gains
taxation and to address the federal budget deficit. This set of circumstances,
clearly positive for equity investing, was not matched in any other part of the
world.

In Latin America, by contrast, the fiscal year began with the collapse
of the Mexican peso and the unraveling of the region's equity markets. The
Fund's Latin American losses were quite modest, however, as we held only a small
percentage of the portfolio in this part of the world.

Japan is impossible to ignore due to its 24% weighting in the MSCI
World Index. From our perspective, the Japanese market remains expensive.
Price-to-earnings ratios -- the conventional valuation yardstick -- are still
significantly higher in Japan than in virtually all other world markets, even
after a five-year bear market. In addition, real estate values remain inflated,
and corporate restructuring measures are not being implemented at a rate we
consider acceptable. We continue to find it difficult to identify Japanese
investments at attractive prices. Nevertheless, our analysts have detected some
signs of recovery and attitude changes on the part of government and business.
What is needed is renewed confidence at the consumer level.

6
<PAGE>

Our participation in Asian markets continues to include Malaysia,
Korea, Hong Kong, Singapore, Thailand, and Australia. We have become
increasingly interested in Indonesia and less optimistic regarding Hong Kong and
Malaysia. Indonesia possesses a number of investment attributes we find
particularly attractive, including one of the world's largest populations and a
rapidly emerging consumer market. Moreover, our research indicates that the
country does not face the near-term prospects for overheating now appearing in
Malaysia and some of the other Pacific Rim countries. In Hong Kong, we believe
China's sovereignty in 1997 over the colony poses considerable risk and we are
cautious about investments there.

European markets started the fiscal year slowly but appreciated
modestly in local currency terms later in the period. The decline in the value
of the U.S. dollar aided returns for the Fund's European holdings through
currency translation effects. Overall, however, European equity markets were not
able to attract as much investment interest as our domestic market. One reason:
Interest rates did not fall as much in Europe as in the United States. Another
source of unease was the volatile European political landscape, as investors
continue to fret about the challenges of achieving the fiscal policy goals laid
out by the Maastricht Treaty. Finally, European companies have not been as
aggressive as those in the United States regarding the restructuring of their
operations. We believe European management will be forced to respond
increasingly to more efficient global competition by undertaking many of the
streamlining measures already implemented in the United States. The outcome will
be significantly more profitable businesses.

Technology Sector Gains Help Performance

For much of the year the Fund's industry exposure was increasingly
weighted toward the technology sector, as this area clearly was producing the
most significant returns in the world markets. Investor enthusiasm for
technology-related companies has been supported by a rapid increase in the
earnings generated by these businesses. We believe this growth in earnings
derives from unusually robust conditions for four major technological product
groups. Specifically, cellular telephone penetration rose significantly,
personal computer sales were driven by a new product cycle and home purchases,
corporate data processing is undergoing a shift toward network-distributed
computing, and the commercialization of the Internet and other on-line services

7
<PAGE>

is establishing the basis for new transaction-processing industries. One
byproduct of this boom has been a semiconductor parts shortage, accompanied by
higher parts prices and increased profits for that group as well. The Fund
participated in each of these developments through a number of holdings that
produced significant gains.

Outstanding performers in the U.S. technology sector included Atmel,
one of the Fund's largest holdings. Atmel is a U.S. semiconductor manufacturer
specializing in the production of high-performance, low-voltage devices for
portable computing and communications applications. Atmel has produced an
exceptional record of sales and earnings growth over the past five years. Other
successful U.S. technology investments for the Fund included Ascend
Communications, U.S. Robotics, Shiva Corp., and Sterling Software.

Outside the U.S., German software manufacturer SAP AG, the Fund's
largest position, is worthy of special comment. In late 1993, SAP introduced its
multicurrency R/3 client/server software product for multinational corporations.
The rollout of the R/3 met with success on a global scale and rapidly growing
sales of this high margin product translated quickly into significant profits.
From a virtually unknown position, SAP now ranks among the world's largest
software enterprises, has been added to the German DAX index, and has a market
value in excess of many top German companies, including BMW. SAP shares have
appreciated 614% since the Fund's purchase, with a 136% gain in fiscal 1995.

In August, it began to appear to us that valuations in the technology
sector were probably reflecting optimistic earnings projections too far into the
future. We therefore took action to reduce the Fund's exposure to the group in
September through the sale or reduction of several holdings, including Silicon
Valley Group, Integrated Process Equipment, Shiva Corp., and Maxim Integrated
Products.

Investments not predominantly related to technology that have performed
well for the Fund and deserve mention include the Australian soft drink company
Coca-Cola Amatil, the Swedish automobile airbag manufacturer Autoliv, the
Eastern European media business Central European Media, the German-based kidney
dialysis company Fresenius, Spanish energy enterprise Gas Natural, and the
Italian eyeglass producer Luxottica. In addition, your Fund was the beneficiary
of several takeovers during the year, each of which produced significant gains.

8
<PAGE>

On the negative side of the ledger, many of the Fund's Japanese
holdings declined markedly in value, as Japanese small stocks underperformed
even the weak broader market. Also, two substantial Fund holdings outside of
Japan proved particularly disappointing. Tibbett & Britten, the U.K.
transportation logistics company, suffered from a deterioration in the economics
of its auto transport contract with Ford Motor Company. The company is currently
working with Ford to renegotiate the contract on terms that would allow for a
reasonable rate of return. U.S. publisher Thomas Nelson reported an earnings
disappointment just before the close of the Fund's fiscal year. This was
particularly surprising in that management had recently conducted a public
offering of new shares. Purchasers of those shares sold aggressively on the
news, driving down Nelson's share price from $25 to $15.88 in one day.

The Fund's currency hedging activities are generally modest and
implemented on an opportunistic basis. In the second half of 1995, the Fund
hedged its Japanese holdings at a particularly good time. During the summer, the
yen became overbought in our view, and a significant hedge was accordingly
placed against the Fund's Japan holdings. As the U.S. dollar subsequently
strengthened, the dollar value of your Japanese holdings was preserved. We
engaged in no hedging as it pertains to European currencies during the year.

Outlook and Strategy

Going forward, the most pressing issues are the prospects in 1996 for
our U.S. holdings and the development of an investment perspective on Asia,
particularly Japan. We believe that U.S. companies will continue to push
aggressively for productivity gains. Moreover, there are encouraging signs from
Washington that the government is on the road to becoming more fiscally
responsible. Taken together, these trends bode well for the long-term health of
U.S. industry and we are bullish long-term on our domestic economy. However, we
realize that equity markets rarely proceed upward in a smooth fashion, and
valuations by any standard are high. Our relatively low position in U.S.
securities reflects our view that superior returns for fiscal 1996 lie mostly
outside the U.S.

Europe appears reasonably valued compared with the United States, but
aggressive restructuring must take place to improve competitive positions and
potential profits. As outlined above, we believe that these changes are coming;

9
<PAGE>

the possibility of business reorganization throughout Europe is a leading
principle behind our continued investment focus on this region. Over the long
term, however, higher growth in earnings will probably come from companies in
Asia, and we continue to hunt for opportunity there.

Scudder Global Small Company Fund remains focused on finding small
growth companies worldwide with the potential for increasing earnings at
well-above-average rates. We believe the Fund's careful stock selection process
continues to make it an excellent vehicle for long-term investors seeking the
benefits of small stock investing.

Sincerely,
Your Portfolio Management Team

/s/Gerald J. Moran /s/Elizabeth J. Allan
Gerald J. Moran Elizabeth J. Allan

/s/Carol L. Franklin /s/Joan R. Gregory
Carol L. Franklin Joan R. Gregory

Scudder Global Small Company Fund: A Team Approach to
Investing

Scudder Global Small Company Fund is run by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund. They are supported by Scudder's large staff of
economists, research analysts, traders, and other investment specialists who
work in Scudder offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.

Lead Portfolio Manager Gerald J. Moran has set Scudder Global Small Company
Fund's investment strategy and overseen its daily operation since the Fund was
introduced in 1991. Gerry joined Scudder's equity research and management area
in 1968 and has been a portfolio manager since 1985. Portfolio Manager Elizabeth
Allan, who joined the team in 1994, concentrates on the Fund's Pacific Basin
investments. Elizabeth has been a portfolio manager at Scudder since 1991 and
joined the firm in 1987. Carol L. Franklin, Portfolio Manager, contributes
expertise on the Fund's European investments, a role she has filled since the
Fund commenced operations. Carol has worked on international equity investing as
a portfolio manager at Scudder since 1981. Joan Gregory, Portfolio Manager,
joined the team in 1994 and focuses on stock selection, a role she has played
since she joined Scudder in 1992. Joan has been involved with investment in
global and international stocks as an assistant portfolio manager since 1989.

10
<PAGE>

INVESTMENT PORTFOLIO AS OF OCTOBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7.9% REPURCHASE AGREEMENT
19,822,000 Repurchase Agreement with Donaldson, Lufkin & Jenrette dated
10/31/95 at 5.875% to be repurchased at $19,825,235 on
11/1/95, collateralized by a $14,085,000 U.S. Treasury
Note, 11.875%, 11/15/03 (Cost $19,822,000)................. 19,822,000
-----------
3.6% COMMERCIAL PAPER
9,000,000 General Electric Capital Corp., 5.73%, 11/7/95 (Cost
$8,991,405)................................................ 8,991,405
-----------
7.5% PREFERRED STOCKS

<CAPTION>
Shares
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GERMANY 3,700 Fresenius AG (Developer, manufacturer and distributor of
pharmaceutical and medical systems products)............... 2,956,951
3,040 Hornbach Holding AG (Supermarket chain specializing in
building materials and gardening products)................. 3,055,765
3,080 Marschollek Lautenschlaeger und Partner AG (Leading
independent life insurance company)........................ 2,067,628
70,200 SAP AG (Computer software manufacturer)..................... 10,771,613
-----------
TOTAL PREFERRED STOCKS (Cost $6,008,191).................... 18,851,957
-----------
81.0% COMMON STOCKS
ARGENTINA 1.2% 585,035 Central Costanera "B" (Electric utility).................... 1,620,466
776,200 Dalmine Siderca (Steel producer)............................ 582,121
51,800 Quilmes Industrial S.A. (Leading beer distributor).......... 911,680
-----------
3,114,267
-----------
AUSTRALIA 2.0% 673,807 Ampol Exploration Ltd.* (Oil and gas exploration company)... 1,334,508
240,000 Coca Cola Amatil Ltd.* (Soft drink bottler and
distributor)............................................... 1,857,451
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

----
11

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,627,100 E.R.G. Australia Ltd. (Producer and installer of electronic
ticketing equipment, and manufacturer of radio
communication equipment)................................... 1,970,715
-----------
5,162,674
-----------
AUSTRIA 0.8% 9,620 Flughafen Wien AG (Operator of terminals and facilities at
Vienna International Airport).............................. 617,919
20,100 Mayr Meinhof Karton AG (Leading carton producer)............ 1,173,337
3,700 VAE Eisenbahnsysteme AG (Manufacturer of electronic control
systems for use in rail transportation technology)......... 331,081
-----------
2,122,337
-----------
BRAZIL 1.4% 773,000 Rhodia-Ster (Manufacturer of PET resin, polyester and
acrylic fibers)............................................ 1,036,829
182,800 Rhodia-Ster (GDR)........................................... 2,422,100
-----------
3,458,929
-----------
CANADA 0.6% 179,000 Petromet Resources Ltd* (Exploration and production of
natural gas in Alberta).................................... 427,463
132,100 Reko International Group, Inc.* (Designer and manufacturer
of injection moulds and other industrial tools)............ 418,974
30,000 Renaissance Energy Ltd.* (Exploration, production and
marketing of crude oil and natural gas, operating in
Alberta)................................................... 663,246
-----------
1,509,683
-----------
CHILE 1.5% 76,400 Cristalerias de Chile (ADR) (Glassworks).................... 1,852,700
80,000 Santa Isabel S.A.* (Supermarket chain)...................... 1,810,000
-----------
3,662,700
-----------
CZECH REPUBLIC 1.5% 171,100 Central European Media Enterprises Ltd. "A"* (Owner and
operator of national and regional private commercial
television stations in central Europe and Germany)......... 3,935,300
-----------
FRANCE 1.5% 14,100 Essilor International (Manufacturer of various types of
lenses, eyeglasses, contact lenses and optical measuring
instruments)............................................... 2,614,857
14,550 Sligos SA (Electrical payment and computing engineering
services company).......................................... 1,261,199
-----------
3,876,056
-----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

- ----
12

<PAGE>

INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GERMANY 0.2% 12,600 Hornbach Baumarkt AG (Do-it-yourself home improvement
retailer).................................................. 635,505
-----------
HONG KONG 1.3% 6,436,000 Hong Kong Toy Centre International, Ltd. (Major toy
manufacturer).............................................. 395,398
1,068,600 Jinhui Shipping and Transportation Ltd.* (Operator of cargo
fleet of ships transporting steel, iron ore, non-ferrous
metals and agricultural products).......................... 1,415,895
357,000 Johnson Electric Holdings Ltd. (Designer and manufacturer of
micrometers for domestic and commercial uses).............. 745,703
700,000 Sime Darby Hong Kong (Vehicle distributor).................. 765,032
1,501 Yips Hang Cheung (Manufacturer of mixed solvents and
paints).................................................... 233
-----------
3,322,261
-----------
INDIA 0.4% 95,700 Indian Rayon & Industries Ltd. (GDR) (Manufacturer and
marketer of rayon yarn and textiles)....................... 1,112,513
-----------
INDONESIA 3.8% 331,000 Bakrie & Brothers (Manufacturer of industrial steel
products, steel pipes, corrugated sheet iron, asbestos and
fiber cements)............................................. 588,469
61,000 Indonesia Satellite Corp. (ADR) (International
telecommunication services)................................ 2,020,625
55,000 Kabelmetal Indonesia (Foreign registered) (Cable
manufacturer).............................................. 49,950
702,640 Kalbe Farma (Foreign registered) (Pharmaceutical producer
and distributor)........................................... 2,227,657
116,500 Medco Energi Corp. (Foreign registered) (Oil and gas
exploration and production, drilling services)............. 189,806
100,000 Merck-Indonesia (Foreign registered) (Pharmaceutical
company) (b)............................................... 418,318
238,000 Modern Photo Film Co. (Photographic film distributor)....... 1,446,235
546,500 Mustika Ratu* (Foreign registered) (Consumer cosmetics
producer).................................................. 890,379
373,000 Panin Bank (Foreign registered) (Bank)...................... 410,612
382,000 Sekar Bumi* (Foreign registered) (Producer of frozen raw
shrimp, prawns and fish)................................... 479,392
51,743 Unilever-Indonesia (Foreign registered) (Consumer products
manufacturer) (b).......................................... 729,095
-----------
9,450,538
-----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

----
13

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IRELAND 4.9% 5,161,000 Aran Energy PLC* (Oil and natural gas exploration).......... 6,099,633
841,313 Bank of Ireland PLC (Bank).................................. 5,598,174
70,205 Irish Continental Group PLC (Transport of passengers,
freight and containers between Ireland, the U.K. and the
continent)................................................. 534,211
-----------
12,232,018
-----------
ITALY 1.1% 10,000 De Rigo SpA* (ADR) (Manufacturer and distributor of
sunglasses and prescription eyeglass frames)............... 206,250
32,300 Luxottica Group SpA (ADR) (Manufacturer and marketer of
eyeglasses)................................................ 1,574,625
445,300 Merloni Elettrodomestici SpA (Manufacturer of a variety of
household appliances sold throughout western Europe)....... 994,834
-----------
2,775,709
-----------
JAPAN 9.4% 47,000 Cox Co., Ltd. (Men's and women's wear chain store
operator).................................................. 372,159
17,000 Eyeful Home Technology Inc. (Homebuilding franchise
operator).................................................. 320,739
52,000 Genki Sushi Co., Ltd. (North Kanto-based fast-food sushi
chain) (b)................................................. 1,321,668
25,000 Horipro Inc. (Growing entertainment production company)..... 371,475
57,000 JAMCO Corp. (Leading manufacturer of galleys and lavatories
for commercial aircraft)................................... 534,924
51,000 Japan Associated Finance Co. (Venture capital company)...... 4,960,653
43,000 Kyokuto Kaihatsu Kogyo Co., Ltd. (Leading maker of dump
trucks and other specialty vehicles)....................... 945,794
125,000 Maeda Road Construction Co., Ltd. (Major road paver)........ 2,236,180
63,000 Nichiei Co., Ltd. (Finance company for small and
medium-sized firms)........................................ 3,910,748
39,500 Nissen Co., Ltd. (Mail-order women's apparel distributor)... 1,139,107
72,000 Rock Field Co., Ltd. (Major delicatessen food processor).... 1,266,924
94,000 Royal Ltd. (Wholesaler and retailer of automobile equipment
and parts)................................................. 3,216,188
114,000 ShinMaywa Industries, Ltd. (Leading maker of dump trucks and
other specialty vehicles).................................. 885,967
90,000 Ten Allied Co., Ltd. (Tavern chain operator)................ 1,170,145
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

- ----
14

<PAGE>

INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
19,200 Tsutsumi Jewelry Co., Ltd. (Manufacturer, wholesaler and
retailer of jewelry)....................................... 947,847
-----------
23,600,518
-----------
KOREA 2.1% 180 units Korea 1990 Trust IDR* (Investment company) (c).............. 968,400
182,080 Korea Fund, Inc.* (Investment company)...................... 3,937,480
16,000 Ottogi Foods (Manufacturer of various food products)........ 480,951
-----------
5,386,831
-----------
MALAYSIA 0.4% 279,000 Westmont Bhd. (Conglomerate: construction and repair of
ships and offshore oil platforms, power transmission,
garment manufacturing, and marketing services)............. 966,234
-----------
MEXICO 0.4% 71,500 Grupo Casa Autrey SA (ADR) (Consumer specialty
manufacturer).............................................. 911,625
-----------
NETHERLANDS 2.9% 81,000 IHC Caland N.V. (Dredging and offshore services)............ 2,305,045
8,700 Telegraaf Holdings CVA (Newspaper publisher)................ 1,251,680
40,708 Wolters Kluwer CVA (Publisher).............................. 3,704,949
-----------
7,261,674
-----------
NORWAY 0.6% 127,800 Unitor A/S (Provider of broad range of ship services,
leading supplier of marine chemicals)...................... 1,579,931
-----------
PERU 1.1% 1,500,000 Compania Peruana de Telefonos S.A. "B" (Public and cellular
telephone services)........................................ 2,678,571
-----------
PHILIPPINES 0.0% 51,878 Keppel Philippines Shipyard "B"* (Shipbuilding and repair)
(b)........................................................ 21,441
6,804 Kepphil Shipyard Inc.* (Shipbuilding and repair)............ 471
-----------
21,912
-----------
POLAND 0.6% 3 Pioneer Poland Fund (Closed-end investment company) (b)
(d)........................................................ 1,443,091
-----------
PORTUGAL 2.1% 59,460 Jeronimo Martins (Food producer and retailer)............... 3,165,110
126,000 Uniao Cervejaria, S.A. (Brewery)............................ 2,046,089
-----------
5,211,199
-----------
SINGAPORE 0.4% 400,000 GP Batteries International, Ltd. (Developer, manufacturer
and distributor of batteries and battery-related
products).................................................. 976,000
100,000 GP Batteries International, Ltd. Warrants* (b).............. 50,000
-----------
1,026,000
-----------
SPAIN 1.3% 14,500 Gas Natural SDG, S.A. (Distributor of natural and
manufactured gas).......................................... 1,989,346

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

----
15

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
124,000 Uralita, SA (Processor of concrete pipes and cement for the
construction industry)..................................... 1,250,010
-----------
3,239,356
-----------
SWEDEN 3.1% 91,600 Autoliv AB (Free) (Manufacturer of safety airbags for
automobiles)............................................... 5,254,342
38,800 Hennes & Mauritz AB 'B' (Free) (Clothing and cosmetics
retailer throughout Europe)................................ 2,535,241
-----------
7,789,583
-----------
SWITZERLAND 1.6% 3,000 Phoenix Mecano AG (Bearer) (Manufacturer of housings and
components for computers).................................. 1,451,826
2,650 Schindler Holdings AG (PC) (Leading elevator and escalator
manufacturer).............................................. 2,483,282
-----------
3,935,108
-----------
THAILAND 0.2% 28,200 American Standard Sanitaryware (Foreign registered)
(Manufacturer of bathroom fixtures) (b).................... 458,327
99 Bangkok Dusit Medical Services Co., Ltd. (Health services)
(b)........................................................ 128
-----------
458,455
-----------
UNITED KINGDOM 4.5% 180,300 Brake Brothers PLC (Specialist supplier of frozen foods to
the catering industry)..................................... 1,966,875
903,300 Hambros Insurance Services Group PLC (Insurance company).... 1,213,900
57,100 Hardy Oil & Gas PLC (Oil and gas exploration and
development)............................................... 166,106
703,700 Serco Group PLC (Facilities management company)............. 4,116,434
574,100 Tibbett and Britten Group PLC (Transportation services for
manufacturing and retail industries)....................... 3,948,287
-----------
11,411,602
-----------
UNITED STATES 28.1% 7,500 AHI Healthcare Systems, Inc.* (Operator of comprehensive
locally managed healthcare delivery networks).............. 105,000
105,100 American Classic Voyager Co. (North American operator of
steamboat cruises)......................................... 1,261,200
263,800 Atmel Corp.* (Developer and manufacturer of integrated
circuits).................................................. 8,243,750
266,500 BE Aerospace* (Airline audio/video control systems)......... 2,098,687
200,000 Benton Oil & Gas Co.* (Oil and gas exploration, development
and production)............................................ 2,425,000
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

- ----
16

<PAGE>

INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
17,000 Bio-Vascular, Inc.* (Marketer of tissue and
biosynthetic-based medical products and grafts for
cardiovascular surgery).................................... 242,250
16,900 Ceridian Corp.* (Information services and defense
electronics)............................................... 735,150
59,200 Cerner Corp.* (Developer of patient-focused clinical
information systems)....................................... 1,568,800
24,400 Department 56, Inc.* (Designer, importer and distributor of
collectibles and specialty giftware)....................... 1,107,150
75,900 Enron Global Power & Pipelines L.L.C. (Owner and manager of
power plants and a natural gas pipeline system)............ 1,831,087
142,000 First Colony Corp. (Holding company which sells individual
life insurance and annuity products throughout the U.S.)... 3,869,500
120,775 Fiserv Inc.* (Data processing services)..................... 3,109,956
118,000 Fresenius USA, Inc.* (Manufacturer and distributor of
medical products for treatment of kidney failure).......... 1,932,250
47,000 HBO & Company (Designer of computerized information systems
to the health-care industry)................................ 3,325,250
313,300 IGEN Inc.* (Producer of medical supplies)................... 1,840,638
68,400 KLA Instruments Corp.* (Developer, manufacturer and marketer
of automated image processing systems)..................... 2,924,100
17,000 LeCroy Corp.* (Developer and manufacturer of digital
oscilloscopes which capture electronic signals)............ 208,250
96,300 M.S. Carriers Inc.* (Truckload carrier of general
freight)................................................... 1,492,650
116,500 Millicom International Cellular SA* (Developer and operator
of cellular telephone networks)............................ 3,844,500
17,900 Nordson Corp. (Industrial application equipment)............ 1,033,725
183,000 Nu-Kote Holdings Inc. 'A'* (Manufacturer of office and home
printing products)......................................... 3,797,250
24,300 OccuSystems Inc.* (Provider of primary care physician and
case management services).................................. 502,706
105,525 PhyCor Inc.* (Operator of specialty medical clinics)........ 3,878,044
13,900 Premenos Technology Corp.* (Developer, marketer and
supporter of electronic products and services for
exchanging information via e-mail)......................... 545,575
22,300 R.P. Scherer Corp.* (Manufacturer of drug delivery system).. 992,350
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

----
17

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
43,300 Silicon Valley Group Inc.* (Manufacturer of equipment for
semiconductor industry).................................... 1,401,838
119,700 Sterling Software Inc.* (Computer software products)........ 5,521,163
80,800 Stillwater Mining Co.* (Exploration and development of mines
in Montana producing platinum, palladium and associated
metals).................................................... 1,363,500
351,062 Thomas Nelson, Inc. (Publisher)............................. 5,836,406
8,500 Trimedyne Inc. Warrants* (expire 12/9/96) (b)............... 12,495
6,600 United Dental Care, Inc.* (Provider of a comprehensive range
of prepaid dental plans)................................... 201,300
8,900 Verity, Inc.* (Developer and supporter of software tools and
applications for locating information on various networks
and databases)............................................. 327,075
67,900 Vivra, Inc.* (Provider of dialysis services)................ 2,240,700
91,200 Wandel & Goltermann Technologies, Inc.* (Manufacturer of
test, measurement, diagnostic and monitoring products for
local and wide area networks).............................. 912,000
-----------
70,731,295
-----------
TOTAL COMMON STOCKS (Cost $178,904,119)..................... 204,023,475
-----------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $213,725,715) (a).................................... 251,688,837
-----------
-----------
</TABLE>

(a) The cost for federal income tax purposes was $215,827,292. At October 31,
1995, net unrealized appreciation for all securities based on tax cost was
$35,861,545. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$57,340,824 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $21,479,279.

(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities at October 31, 1995 aggregated
$4,526,828. See Note A of the Notes to Financial Statements.

(d) Market value and cost reflect full payment. The remaining installments which
total $1,108,125 will be payable upon thirty days prior notice from
Pioneering Management Limited.

* Non-income producing security.

Sector breakdown of the Fund's equity securities is noted on page 5.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

- ----
18

<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
Transactions in written call options on currencies during the year ended
October 31, 1995 were:

<TABLE>
<CAPTION>
PRINCIPAL PREMIUMS
AMOUNT RECEIVED ($)
---------------------------------------------
<S> <C> <C>
Outstanding at
October 31, 1994............ Y923,000,000 448,218
Contracts closed............ Y923,000,000 448,218
---------------------------------------------
Outstanding at
October 31, 1995............ -- --
----------- -------
----------- -------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

----
19

<PAGE>
SCUDDER GLOBAL SMALL COMPANY FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $213,725,715)
(Note A)................................................... $251,688,837
Cash........................................................ 125
Foreign currency holdings, at market (identified cost
$80,259) (Note A).......................................... 80,333
Unrealized appreciation on forward currency exchange
contracts (Notes A and D) 212,489
Other receivables:
Investments sold.......................................... 962,049
Fund shares sold.......................................... 6,316,864
Dividends and interest.................................... 213,674
Foreign taxes recoverable................................. 46,262
Deferred organization expenses (Note A)..................... 8,849
------------
Total assets............................................ 259,529,482

LIABILITIES
Payables:
Investments purchased..................................... $1,813,725
Fund shares redeemed...................................... 174,272
Accrued management fee (Note C)........................... 234,793
Other accrued expenses (Note C)........................... 268,143
Payable on closed forward foreign currency exchange
contracts (Note A)....................................... 1,949,907
----------
Total liabilities....................................... 4,440,840
------------
Net assets, at market value................................. $255,088,642
------------
------------
NET ASSETS
Net assets consist of:
Undistributed net investment income....................... $ 2,587,566
Unrealized appreciation on:
Investments............................................. 37,963,122
Foreign currency related transactions................... 212,441
Accumulated net realized gain............................. 3,999,959
Capital stock............................................. 145,471
Additional paid-in capital................................ 210,180,083
------------
Net assets, at market value................................. $255,088,642
------------
------------
NET ASSET VALUE, offering and redemption price per share
($255,088,642 DIVIDED BY 14,547,124 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares
authorized)................................................ $17.54
------
------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

- ----
20

<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $236,274)....... $ 2,464,226
Interest.................................................... 1,220,013
-----------
3,684,239
Expenses:
Management fee (Note C)..................................... $2,573,030
Services to shareholders (Note C)........................... 710,463
Custodian and accounting fees (Note C)...................... 352,733
Directors' fees and expenses (Note C)....................... 46,658
Reports to shareholders..................................... 151,281
Auditing.................................................... 73,630
Legal....................................................... 19,054
Amortization of organization expense (Note A)............... 10,423
Other....................................................... 39,543 3,976,815
---------- -----------
Net investment loss......................................... (292,576)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain from:
Investments............................................... 8,268,669
Options................................................... 243,429
Foreign currency related transactions..................... 365,052 8,877,150
----------
Net unrealized appreciation (depreciation) during the period
on:
Investments............................................... 5,921,203
Options................................................... (88,248)
Foreign currency related transactions..................... 2,488,028 8,320,983
---------- -----------
Net gain on investment transactions......................... 17,198,133
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $16,905,557
-----------
-----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

----
21
<PAGE>
<TABLE>
<CAPTION>

SCUDDER GLOBAL SMALL COMPANY FUND
- ------------------------------------------------------------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS

Years Ended October 31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
---------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment loss. . . . . . . . . . . . . . . . $ (292,576) $ (668,612)
Net realized gain from investment
transactions. . . . . . . . . . . . . . . . . . 8,877,150 1,326,728
Net unrealized appreciation on investment
transactions during the period. . . . . . . . . 8,320,983 3,962,657
------------ ------------
Net increase in net assets resulting from
operations. . . . . . . . . . . . . . . . . . . 16,905,557 4,620,773
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
In excess of net investment income ($.18
per share). . . . . . . . . . . . . . . . . . . - (2,271,808)
------------ ------------
From net realized gains ($.08 and $.15
per share, respectively). . . . . . . . . . . . (1,236,433) (1,947,264)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold. . . . . . . . . . . . . 77,102,527 167,361,242
Net asset value of shares issued to
shareholders in reinvestment of
distributions . . . . . . . . . . . . . . . . . 1,187,647 3,818,846
Cost of shares redeemed. . . . . . . . . . . . . . (94,864,766) (113,105,251)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . . . (16,574,592) 58,074,837
------------ ------------
Increase (decrease) in net assets. . . . . . . . . (905,468) 58,476,538
Net assets at beginning of period. . . . . . . . . 255,994,110 197,517,572
------------ ------------
Net assets at end of period (including
undistributed net investment income of
$2,587,566 and accumulated distributions
in excess of net investment income of
$1,776,624, respectively) . . . . . . . . . . . $255,088,642 $255,994,110
------------ ------------
------------ ------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period. . . . . 15,734,564 12,238,526
------------ ------------
Shares sold. . . . . . . . . . . . . . . . . . . . 4,678,309 10,300,657
Shares issued to shareholders in
reinvestment of distributions . . . . . . . . . 79,071 232,856
Shares redeemed. . . . . . . . . . . . . . . . . . (5,944,820) (7,037,475)
------------ ------------
Net increase (decrease) in Fund shares . . . . . . (1,187,440) 3,496,038
------------ ------------
Shares outstanding at end of period. . . . . . . . 14,547,124 15,734,564
------------ ------------
------------ ------------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
22

<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
September 10, 1991
(commencement
Years Ended October 31, of operations)
-------------------------------------------------- to October 31
1995 1994 1993 1992 1991
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . $16.27 $16.14 $12.05 $11.92 $12.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) . . . . . . . . . . (.03) (.02) .04 .07 .01
Net realized and unrealized gain (loss) on investment
transactions . . . . . . . . . . . . . . . . . . . 1.38 .48 4.24 .08 (.09)
------ ------ ------ ------ ------
Total from investment operations . . . . . . . . . . . 1.35 .46 4.28 .15 (.08)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income . . . . . . . . . . . . . - - (.07) (.02) -
In excess of net investment income . . . . . . . . . - (.18) - - -
From net realized gains on investment transactions . (.08) (.15) (.12) - -
------ ------ ------ ------ ------
Total distributions. . . . . . . . . . . . . . . . . . (.08) (.33) (.19) (.02) -
------ ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . $17.54 $16.27 $16.14 $12.05 $11.92
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return (%) . . . . . . . . . . . . . . . . . . . 8.32 2.80 36.04 1.26 (.67)*
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . 255 256 198 55 9
Ratio of operating expenses net, to average daily
net assets (%) (a) . . . . . . . . . . . . . . . . . 1.69 1.70 1.50 1.50 1.50**
Ratio of net investment income (loss) to average daily
net assets (%) . . . . . . . . . . . . . . . . . . . (.12) (.28) .53 .78 2.47**
Portfolio turnover rate (%). . . . . . . . . . . . . . 43.7 45.8 54.6 23.4 -
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of . . $ - $ - $ - $ - $ .06
Reflects a per share amount of management fee not
imposed by the Adviser of . . . . . . . . . . . . $ - $ .01 $ .04 $ .09 $ .01
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%) . . . . . . . . . . . . . . . . . - 1.76 2.01 2.53 15.34**
* Not annualized
** Annualized
</TABLE>
----
23
<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Global Small Company Fund (the "Fund") is a diversified series of
Scudder Global Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The policies described below are followed consistently by the Fund in
the preparation of its financial statements in conformity with generally
accepted accounting principles.

SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association
of Securities Dealers Automatic Quotation ("NASDAQ") System, for which there
have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the high or "inside" bid
quotation. Securities which are not quoted on the NASDAQ System but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such bid
and asked quotations, the most recent bid quotation shall be used.

Portfolio debt securities with remaining maturities greater than sixty days
are valued by pricing agents approved by the officers of the Fund, which
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost.

All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors. Securities valued in
good faith by the Valuation Committee of the Board of Directors at fair value
amounted to $4,454,563 (1.75% of net assets) and have been noted in the
investment portfolio as of October 31, 1995.

- ----
24

<PAGE>

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

If the Fund writes an option and 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 Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.

The gain or loss recognized by the Fund upon the exercise of a written call
or purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the Fund's cost basis of
the acquired security or currency would be the exercise price adjusted for
the amount of the option premium.

The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.

When the Fund writes a covered call option, the Fund foregoes, in exchange
for the premium, the opportunity to profit during the option period from an
increase in the market value of the underlying security or currency above the
exercise price. When the Fund writes a put option it accepts the risk of a
decline in the market value of the underlying security or currency below the
exercise price. Over-the-counter options have the risk of the potential
inability of counterparties to meet the terms of their contracts. The Fund's
maximum exposure to purchased options is limited to the premium initially paid.
In addition, certain risks may arise upon entering into option contracts
including the risk that an illiquid secondary market will limit the Fund's
ability to close out an option contract prior to the expiration date and, that a
change in the value of the option contract

----
25

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------

may not correlate exactly with changes in the value of the securities or
currencies hedged.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the resale price.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.

Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.

Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity
to profit from favorable exchange rate movements during the term of the
contract.

- ----
26

<PAGE>

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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.

FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no federal income tax
provision was required.

DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.

The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in forward contracts, passive
foreign investment companies, and certain securities sold at a loss. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period.

----
27

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------

Accordingly, the Fund may periodically make reclassifications among certain
of its capital accounts without impacting the net asset value of the Fund.

The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.

ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.

OTHER. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the ex-
dividend date. Interest income is recorded on the accrual basis.

B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $95,167,714 and
$123,456,571, respectively.

C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser
a fee equal to an annual rate of 1.10% of the Fund's average daily net assets,
computed and accrued daily and payable monthly. As manager of the assets of
the Fund, the Adviser directs the investments of the Fund in accordance with
its investment objectives, policies, and restrictions. The Adviser determines
the securities, instruments, and other contracts relating to investments to
be purchased, sold or entered into by the Fund. In addition to portfolio
management services, the Adviser provides certain administrative services in
accordance with the Agreement. The Agreement provides that if the Fund's
expenses, exclusive of taxes, interest, and extraordinary expenses, exceed
specified limits, such excess, up to the amount of the management fee, will be
paid by the Adviser. For the year ended October 31, 1995, the fee pursuant to
the Agreement amounted to $2,573,030.

- ----
28

<PAGE>

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended October 31, 1995, the amount charged by SSC aggregated
$594,078, of which $54,590 is unpaid at October 31, 1995.

Effective June 15, 1995, Scudder Fund Accounting Corporation ("SFAC"), a wholly-
owned subsidiary of the Adviser, assumed responsibility for determining the
daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the year ended October 31, 1995, the amount
charged to the Fund by SFAC aggregated $63,829, of which $14,378 is unpaid at
October 31, 1995.

The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1995, Directors' fees and expenses aggregated $46,658.

D. COMMITMENTS
- --------------------------------------------------------------------------------
As of October 31, 1995, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized appreciation of
$212,489.
<TABLE>
<CAPTION>

Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
- ------------------------------- ------------------------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 623,329,250 U.S. Dollars 6,336,201 3/19/96 109,433
Japanese Yen 623,329,250 U.S. Dollars 6,356,351 4/17/96 103,056
-------
212,489
-------
-------
</TABLE>

----
29

<PAGE>

SCUDDER GLOBAL SMALL COMPANY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE SHAREHOLDERS
OF SCUDDER GLOBAL SMALL COMPANY FUND:

We have audited the accompanying statement of assets and liabilities of Scudder
Global Small Company Fund including the investment portfolio, as of October
31, 1995, 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 four years in the
period then ended and for the period September 10, 1991 (commencement of
operations) to October 31, 1991. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Scudder Global Small Company Fund as of October 31, 1995, the results of its
operations for the year then ended, the changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the four years in the period then ended and for the period September 10, 1991
(commencement of operations) to October 31, 1991 in conformity with generally
accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 15, 1995

- ----
30

<PAGE>

TAX INFORMATION
- --------------------------------------------------------------------------------

The Fund will mail shareholders IRS Form 1099-Div in late January, summarizing
all taxable distributions paid for 1995.

Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$6,170,292 as capital gain dividends for its taxable year ended October 31,
1995.

The Fund paid foreign taxes of $236,274 and the Fund recognized $1,029,969
of foreign source income during the taxable year ended October 31, 1995.
Pursuant to section 853 of the Internal Revenue Code, the Fund designates $.016
per share of foreign taxes and $.071 of income from foreign sources as having
been paid in the taxable year ended October 31, 1995.

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 Investor Relations
Representative at 1-800-225-5163.

----
31
<PAGE>

SHAREHOLDER MEETING RESULTS

A Special Meeting of Shareholders of Scudder Global Fund, Inc.,
consisting of Scudder Emerging Markets Income Fund, Scudder Global Fund, Scudder
Global Small Company Fund, Scudder International Bond Fund and Scudder Short
Term Global Income Fund was held on Wednesday, December 6, 1995, at the offices
of Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue, New York, New
York 10154. The two matters voted upon by Shareholders of Scudder Global Small
Company Fund and the resulting votes for each matter are presented below.

1. The election of eight Directors to hold office until their respective
successors shall have been duly elected and qualified.

Director: Number of Votes:
--------- ----------------
For Withheld Broker Non-Votes*
--- -------- -----------------
Edmond D. Villani 8,173,630 196,058 0
Nicholas Bratt 8,171,658 198,031 0
Daniel Pierce 8,169,955 199,734 0
Paul Bancroft III 8,163,658 206,030 0
Sheryle J. Bolton 8,125,667 244,021 0
Thomas J. Devine 8,152,628 217,060 0
William H. Gleysteen, Jr. 8,155,571 214,118 0
William H. Luers 8,127,506 242,182 0

2. Ratification or rejection of the action taken by the Board of Directors in
selecting Coopers & Lybrand L.L.P. as independent accountants for the
fiscal year ending October 31, 1996.

Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
8,069,349 83,583 216,755 0

- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.

32
<PAGE>

OFFICERS AND DIRECTORS

Edmond D. Villani*
Chairman of the Board and Director

Nicholas Bratt*
President and Director

Paul Bancroft III
Director; Venture Capitalist and Consultant

Sheryle J. Bolton
Director; Consultant

Thomas J. Devine
Director; Consultant

William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.

William H. Luers
Director; President, The Metropolitan Museum of Art

Daniel Pierce*
Director and Vice President

Robert G. Stone, Jr.
Honorary 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

Adam Greshin*
Vice President

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Douglas M. Loudon*
Vice President

Gerald J. Moran*
Vice President

M. Isabel Saltzman*
Vice President

Cornelia Small*
Vice President

David S. Lee*
Vice President and Assistant Treasurer

Thomas F. McDonough*
Vice President and Secretary

Pamela A. McGrath*
Vice President and 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>
<CAPTION>

The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <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 Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------

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>

34
<PAGE>

HOW TO CONTACT SCUDDER
<TABLE>

<S> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------

For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163

For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund 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
RELATIONS 1-800-225-2470

For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION 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 New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles 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 that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.

-------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
<FN>

35
<PAGE>

Celebrating Over 75 Years of Serving Investors

Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark 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 37 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 us 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 long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.

<PAGE>
This information must be preceded or accompanied by a current prospectus.

Portfolio changes should not be considered recommendations for action by
individual investors.

Scudder
Short Term
Global Income
Fund

Annual Report
October 31, 1995

o A fund designed to provide high current income by investing primarily in
short-term, high-grade fixed-income securities denominated in foreign
currencies and the U.S. dollar.

o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.

<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------

CONTENTS

2 In Brief

3 Letter from the Fund's Chairman

4 Performance Update

5 Portfolio Summary

6 Portfolio Management Discussion

9 Investment Portfolio

13 Financial Statements

16 Financial Highlights

17 Notes to Financial Statements

25 Report of Independent
Accountants

26 Shareholder Meeting Results

29 Officers and Directors

30 Investment Products
and Services

31 How to Contact
Scudder

IN BRIEF

* On December 6, 1995, a majority of shareholders of Scudder Short Term
Global Income Fund approved a measure to change the Fund's name and
investment objective and strategies. The revisions will become effective on
December 27, 1995, including the new name: Scudder Global Bond Fund.

* Scudder Short Term Global Income Fund provided a total return of 5.43% for
the 12-month period ended October 31, 1995, considerably higher than the
3.18% average return of the 44 short world multimarket funds tracked by
Lipper Analytical Services, Inc.

(BAR CHART TITLE)
Investment Returns
(12 months ended October 31, 1995)
(BAR CHART DATA)
Scudder Short Term Global Income Fund 5.43%

Lipper Average 3.18%

* Given the challenging investment environment early in the fiscal year, the
Fund adopted a relatively conservative investment strategy, emphasizing
markets with high real (inflation-adjusted) interest rates, stable
fundamentals, and stable currencies.

* As bond markets improved later in the year, we emphasized securities in the
longer end of the Fund's stated maturity range (one to three years),
particularly in the peripheral European markets.

<PAGE>
LETTER FROM THE FUND'S CHAIRMAN
- --------------------------------------------------------------------------------

Dear Shareholders,

The global bond markets emerged from an especially difficult period early
this year to provide strong overall performance for the 12 months ended October
31, 1995--Scudder Short Term Global Income Fund's 1995 fiscal year. Interest
rates fell throughout 1995, based on indications of slower economic growth
worldwide. Beginning in the United States, the decline in rates spread to Europe
and dollar-bloc countries like Canada and Australia, helping to push bond prices
higher.

Scudder Short Term Global Income Fund provided above-average performance
during the period, outpacing the average return of the 44 short world
multimarket funds tracked by Lipper Analytical Services. Commensurate with the
decline in interest rates around the world, however, the Fund's 30-day net
annualized SEC yield declined during the period to 6.92% on October 31, 1995,
from 8.13% on October 31, 1994. Understandably, many investors have been
unsatisfied with the returns of short-term global income funds in general, and
with the price volatility that has accompanied the collapse of the European
exchange-rate mechanism and disruptions in the world's emerging markets.

For these and other reasons detailed in the supplement to this report,
shareholders of Scudder Short Term Global Income Fund voted on December 6, 1995,
to change the Fund's name and investment strategies to that of a longer-maturity
investment vehicle. There also has been a change in your Fund's portfolio
management team, which now consists of Lead Manager Adam Greshin and Margaret D.
Hadzima. Mr. Greshin, who also manages Scudder International Bond Fund, joined
the Fund's management team earlier this year and brings years of global bond
investment experience.

If you have any questions about the Fund or the many recent changes, please
call a Scudder Investor Relations representative at 1-800-225-2470. Thank you
for choosing Scudder Short Term Global Income Fund to help meet your investment
needs.

Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Short Term Global Income Fund

3
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
PERFORMANCE UPDATE as of October 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER SHORT TERM GLOBAL INCOME FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,543 5.43% 5.43%
Life of
Fund* $12,958 29.58% 5.70%

SALOMON BROTHERS CURRENCY-HEDGED
WORLD GOVERNMENT BOND INDEX (1-3 YEARS)
- ---------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,968 9.68% 9.68%
Life of
Fund* $13,392 33.92% 6.58%

*The Fund commenced operations on
March 1, 1991. Index comparisons
begin March 31, 1991.

A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:

YEARLY PERIODS ENDED OCTOBER 31

Scudder Short Term Global Income Fund
Year Amount
- ----------------------
3/31/91* $10,000
91 $10,653
92 $11,487
93 $12,307
94 $12,277
95 $12,944

Salomon Brothers Currency-Hedged World
Government Bond Index (1-3 years)
Year Amount
- ----------------------
3/31/91* $10,000
91 $10,556
92 $11,354
93 $12,044
94 $12,210
95 $13,392

The unmanaged Salomon Brothers Currency-Hedged World Government
Bond Index (1-3 years) consists of worldwide fixed-rate government
bonds with one to three years to maturity. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses.

- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------

A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.

YEARLY PERIODS ENDED OCTOBER 31

1991* 1992 1993 1994 1995
---------------------------------------
NET ASSET VALUE... $12.01 $11.84 $11.68 $10.78 $10.53
INCOME DIVIDENDS.. $ .76 $ 1.08 $ .95 $ .87 $ .80
CAPITAL GAINS
DIVIDENDS......... $ -- $ -- $ .02 $ -- $ --
FUND TOTAL
RETURN (%)........ 6.65 7.83 7.14 -.25 5.43
INDEX TOTAL
RETURN (%)........ 5.56 7.56 6.08 1.87 9.68

All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not temporarily capped expenses, the average annual
total return for the Fund for the one year and life of Fund periods
would have been lower.

4
<PAGE>

PORTFOLIO SUMMARY as of October 31, 1995
- ---------------------------------------------------------------------------
MARKET EXPOSURE
- ---------------------------------------------------------------------------

Geographical Interest Rate
- --------------------------- -------------------------
United States 27.2% United States 27.1%
U.K. 15.9% ECU 8.7%
Italy 8.6% Italy 8.6%
Netherlands 8.6% Netherlands 8.6%
Germany 7.5% U.K. 7.6%
Denmark 6.4% Denmark 6.4%
Canada 6.1% Canada 6.1%
Australia 5.2% Germany 5.3%
Sweden 4.9% Australia 5.2%
Spain 4.2% Sweden 4.9%
France 2.4% Spain 4.3%
Indonesia 2.1% Czech Republic 2.7%
Czech Republic 0.5% France 2.4%
Mexico 0.4% Indonesia 2.1%
---- ----
100% 100%
==== ====

Graphs in the form of pie charts appears here,
illustrating the exact data points in the above tables.

<TABLE>
<C> <C> <S>
Currency Exposure (a)
- -------------------------------------------------------------
Australia 3.7% Indonesia 2.1%
Belgium -1.3% Italy 2.9% The Fund's hedging strategy
Canada 0.4% Netherlands 8.6% helped limit declines when the
Czech Republic 2.7% Spain -0.2% emerging markets were
Denmark -0.4% Sweden -0.1% experiencing significant
ECU 1.9% Switzerland -4.4% currency volatility and has
France -4.5% U.K. 2.7% contributed significantly to the
Germany -2.7% U.S. 88.6% Fund's returns in recent months.
----
100%
====

</TABLE>

(a) Currency exposure after taking into account the effects of foreign
currency options, futures, and forward contracts.

- --------------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.

5
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------

Dear Shareholders,

A favorable combination of moderate economic growth and very little
inflation prevailed for much of Scudder Short Term Global Income Fund's fiscal
year ended October 31, 1995. However, the year started on a difficult note, as
the Mexican peso devaluation prompted much price volatility in the world's
developing bond markets. The Fund provided a total return of 5.43% for the
12-month period from a combination of price change and income distributions
totaling $0.80 per share. While comfortably higher than the 3.18% average return
of the 44 short world multimarket funds tracked by Lipper, the Fund's return
failed to keep pace with its benchmark index. The unmanaged Salomon Brothers
Currency-Hedged World Government Bond Index (1-3 years) returned 9.68% during
the year.

The Fund's 30-day net annualized SEC yield declined to 6.92% on October 31,
1995, from 8.13% a year earlier. A shift away from the high-yielding Italian and
emerging bond markets, along with the general decline in global interest rates,
contributed to the lower yield.

A Difficult Start

The first few months of the fiscal year were characterized by substantial
currency and bond market volatility. In the weeks after the Mexican peso
devaluation of December 1994, investor confidence was noticeably shaken. As a
result, high-yielding European markets with lofty debt levels and uncertain
political landscapes--such as Italy, Sweden, and Spain--suffered. Sounder fiscal
and monetary regimes in Germany, the Netherlands, and Denmark enabled those bond
markets to pull ahead.

In the currency markets, the deutschemark strengthened dramatically
relative to the U.S. dollar, in part reflecting investor confidence in Germany.
The Japanese yen climbed sharply relative to the dollar as Japanese investors
continued to keep their money at home, thus contributing to the yen's scarcity
in capital markets.

In response to these events, the Fund adopted a conservative investment
strategy. Anticipating that the price volatility in Latin America would spill
over into other emerging markets, we first disposed of the Fund's Asian bonds,
thus protecting the Fund from the subsequent decline in Asian markets. We then
sold holdings in Latin America, reducing the Fund's total position in emerging
markets to 5% of portfolio holdings by early February. In addition, we scaled
back investments in the smaller

6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------

European economies, particularly those with burdensome debt levels, and directed
the proceeds into more stable European bond markets, primarily the Netherlands
and Germany. In the dollar-bloc markets, we established a position in Canadian
bonds, which have provided attractive real (inflation-adjusted) yields.

Markets Respond to Improving Fundamentals

Since March, a much more favorable combination of slowing economic growth,
moderate inflation, and calmer currency markets has prevailed. Economic
catastrophes outside of Mexico failed to materialize, and the bonds of
developing markets around the world have rallied as a result. Political
developments also served to bolster the bond markets. In France, statements from
President Chirac concerning his commitment to reducing the budget deficit were
well received; and Canadian bond prices gained following the Quebec sovereignty
referendum, where a narrow majority voted in favor of remaining part of Canada.
(We took advantage of the market uneasiness that preceded the referendum by
increasing the Fund's holdings in Canadian bonds prior to the vote.)

Throughout this period, we maintained the Fund's emphasis on European
holdings (59% of portfolio holdings as of October 31, 1995), which we believed
offered the best value relative to other markets around the world. Prudent
monetary policy in the core European countries, combined with favorable
inflation data across the European continent, have been the basis for strong
returns in recent months. As investor concern for the stability of developing
markets has subsided, we have increased the Fund's weighting in the smaller,
higher-yielding markets of Sweden, Italy, and Spain, where we expect the best
overall returns. To gain maximum exposure to the total return potential of these
markets, we have invested in securities at the longer end of the Fund's stated
maturity range (one to three years). Meanwhile, an emphasis on the dollar-bloc
markets of Canada, New Zealand, and Australia provided the Fund with an
attractive yield advantage over U.S. securities of equivalent maturity. The
dollar-bloc markets generally lagged the U.S. in early 1995, and we have
positioned the portfolio to take advantage of this relative value.

The Fund remained primarily hedged back to the U.S. dollar throughout the
year (roughly 90% of all currency exposure). This conservative strategy helped
limit price volatility when the

7
<PAGE>
SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------

emerging markets were experiencing significant upheaval and has contributed
significantly to the Fund's returns in recent months. The first signs of the
long-awaited resurgence in the U.S. dollar that began during July confirmed our
belief that the U.S. dollar had been oversold. However, we have maintained some
currency exposure in the peripheral European markets of Italy and Sweden, due to
our conviction that the lira and the krona also had been oversold earlier in the
year and thus had room for appreciation.

Outlook

The rally in the bond markets of Europe and elsewhere this year has been
gratifying but has also provided cause for caution. Slowing economic growth
rates in the United States and Europe could potentially develop into recessions,
which would re-focus attention on the riskier markets in Europe and elsewhere.
In 1992, European economic malaise crippled the exchange rate mechanism and
resulted in much currency volatility, as countries sought to stimulate growth
through lower interest rates and cheaper currencies. On the positive side, the
dollar's recovery is re-liquifying the international capital markets, drawing
savings out of Japan for the first time in years.

Going forward, the change in the Fund's objective has provided us with much
greater flexibility to pursue opportunities that exist in the global bond
markets for attractive yields and total returns. We look forward to taking
advantage of those opportunities in 1996, and we thank shareholders for their
interest in and commitment to the Fund during this period of transition.

Sincerely,

Your Portfolio Management Team

/s/Adam M. Greshin /s/Margaret D. Hadzima
Adam M. Greshin Margaret D. Hadzima

Scudder Short Term
Global Income Fund:
A Team Approach to Investing

Scudder Short Term Global Income Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment strategies
and select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders and other investment
specialists who work in Scudder's offices across the United States and abroad.
Scudder believes its team approach benefits Fund investors by bringing together
many disciplines and leveraging Scudder's extensive resources.

Lead Portfolio Manager Adam M. Greshin assumed responsibility for the
Fund's day-to-day management and investment strategies in November 1995. Adam
joined Scudder in 1986 as an international bond analyst and is Product Leader
for Scudder's global and international fixed-income investing. Portfolio Manager
Margaret D. Hadzima is Chairman of Scudder's Global Bond Strategy Committee and
Director of Global Bond Research. Margaret, who joined Scudder in 1973 and the
team in 1995, plays an active role in setting the Fund's overall bond strategy.

INVESTMENT PORTFOLIO as of October 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------

68.2% FOREIGN DENOMINATED DEBT OBLIGATIONS
<S> <C> <C> <C> <C> <C>
AUSTRALIAN DOLLARS 5.2% AUD 22,600,000 Commonwealth of Australia, 12.5%, 1/15/98 . . . . . . 18,749,887
-----------
BRITISH POUNDS 7.6% GBP 8,220,000 United Kingdom Treasury Bond, 8.75%, 9/1/97 . . . . . 13,441,845
8,250,000 United Kingdom Treasury Bond, 9.75%,
1/19/98 . . . . . . . . . . . . . . . . . . . . . . . 13,800,945
-----------
27,242,790
-----------

CANADIAN DOLLARS 6.1% CAD 3,120,000 Government of Canada,6.25%, 2/1/98. . . . . . . . . . 2,302,057
7,760,000 Government of Canada, 6.5%, 9/1/98. . . . . . . . . . 5,731,441
17,500,000 Government of Canada, 9.5%, 10/1/98 . . . . . . . . . 13,932,684
-----------
21,966,182
-----------

CZECH KORUNA 0.5% CSK 40,000,000 Czech Republic, 14.6%, 3/18/97. . . . . . . . . . . . 1,607,189
-----------
DANISH KRONER 6.4% DKK 45,000,000 Kingdom of Denmark, 9%, 11/15/96. . . . . . . . . . . 8,502,953
74,000,000 Kingdom of Denmark, 9%, 11/15/98. . . . . . . . . . . 14,488,014
-----------
22,990,967
-----------
DEUTSCHEMARKS 5.2% DEM 8,600,000 Federal Republic of Germany, 6%, 2/20/98. . . . . . . 6,298,523
17,000,000 Federal Republic of Germany, 6.625%, 1/20/98. . . . . 12,599,077
-----------
18,897,600
-----------

DUTCH GUILDERS 8.5% NLG 26,500,000 Government of the Netherlands, 6.25%, 7/15/98 . . . . 17,390,683
19,500,000 Government of the Netherlands, 7.5%, 6/15/99. . . . . 13,276,231
-----------
30,666,914
-----------

EUROPEAN
CURRENCY UNITS 8.6% ECU 1,000,000 Nacional Financiera SNC, 10.25%, 3/11/97. . . . . . . 1,300,186
8,400,000 United Kingdom Treasury Bond, 5.25%, 1/21/97. . . . . 10,883,240
14,000,000 United Kingdom Treasury Bond, 8%, 1/27/98 . . . . . . 18,925,232
-----------
31,108,658
-----------

FRENCH FRANCS 2.4% FRF 40,000,000 Government of France, 8.5%, 3/12/97 . . . . . . . . . 8,447,994
-----------
ITALIAN LIRE 8.6% ITL 19,000,000,000 Republic of Italy, 8.5%, 8/1/97 . . . . . . . . . . . 11,502,041
33,000,000,000 Republic of Italy, 8.5%, 1/1/99 . . . . . . . . . . . 19,398,269
-----------
30,900,310
-----------

SPANISH PESETAS 4.2% ESP 995,000,000 Kingdom of Spain, 10.25%, 11/30/98. . . . . . . . . . 8,157,407
835,000,000 Kingdom of Spain, 11.45%, 8/30/98 . . . . . . . . . . 7,042,133
-----------
15,199,540
-----------

SWEDISH KRONOR 4.9% SEK 110,000,000 Kingdom of Sweden, 11%, 1/21/99 . . . . . . . . . . . 17,568,505
-----------
TOTAL FOREIGN DENOMINATED DEBT
OBLIGATIONS (Cost $235,503,958) . . . . . . . . . . 245,346,536
-----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
---
9

<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

% of Principal Market
Portfolio Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------

27.0% U.S. DOLLAR DENOMINATED DEBT OBLIGATIONS
<S> <C> <C> <C> <C> <C>
U.S. DOLLARS USD 54,163 Federal Home Loan Mortgage Corp., REMIC,
Series 1543 PN, Interest only, 2/15/08 . . . . . . . 93,992
2,003,981 Federal Home Loan Mortgage Corp.,
Series 1223 C, 7.25%, 7/15/20. . . . . . . . . . . . 2,018,071
2,278,681 Federal National Mortgage Association,
7.422%, 11/1/21. . . . . . . . . . . . . . . . . . . 2,319,983
2,704,455 Federal National Mortgage Association,
7.696%, 3/1/22 . . . . . . . . . . . . . . . . . . . 2,760,234
3,333,125 General Electric Capital Mortgage Services, Inc.,
1991#5 Series A (PT), 8.5%, 9/25/06. . . . . . . . . 3,404,993
18,323,117 Government National Mortgage Association
Pass-thru, 10% with various maturities to
2/15/25. . . . . . . . . . . . . . . . . . . . . . . 20,079,461
17,300,000 Home Savings of America Subordinated Note,
10.5%, 6/12/97 . . . . . . . . . . . . . . . . . . . 17,581,125
11,923,000 Household Finance Corp., Commercial Paper,
5.82%, 11/1/95 . . . . . . . . . . . . . . . . . . . 11,923,000
4,500,000 RJR Nabisco Inc., Medium-Term Note,
6.8%, 9/1/01 . . . . . . . . . . . . . . . . . . . . 4,567,500
3,500,000 Time Warner Inc., Senior Note, 7.45%,
2/1/98 . . . . . . . . . . . . . . . . . . . . . . . 3,571,750
13,000,000 U.S. Treasury Bill, 5/2/96. . . . . . . . . . . . . . 12,645,851
1,500,000 U.S. Treasury Note, 6%, 6/30/96 . . . . . . . . . . . 1,503,516
5,011,230 United Companies Financial Corp., Home
Loan Trust, Series 1993 B1, 6.075%, 7/25/14. . . . . 4,929,797
10,000,000 United Savings Association of Texas,
9.05%, 5/15/98 . . . . . . . . . . . . . . . . . . . 9,875,000
-----------
TOTAL U.S. DOLLAR DENOMINATED DEBT
OBLIGATIONS (Cost $98,800,041) . . . . . . . . . . . 97,274,273
-----------

4.4% PRINCIPAL INDEXED SECURITIES

<S> <C> <C> <C> <C> <C>
U.S. DOLLARS USD 8,000,000 Bayerische Landesbank Girozentrale,
indexed to Czech Koruna performance
10.2%, 1/16/96 . . . . . . . . . . . . . . . . . . . 8,050,400
7,650,000 Citibank Time Deposit, indexed to Indonesian
Rupiah performance 13.6%, 12/15/95 . . . . . . . . . 7,629,728
-----------
TOTAL PRINCIPAL INDEXED SECURITIES
(Cost $15,650,000) . . . . . . . . . . . . . . . . . 15,680,128
-----------
TOTAL INVESTMENTS (Cost $349,953,999) . . . . . . . . 358,300,937
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
10

<PAGE>

INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

% of Principal Market
Portfolio Amount Value ($)
- ------------------------------------------------------------------------------------------------------------------------------

0.4% PURCHASED OPTIONS
<S> <C> <C> <C> <C> <C>
AUD 8,157,835 Put on Australian Dollars, strike price AUD .6875,
expiration date 1/8/96 . . . . . . . . . . . . . . . 351
GBP 8,400,000 Put on British Pounds, strike price GBP 1.463,
expiration date 11/14/95 . . . . . . . . . . . . . . --
CAD 18,701,220 Put on Canadian Dollars, strike price
CAD 1.3407, expiration date 1/9/96 . . . . . . . . . 181,402
DEM 28,300,000 Put on Deutschemarks, strike price
DEM 1.489, expiration date 4/19/96 . . . . . . . . . 241,512
DEM 19,400,000 Put on Deutschemarks, strike price
DEM 1.495, expiration date 2/1/96. . . . . . . . . . 91,568
DEM 42,975,000 Put on Deutschemarks, strike price
DEM 1.43250, expiration date 2/1/96. . . . . . . . . 497,092
FRF 100,000,000 Call on French Francs, strike price FRF 4.40
expiration date 11/28/95 . . . . . . . . . . . . . . --
FRF 125,000,000 Put on French Francs, strike price FRF 5,
expiration date 2/8/96 . . . . . . . . . . . . . . . 312,500
FRF 100,000,000 Put on French Francs, strike price FRF 5.07,
expiration date 11/28/95 . . . . . . . . . . . . . . 24,800
ITL 25,000,000,000 Put on Italian Lire, strike price ITL 1636.9,
expiration date 11/9/95. . . . . . . . . . . . . . . 12,500

Number of
Contracts
-------------
2,500 Put on December 1995 Eurodeutschemarks,
strike price 94.5, expiration date 12/18/95. . . . . 44,389
65 Put on December 1995 Eurolira, strike
price 88.5, expiration date 12/18/95 . . . . . . . . 8,175
80 Put on March 1996 Mibor, strike
price 90.25, expiration date, 3/16/96. . . . . . . . 18,036
-----------
TOTAL PURCHASED OPTIONS (Cost $3,374,923) . . . . . . 1,432,325
-----------

- ------------------------------------------------------------------------------------------------------------------------------

TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $353,328,922) (a). . . . . . . . . . . . . . . 359,733,262
-----------
-----------
</TABLE>

(a) The cost for federal income tax purposes was $353,365,447. At October 31,
1995, net unrealized appreciation for all securities based on tax cost was
$6,367,815. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $10,813,907 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$4,446,092.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
11
<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------

WRITTEN OPTIONS
At October 31, 1995 outstanding written options were as follows
(Notes A and B):

Principal
Amount Expiration Strike Market
Call Options (000's) Date Price Value($)
- ------------ -------------------------------------------------------
<S> <C> <C> <C> <C>
GBP . . . . . . . . 8,400 11/14/95 GBP1.55 271,841
CAD . . . . . . . . 10,500 11/17/95 CAD1.3675 156,104
ITL . . . . . . . . 25,000,000 11/22/95 ITL1621.95 275,000
ECU . . . . . . . . 16,500 11/24/95 ECU1.2893 353,546
SEK . . . . . . . . 101,000 11/24/95 SEK6.992 782,750
ITL . . . . . . . . 25,300,000 12/22/95 ITL1613 290,950
AUD . . . . . . . . 8,158 1/8/96 AUD.715 359,385
CAD . . . . . . . . 18,701 1/9/96 CAD1.337 140,259
DEM . . . . . . . . 33,750 2/8/96 DEM1.35 297,000
GBP . . . . . . . . 9,000 4/26/96 GBP1.5723 371,254
</TABLE>
<TABLE>
<CAPTION>

Number of
Contracts
-------------
<S> <C> <C> <C> <C>
Eurodollar
Futures . . . . . . 99 6/17/96 94.25 123,750
Eurodollar
Futures . . . . . . 99 9/1/96 94.25 143,550
Eurodollar
Futures . . . . . . 99 12/16/96 94 173,250
---------
Total outstanding written options (Premiums received $3,198,757) 3,738,639
---------
---------
</TABLE>

CURRENCY ABBREVIATIONS
- --------------------------------------------------------------------------------
AUD Australian Dollar DEM Deutschemark
BEF Belgian Franc IDR Indonesian Rupiah
GBP British Pound ITL Italian Lira
CAD Canadian Dollar JPY Japanese Yen
CSK Czech Koruna NZD New Zealand Dollar
DKK Danish Krone ESP Spanish Peseta
NLG Dutch Guilder SEK Swedish Krona
ECU European Currency Unit CHF Swiss Franc
FRF French Franc USD United States Dollar

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
12
<PAGE>

FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES

OCTOBER 31, 1995
- --------------------------------------------------------------------------------

ASSETS
<S> <C> <C>
Investments, at market (identified cost
$349,953,999) (Note A) . . . . . . . . . . . . . . . . . . . $358,300,937
Purchased options, at market (identified cost
$3,374,923) (Note A) . . . . . . . . . . . . . . . . . . . . 1,432,325
Foreign currency, at market (identified cost
$345,935) (Note A) . . . . . . . . . . . . . . . . . . . . . 347,831
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . 12,169,478
Receivable on fund shares sold . . . . . . . . . . . . . . . . . 88,645
Unrealized appreciation on forward currency
exchange contracts (Notes A & E) . . . . . . . . . . . . . . 1,590,629
Deferred organization expenses (Note A). . . . . . . . . . . . . 3,818
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 23,615
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 373,957,278
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . $2,330,663
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . 1,238,808
Accrued management fee (Note C). . . . . . . . . . . . . . . 214,652
Other accrued expenses (Note C) . . . . . . . . . . . . . . 242,197
Written options, at market (premiums received
$3,198,757) (Note A) . . . . . . . . . . . . . . . . . . 3,738,639
Net payable on closed forward foreign currency
exchange contracts (Note A). . . . . . . . . . . . . . . 4,915,950
Unrealized depreciation on forward currency
exchange contracts (Notes A & E) . . . . . . . . . . . . 3,936,873
-------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . 16,617,782
------------
Net assets, at market value. . . . . . . . . . . . . . . . . . . $357,339,496
------------
------------
Net Assets
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . $ 8,346,938
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . (2,482,480)
Foreign currency related transactions. . . . . . . . . . . . (2,169,359)
Accumulated net realized loss. . . . . . . . . . . . . . . . . . (8,376,015)
Capital stock. . . . . . . . . . . . . . . . . . . . . . . . . . 339,244
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 361,681,168
------------
Net assets, at market value. . . . . . . . . . . . . . . . . . . $357,339,496
------------
------------
NET ASSET VALUE, offering and redemption price per
share ($357,339,496 DIVIDED BY 33,924,422 shares of
capital stock outstanding, $.01 par value,
300,000,000 shares authorized) . . . . . . . . . . . . . . . $10.53
------
------

</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
----
13
<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------

STATEMENT OF OPERATIONS

YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

INVESTMENT INCOME
<S> <C> <C>
Interest (net of foreign taxes withheld of $311,268) . . . . . . $37,661,488

Expenses:
Management fee (Note C). . . . . . . . . . . . . . . . . . . . . $2,392,536
Services to shareholders (Note C). . . . . . . . . . . . . . . . 946,861
Directors' fees and expenses (Note C). . . . . . . . . . . . . . 46,857
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . 577,357
Reports to shareholders. . . . . . . . . . . . . . . . . . . . . 117,057
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,060
Legal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,932
State registration fees. . . . . . . . . . . . . . . . . . . . . 31,823
Amortization of organization expenses (Note A) . . . . . . . . . 11,706
Interest (Note D). . . . . . . . . . . . . . . . . . . . . . . . 17,788
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,216 4,321,193
--------------------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . 33,340,295
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 4,530,521
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,414,222)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . (1,142,640)
Foreign currency related transactions . . . . . . . . . . . . (30,136,115) (28,162,456)
-----------
Net unrealized appreciation during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 5,952,232
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,588
Futures contracts . . . . . . . . . . . . . . . . . . . . . . 351,349
Foreign currency related transactions . . . . . . . . . . . . 8,242,666 14,695,835
--------------------------
Net loss on investment transactions. . . . . . . . . . . . . . . (13,466,621)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . $19,873,674
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
14

<PAGE>

FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS

Years Ended October 31,
------------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . $ 33,340,295 $ 59,953,874
Net realized loss from investment transactions . . . . . . . (28,162,456) (52,947,602)
Net unrealized appreciation (depreciation)
on investment transactions during the
period . . . . . . . . . . . . . . . . . . . . . . . . . 14,695,835 (12,317,902)
------------ -------------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . . . . . . 19,873,674 (5,311,630)
------------ -------------
Distributions to shareholders from:
Net investment income ($.36 and $.02
per share, respectively) . . . . . . . . . . . . . . . . (14,850,406) (1,254,033)
------------ -------------
Tax return of capital ($.44 and $.85 per
share, respectively) . . . . . . . . . . . . . . . . . . (18,185,444) (58,437,746)
------------ -------------
Fund share transactions:
Proceeds from shares sold. . . . . . . . . . . . . . . . . . 51,277,133 212,114,019
Net asset value of shares issued to
shareholders in reinvestment of
distributions. . . . . . . . . . . . . . . . . . . . . . 23,158,972 45,034,626
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . (263,863,651) (673,153,473)
------------ -------------
Net decrease in net assets from Fund
share transactions . . . . . . . . . . . . . . . . . . . (189,427,546) (416,004,828)
------------ -------------
DECREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . (202,589,722) (481,008,237)
Net assets at beginning of period. . . . . . . . . . . . . . 559,929,218 1,040,937,455
------------ -------------
NET ASSETS AT END OF PERIOD. . . . . . . . . . . . . . . . . $ 357,339,496 $ 559,929,218
------------ -------------
------------ -------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period. . . . . . . . . . 51,959,978 89,107,607
------------ -------------
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . 4,874,517 18,796,142
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . . . . . . 2,204,979 4,010,556
Shares redeemed. . . . . . . . . . . . . . . . . . . . . . . (25,115,052) (59,954,327)
------------ -------------
Net decrease in Fund shares. . . . . . . . . . . . . . . . . (18,035,556) (37,147,629)
------------ -------------
Shares outstanding at end of period. . . . . . . . . . . . . 33,924,422 51,959,978
------------ -------------
------------ -------------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
15
<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME 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.

* Annualized
** Not annualized

- ----
16
<PAGE>

NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

A. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------

Scudder Short Term Global Income Fund (the "Fund") is a non-diversified series
of Scudder Global Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The policies described below are followed consistently by the Fund in
the preparation of its financial statements in conformity with generally
accepted accounting principles.

SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which prices reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.

OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on currencies as a
hedge against potential adverse price movements in the value of portfolio
assets. In addition, during the period, the Fund purchased call options and
wrote put options on currencies to lock in the purchase price of a security or
currency which it expects to purchase in the near future and to enhance
potential gain.

----
17
<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
- -------------------------------------------------------------------------------

paid. If the Fund elects to close out the option it would recognize a gain or
loss equal to the difference between the cost of acquiring the option and the
amount realized upon the sale of the option.

The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.

When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.

FUTURES CONTRACTS. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased interest rate futures to increase the duration of the portfolio,
as a temporary substitute for purchasing selected investments, and to lock in
the purchase price of a security which it expects to purchase in the near
future. During the period, the Fund sold interest rate futures to hedge against
declines in the value of portfolio securities.

- ---
18

<PAGE>

NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

Upon entering into a futures contract, the Fund is required to deposit with
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund 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 a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.

Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to hedge, the
Fund gives up the opportunity to profit from favorable price movements in the
hedged positions during the term of the contract.

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.

FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:

(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and
certain expenses at the daily rates of exchange prevailing on the
respective dates of such transactions.

----
19

<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
- -------------------------------------------------------------------------------

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. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge against changes in exchange rates
relating to foreign currency denominated assets.

Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.

FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes, and no federal income tax
provision was required. At October 31, 1995, the Fund had a net tax basis
capital loss carryforward of approximately $9,472,000 which may be applied
against any realized net taxable capital gains of each succeeding year until
fully utilized or until October 31, 2002 ($4,463,000) and October 31, 2003
($5,009,000), the respective expiration dates, whichever occurs first.

- ----
20

<PAGE>

NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

DISTRIBUTION OF INCOME AND GAINS. Distribution of net investment income is
declared as a dividend to shareholders of record as of the close of business
each day and is distributed to shareholders monthly. During any particular year
net realized gains and certain unrealized gains (which for federal income tax
reporting purposes may be considered realized) from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed and, therefore, will be distributed to shareholders. An
additional distribution may be made to the extent necessary to avoid the payment
of a four percent federal excise tax.

The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to investments in options, futures, forward foreign
currency contracts and foreign currency denominated investments. As a result,
net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.

For the year ended October 31, 1995, a portion of the Fund's income dividends
will be treated as nontaxable return of capital distributions under U.S. tax
rules. The final tax status of 1995 distributions will be provided to
shareholders in January 1996.

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.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are accreted for both tax and financial reporting purposes.

---
21
<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
- -------------------------------------------------------------------------------
B. Purchases and Sales of Securities
- -------------------------------------------------------------------------------
During the year ended October 31, 1995, purchases and sales
(including maturities) of investment securities (excluding short-
term investments) aggregated $664,284,533 and $816,592,171,
respectively.

The aggregate face value of futures contracts opened and closed
during the year ended October 31, 1995 was $332,702,513 and
$884,125,795, respectively.

Transactions in written options for the year ended October 31, 1995
are summarized as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
OPTIONS ON CURRENCIES (000 OMITTED)
-----------------------------------------------------------------

Number of
Contracts Premiums AUD CAD DEM DKK Premiums
------------------------- ----------------------------------------------------------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning
of Period 920 $ 402,334 39,193 - - - $ 436,337
Written... 3,836 3,627,514 197,947 135,565 146,799 371,100 4,614,973
Closed.... (4,459) (3,621,969) (124,331) (93,864) (113,049) (91,700) (2,417,715)
Exercised - - (58,704) - - (279,400) (1,331,284)
Expired... - - (45,947) (12,500) - - (415,623)
------ --------- -------- --------- -------- -------- -----------
End of
Period... 297 $ 407,879 8,158 29,201 33,750 - $ 886,688
------ --------- -------- --------- -------- -------- -----------
------ --------- -------- --------- -------- -------- -----------
-----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
OPTIONS ON CURRENCIES (000 OMITTED)
--------------------------------------------------------------------------------------------

ECU ESP FRF GBP ITL JPY Premiums
-------------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning
of Period - - - - - 934,928 $ 455,325
Written... 16,500 16,915,000 100,000 50,600 437,137,848 - 8,025,455
Closed.... - (10,340,000) (100,000) (33,200) (323,000,000) (934,928) (5,511,030)
Exercised - (5,750,000) - - (45,500,000) - (720,313)
Expired.. - (825,000) - - (18,337,848) - (557,025)
-------- ----------- -------- ------- ------------ --------- ----------
End of
Period.. 16,500 - - 17,400 50,300,000 - $ 1,692,412
-------- ----------- -------- ------- ------------ --------- ----------
-------- ----------- -------- ------- ------------ --------- ----------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- ---
22

<PAGE>

NOTES TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
OPTIONS ON CURRENCIES (000 OMITTED)
--------------------------------------------------------------------------------
NZD SEK ESP/DEM ITL/DEM SEK/DEM Premiums
-------------------------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Beginning
of Period 35,500 - 2,540,000 43,000,000 160,000 $ 878,376
Written... 121,296 101,000 1,500,000 118,000,000 545,000 2,310,649
Closed.... (141,596) - (1,500,000) (32,000,000) (190,000) (1,508,025)
Exercised (15,200) - - - (351,000) (516,271)
Expired.. - - (2,540,000) (129,000,000) (164,000) (952,951)
----------- ----------- ------------ ------------- ---------- -----------
End of
Period.. - 101,000 - - - $ 211,778
----------- ----------- ------------ ------------- ---------- -----------
----------- ----------- ------------ ------------- ---------- -----------
-------------------------------------------------------------------------------------------------------
</TABLE>

C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser
a fee equal to an annual rate of 0.75% of the first $1,000,000,000 of average
daily net assets and 0.70% of such assets in excess of $1,000,000,000 computed
and accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. The
Adviser has agreed not to impose all or a portion of its management fee until
February 29, 1996, and during such period to maintain the annualized expenses of
the Fund at not more than 1.00% of average daily net assets. For the year ended
October 31, 1995, the Adviser did not impose a portion of its management fee
aggregating $844,364 and the amount imposed aggregated $2,392,536 which was
equivalent to an annual effective rate of 0.55% of the Fund's average daily net
assets.

Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund. For
the year ended October 31, 1995, the amount charged by SSC aggregated $720,994,
of which $51,237 is unpaid at October 31, 1995.

----
23
<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
- -------------------------------------------------------------------------------

D. SHORT-TERM DEBT
- -------------------------------------------------------------------------------
During the year ended October 31, 1995, the Fund periodically borrowed amounts
from a bank at the existing prime rates. The arrangement with the bank allows
the Fund to borrow a maximum amount based on net asset value. There were no
month-end borrowings outstanding during the year ended October 31, 1995.

During the year ended October 31, 1995, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $4,617,471 with a weighted average interest rate of 8.24%. Interest expense
for the year ended October 31, 1995 was $17,788 (less than $.01 per share).

E. COMMITMENTS
- -------------------------------------------------------------------------------
As of October 31, 1995, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of
$2,346,244.

<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE (U.S.$)
- ------------------------ --------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
SEK 53,835,810 USD 7,334,579 11/6/95 (773,346)
USD 4,689,163 SEK 32,689,090 11/6/95 242,806
DKK 133,609,943 USD 24,367,205 11/22/95 to 1/26/96 (94,365)
ESP 2,850,000,000 USD 22,188,509 12/15/95 (1,058,294)
USD 7,367,355 ESP 915,762,213 12/15/95 111,772
FRF 64,069,454 USD 12,921,918 1/5/96 (178,344)
DEM 45,651,350 USD 32,939,238 1/29/96 384,613
USD 27,400,433 DEM 38,485,000 1/29/96 65,311
ECU 11,777,001 USD 15,347,788 2/20/96 (2,839)
USD 4,242,161 ECU 3,275,800 2/20/96 32,666
BEF 517,548,200 USD 17,194,292 2/22/96 (765,717)
USD 12,447,997 BEF 380,000,000 2/22/96 753,461
CHF 18,068,105 USD 15,056,754 3/13/96 (1,063,968)
--------------
(2,346,244)
--------------
--------------
</TABLE>

- ----
24

<PAGE>

SCUDDER SHORT TERM GLOBAL INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND TO THE SHAREHOLDERS
OF SCUDDER SHORT TERM GLOBAL INCOME FUND:

We have audited the accompanying statement of assets and liabilities of Scudder
Short Term Global Income Fund including the investment portfolio, as of October
31, 1995, 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 four years in the period
then ended and for the period March 1, 1991 (commencement of operations) to
October 31, 1991. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Short Term Global Income Fund as of October 31, 1995, 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 four years in the period then ended and for the period March 1, 1991
(commencement of operations) to October 31, 1991 in conformity with generally
accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 19, 1995

----
25
<PAGE>
SHAREHOLDER MEETING RESULTS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
A Special Meeting of Shareholders of Scudder Global Fund, Inc., consisting of Scudder Emerging
Markets Income Fund, Scudder Global Fund, Scudder Global Small Company Fund, Scudder International Bond Fund
and Scudder Short Term Global Income Fund was held on Wednesday, December 6, 1995, at the offices of
Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue, New York, New York 10154. The three matters
voted upon by Shareholders of Scudder Short Term Global Income Fund and the resulting votes for each matter
are presented below.

1. The election of eight Directors to hold office until their respective successors shall have been
duly elected and qualified.

Director:
Number of Votes:
----------------
For Withheld Broker Non-Votes*
--- -------- -----------------
<S> <C> <C> <C>
Edmond D. Villani 20,580,325 688,602 0
Nicholas Bratt 20,548,437 720,491 0
Daniel Pierce 20,548,367 720,560 0
Paul Bancroft III 20,523,637 745,290 0
Sheryle J. Bolton 20,485,387 783,540 0
Thomas J. Devine 20,522,688 746,239 0
William H. Gleysteen, Jr. 20,520,409 748,518 0
William H. Luers 20,522,276 746,651 0

2. Ratification or rejection of the action taken by the Board of Directors in selecting Coopers &
Lybrand L.L.P. as independent accountants for the fiscal year ending October 31, 1996.

Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
20,333,747 366,126 569,054 0

3. Approval of the change to the name, investment objective and certain investment policies of Scudder
Short Term Global Income Fund.

Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
17,735,111 1,010,791 879,211 0

- --------------------------------------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees when the broker or nominee
neither has received instructions from the beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter.
</TABLE>

26
<PAGE>

(This page intentionally left blank.)

27
<PAGE>

(This page intentionally left blank.)

<PAGE>
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Sheryle J. Bolton
Director; Consultant
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Daniel Pierce*
Director and Vice President
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Columbia University
Graduate School of Business
Adam Greshin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Douglas M. Loudon*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
Cornelia M. Small*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and 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.

29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<C> <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 Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
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>
<C> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------

For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163

For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
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 RELATIONS
1-800-225-2470

For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION 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
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------

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 that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------

Scudder Investor Relations 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 Over 75 Years of Serving Investors
- --------------------------------------------------------------------------------

Established in 1919 by Theodore Scudder, Sidney Stevens, and
F. Haven Clark, Scudder, Stevens & Clark 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 37 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 us
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
long-standing 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
Emerging Markets
Income Fund

Annual Report
October 31, 1995

* For investors seeking high current income and, secondarily, long-term
capital appreciation through investment primarily in high-yielding debt
securities issued in emerging markets.

* A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.

<PAGE>
SCUDDER EMERGING MARKETS INCOME FUND
- --------------------------------------------------------------------------------

CONTENTS

2 In Brief

3 Letter from the Fund's Chairman

4 Performance Update

5 Portfolio Summary

6 Portfolio Management Discussion

10 Investment Portfolio

14 Financial Statements

17 Financial Highlights

18 Notes to Financial Statements

23 Report of Independent Accountants

24 Shareholder Meeting Results

25 Officers and Directors

26 Investment Products and Services

27 How to Contact Scudder

IN BRIEF

* The favorable momentum previously established in emerging country debt
markets was halted at the end of 1994 when Mexico devalued and subsequently
floated its currency. This action provoked a sharp sell-off in emerging
market debt securities, with prices declining through January and February
1995.

* In early March, emerging market debt began a sustained rally after decisive
action by economic leaders in Argentina and Mexico bolstered investor
confidence. Solid positive monthly returns in emerging debt markets were
posted through September before easing somewhat in October.

* Despite difficult market conditions, Scudder Emerging Markets Income Fund
posted a total return of 3.46% for its fiscal year ended October 31, 1995.
The Fund closed its fiscal year with a 30-day net annualized SEC yield of
13.08%, up substantially from 9.13% a year earlier.

* The Fund continues to hold a well-diversified portfolio, with investments in
Latin America, eastern Europe, and northern Africa.

2
<PAGE>
LETTER FROM THE FUND'S CHAIRMAN
- --------------------------------------------------------------------------------

Dear Shareholders,

It has been an eventful 12 months for emerging market bonds, featuring
the early 1995 turmoil after Mexico's currency devaluation followed by a strong
rally for emerging market debt that began in March. At this juncture, what is
the outlook for emerging market bonds?

We believe the long-term outlook is positive, based on several factors.
Emerging countries are becoming much more competitive in the world marketplace
as a result of lower domestic costs and currency adjustments. A number of the
major emerging countries have taken strict measures to ensure their fiscal
stability. In addition, the ability of many of these countries to service their
external debt has been improved as exports have surged and international reserve
positions have been strengthened. Furthermore, the demonstrated determination of
these countries to honor their external obligations has permitted their rapid
return to the international capital markets following the Mexican peso crisis.

Currently, countries such as Mexico and Argentina are in recession, a
condition which is usually favorable for bond markets of developed countries,
but not as helpful in emerging countries where resulting improvements in
external accounts can be offset by pressures on government finances and the
banking sector. We foresee a return to growth in both Mexico and Argentina in
early 1996 that should further support the market for emerging country issues. A
positive political environment in Latin American and Eastern European countries
would also be a big plus for their bond markets in 1996. Our strategy going
forward is to position your Fund to benefit from the brightening economic
outlook in emerging countries. The Fund's high yield should help provide a
buffer against price volatility in those markets.

We would also like to take this opportunity to announce that on October
6, 1995, we introduced Scudder Small Company Value Fund, a pure no-load(TM)
mutual fund designed to seek long-term growth of capital through a disciplined,
value-oriented approach to small-stock investing. For more information about
this Fund and other investment products, see page 26.

Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Emerging Markets Income Fund

3
<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND
PERFORMANCE UPDATE as of October 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER EMERGING MARKETS INCOME FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,346 3.46% 3.46%
Life of
Fund* $ 9,980 -.20% -.11%

JP MORGAN COMPOSITE EMERGING MARKETS
BOND/LATIN EUROBOND INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,785 7.85% 7.85%
Life of
Fund* $ 9,460 -5.40% -2.99%

* The Fund commenced operations on
December 31, 1995

A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:

Scudder Emerging Markets Income Fund
Year Amount
- ----------------------
12/31/93* $10,000
1/94 $10,058
4/94 $ 8,962
7/94 $ 9,067
10/94 $ 9,646
1/95 $ 8,756
4/95 $ 8,858
7/95 $ 9,507
10/95 $ 9,980

JP Morgan Composite Emerging Markets
Bond/Latin Eurobond Index
Year Amount
- ----------------------
12/31/93* $10,000
1/94 $10,041
4/94 $ 8,314
7/94 $ 8,397
10/94 $ 8,771
1/95 $ 7,914
4/95 $ 8,149
7/95 $ 9,070
10/95 $ 9,460

The unmanaged JP Morgan Composite Emerging Markets Bond/Latin
Eurobond Index (EMB/LEI) tracks the performance of U.S.
dollar-denominated sovereign restructured bonds (mostly Brady
bonds) and Latin-issued Eurobonds. The composite includes debt
issues from five countries in Latin America, plus Bulgaria,
Nigeria, the Philippines and Poland. Index returns assume
reinvested dividends and, unlike Fund returns, do not reflect
any fees or expenses.

- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------

A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.

YEARLY PERIODS ENDED OCTOBER 31

1994* 1995
--------------------
NET ASSET VALUE... $11.05 $10.26
INCOME DIVIDENDS.. $ .51 $ 1.11
FUND TOTAL
RETURN (%)........ -3.54 3.46
INDEX TOTAL
RETURN (%)........ -12.23 7.85

Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results.
Total return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not maintained the Fund's expenses, the total return
for the one year and life of Fund periods would have been lower.

4
<PAGE>

PORTFOLIO SUMMARY as of October 31, 1995
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------

Debt Obligations 95% Through challenging market
Cash Equivalents 5% conditions, we have continued
---- to maintain a well-diversified
100% portfolio of the highest quality
==== and most liquid securities
available in the emerging markets.

A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.

- --------------------------------------------------------------------------
MARKET EXPOSURE (Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------

Geographical Currency
- --------------------------- -------------------------
Brazil 28% United States 95%
Argentina 19% Argentina 2%
Poland 14% Mexico 2%
Mexico 10% Poland 1%
Panama 7% ----
Venezuela 6% 100%
Bulgaria 4% ====
Ecuador 4%
Morocco 4% Consistent with the Fund's strategy to
Other 4% maintain a regionally diversified portfolio,
---- 26% of portfolio assets were invested
100% outside of Latin America as of the close of
==== the period.

Graphs in the form of pie charts appears here,
illustrating the exact data points in the above tables.

- --------------------------------------------------------------------------
AVERAGE LIFE (Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------

0 - 3 years 5% We continue to hold a large
3 - 5 years 15% percentage of longer-duration
5 - 10 years 27% bonds to capitalize on the
Greater than 10 years 53% current trend of improving prices
---- and declining yields in the
100% emerging markets.
====
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 10.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.

5
<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------

Dear Shareholders,

The 12 months ended October 31, 1995, have marked a challenging period for
the emerging country debt markets. The favorable momentum previously achieved in
Latin America and other emerging countries was abruptly halted in late December
1994, when Mexico devalued and subsequently floated its currency. The resulting
sell-off in Mexico's financial markets quickly spilled over into the debt and
equity markets of other emerging countries. Delays in the development of both an
effective Mexican economic program and a U.S.-led support package for Mexico put
additional pressure on emerging financial markets and capital flows to emerging
countries during most of the first quarter of 1995.

In March, decisive action by economic leaders in Argentina and Mexico to
deepen economic reform bolstered investor confidence and sparked a strong rally
in emerging market debt. First quarter losses in these markets were erased by
May and solid positive returns were posted for six consecutive months through
September, before the markets eased slightly in October over concerns about the
lingering recessions in Argentina and Mexico. Increased investor confidence was
evidenced by a return of local capital to many emerging economies and renewed
access by a number of emerging countries to the international capital markets.
The market recovery was further enhanced by declining long-term U.S. interest
rates, which were particularly helpful for the many U.S.-dollar fixed-rate bonds
in which the Fund invests.

Fund Performance and Strategy

Despite difficult market conditions, Scudder Emerging Markets Income Fund
posted a total return of 3.46% during the fiscal year ended October 31, 1995.
This compares with a total return of 7.85% during the same period for the
unmanaged J.P. Morgan Composite Emerging Markets Bond/Latin Eurobond Index. The
Fund underperformed the J.P. Morgan Index largely because we chose to maintain a
defensive stance by holding a significant cash position through the early spring
of 1995 in view of the winter's events. As market conditions improved in the
second half of its fiscal year, however, the Fund was fully invested.

Even with our conservative approach to these volatile markets, the Fund's
net asset value declined from $11.05 to $10.26 during the period. But the change
in price was more than offset by income distributions of $1.11 per share. The
Fund's high yield

6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------

remains attractive to investors. On October 31, 1995, the Fund's 30-day net
annualized SEC yield was 13.08%, up substantially from 9.13% at the beginning of
the fiscal year.

Through challenging market conditions, we have continued to maintain a
well-diversified portfolio, seeking the highest quality and most liquid
securities available in the emerging markets consistent with the Fund's
objectives and policies. Although the Fund may invest up to 50% of its assets in
corporate obligations, only 2% of the Fund's assets were invested in such
securities as of October 31, 1995, while 93% of assets were invested in
sovereign debt. Despite having generally lower yields, sovereign obligations
tend to be of higher credit quality than corporate debt. In addition, we often
favor sovereign Brady bonds because their large volume greatly enhances their
liquidity and because many are backed by U.S. Treasury bonds, a defensive
characteristic which aids their performance in poor markets. As market
conditions improved during the spring, we increased our holdings in
uncollateralized Brady bonds, which tend to perform better than their
collateralized counterparts as economic conditions improve in the issuer
countries.

In June, we substantially increased the Fund's holdings in fixed-rate
securities because we believed the U.S. Federal Reserve would soon begin to
lower short-term interest rates, which it did in early July. By the end of
October, however, in light of the significant declines that had taken place in
long-term U.S.-dollar interest rates, we took some profits and reduced
fixed-rate holdings to approximately 37% of the Fund's assets.

Securities denominated in local currencies can offer relatively high yields
as well as the opportunity to benefit from currency appreciation in developing
countries with improving economies. As the Mexican peso crisis demonstrated,
however, local currencies can also be susceptible to dramatic devaluations when
there is a loss of confidence in a country's economic policies. We have
therefore continued to take a cautious and opportunistic approach with respect
to the Fund's exposure to foreign currencies, limiting it to countries where we
foresee a stable or improving exchange rate. As of October 31, 1995, only 5% of
the Fund's assets was invested in securities denominated in local currencies,
with the balance held in U.S.-dollar denominated obligations.

In line with the Fund's strategy to maintain a regionally diversified
portfolio, 24% of portfolio assets were invested outside of Latin America as of
October 31, 1995. In particular, we

7
<PAGE>
SCUDDER EMERGING MARKETS INCOME FUND
- --------------------------------------------------------------------------------

increased holdings in eastern Europe from 6% to 18% of assets during the
12-month period. In early 1995, many investors seemed unable to differentiate
among emerging markets on the basis of fundamentals and sold assets
indiscriminately, thereby undercutting the benefits of our diversification
strategy. However, our strategy began to pay off beginning in the second quarter
of 1995, as confidence returned to the markets and investors began to
distinguish among issuers once again. The Fund's holdings of Polish bonds (13%
of assets) in particular have benefited performance. Bolstered by an
investment-grade rating from Moody's for Poland's Eurobond issue in June, Polish
debt markets rallied strongly and have been among the best performing emerging
markets in 1995. Poland has experienced strong growth in 1995 and its manageable
debt profile is buttressed by high international reserves.

A Positive Outlook for Argentina and Brazil

The Fund's core Latin American holdings continue to be in Argentina (18% of
assets) and Brazil (26% of assets). The Argentine government deftly handled the
spill-over effects of the Mexican peso crisis in early 1995, cutting government
spending to ensure fiscal stability. In addition, exports have grown rapidly,
enhancing the country's ability to pay back its debt. President Menem's
first-round re-election in May signaled popular approval of the economic
measures undertaken by the government over the last several years. Recently,
however, the Argentine debt markets have experienced heightened volatility over
the uncertainty of highly regarded Economy Minister Cavallo's tenure within the
Menem administration. Nonetheless, our long-term outlook for Argentina remains
positive.

The Fund modestly increased its holdings in Brazil during the fiscal year
as the country's fundamental outlook improved. Brazil successfully slowed the
torrid pace of economic growth exhibited early in 1995, reducing the risk of an
overheated economy, and has improved its external accounts. High real interest
rates have also bolstered international reserves. Moreover, President Cardoso
has made gradual but steady progress on advancing important financial and
constitutional reforms through Congress.

<PAGE>

PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------

Throughout the fiscal year, the Fund held underweight positions in Mexico
(10% of assets) and Venezuela (6% of assets) on October 31. The Mexican
government has steadfastly adhered to sound economic policies implemented in the
aftermath of the peso crisis, but lingering political concerns and a significant
economic contraction have recently created some uneasiness in Mexico's financial
markets. Venezuelan government bonds offer attractive yields, but at the end of
the fiscal year investors were still awaiting progress on an International
Monetary Fund program to address the serious imbalances in that country's
economy.

Looking Ahead

The effects of the Mexican peso crisis in early 1995 proved a daunting
challenge for economic leaders in many emerging countries. To preserve their
countries' creditworthiness and to safeguard their hard-won access to the
international capital markets, leaders in Argentina and Mexico imposed further
fiscal discipline and accelerated the pace of economic reforms. In the near
term, these measures have created difficult domestic conditions in some emerging
economies, but we believe that they will improve the long-term fundamentals in
these countries. These developments, coupled with a constructive global
environment for the U.S. dollar, interest rates, and bond markets, should be
reflected in improving prices for emerging market debt in the coming months. In
keeping with Scudder Emerging Markets Income Fund's objectives, we will continue
to look for opportunities to provide high current income and long-term capital
appreciation for our shareholders.

Sincerely,

Your Portfolio Management Team

/s/M. Isabel Saltzman /s/Susan E. Gray
M. Isabel Saltzman Susan E. Gray

/s/Lincoln Y. Rathnam
Lincoln Y. Rathnam

Scudder Emerging Markets Income Fund:
A Team Approach to Investing

Scudder Emerging Markets Income Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment strategies
and select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.

Lead Portfolio Manager M. Isabel Saltzman has responsibility for the Fund's
investment strategies. Isabel, who joined Scudder in 1990, has been involved in
foreign finance and investing since 1979 and contributes special expertise in
Latin America. Lincoln Y. Rathnam, Portfolio Manager, is responsible for the
Fund's day-to-day management. Lincoln, who joined Scudder in 1984, has over 15
years of experience in international investing. Susan E. Gray, Portfolio
Manager, has responsibility for developing the Fund's trading strategies. Susan,
who has over four years of investment trading experience, has worked at Scudder
since 1987.

<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND
INVESTMENT PORTFOLIO as of October 31, 1995

% of Principal Market
Portfolio Amount ($) (b) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.0% COMMERCIAL PAPER
-------------------------------------------------------------------------------------------
4,000,000 Associates Corp. of North America,
5.82%, 11/1/95 . . . . . . . . . . . . . . . . . . 4,000,000
4,432,000 Household Finance Corp., 5.82%, 11/1/95. . . . . . . 4,432,000
-----------
Total Commercial Paper (Cost $8,432,000) . . . . . . 8,432,000
-----------

94.9% DEBT OBLIGATIONS
-------------------------------------------------------------------------------------------
Argentina 18.1% ARP 7,886,744 Argentine Republic, Bonos de Consolidacion
de Deudas Previsionales Pre 1 (BOCON),
Variable Rate Interest Bond, 3.5%, 4/1/01. . . . . 3,693,780
1,500,000 Argentine Republic, Collateralized Discount
Bond, Series L, Floating Rate Bond, LIBOR plus
.8125% (6.875%), 3/31/23 . . . . . . . . . . . . . 841,875
23,600,000 Argentine Republic, Collateralized Par
Bond, Series L, Step-up Coupon, 5%, 3/31/23 (d). . 11,224,632
20,800,000 Argentine Republic, Floating Rate Bond,
Series L, LIBOR plus .8125% (6.8125%), 3/31/05 (d) 12,310,896
3,150,000 Cedulas Hipotecarias, Floating Rate Bond,
LIBOR plus 2.9% (8.9781%), 9/1/00. . . . . . . . . 2,767,991
-----------
30,839,174
-----------

Brazil 26.4% 500,000 Minas Gerais, Series A, Without Warrants,
7.875%, 2/10/99. . . . . . . . . . . . . . . . . . 418,750
3,550,000 Minas Gerais, Series B, Without Warrants,
8.25%, 2/10/00 . . . . . . . . . . . . . . . . . . 2,902,125
11,250,000 Federative Republic of Brazil, Collateralized
Par Bond, Series Z, Step-up Coupon, 4.25%, 4/15/24 5,428,125
18,305,838 Federative Republic of Brazil C Bond, 4% with
4% Interest Capitalization, 4/15/14. . . . . . . . 9,290,213
8,875,000 Federative Republic of Brazil, Debt Conversion
Bond, Series L, Floating Rate Bond, LIBOR
plus .875% (6.875%), 4/15/12 . . . . . . . . . . . 4,859,063
14,500,000 Federative Republic of Brazil, Eligible Interest
Bond, Floating Rate Bond, LIBOR plus
.8125% (6.8125%), 4/15/06. . . . . . . . . . . . . 9,588,125
10,212,500 Federative Republic of Brazil, IDU Bond,
Floating Rate Bond, LIBOR plus .8125%
(6.6875%), 1/1/01. . . . . . . . . . . . . . . . . 8,725,254
714,287 Federative Republic of Brazil, New Money
Bond, LIBOR plus .8125% (6.75%), 10/15/99. . . . . 664,287

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --
10

<PAGE>

INVESTMENT PORTFOLIO

% of Principal Market
Portfolio Amount ($) (b) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5,000,000 Federative Republic of Brazil, New Money
Bond, LIBOR plus .875% (6.875%), 4/15/09 . . . . . 2,950,000
-----------
44,825,942
-----------
Bulgaria 3.3% 5,000,000 Republic of Bulgaria, Collateralized Discount
Bond, Tranche A, LIBOR plus .8125%
(6.75%), 7/28/24 . . . . . . . . . . . . . . . . . 2,525,000
5,500,000 Republic of Bulgaria, Floating Rate Interest
Reduction Bond, Series A, Step-up Coupon,
2%, 7/28/12. . . . . . . . . . . . . . . . . . . . 1,533,125
3,500,000 Republic of Bulgaria, Interest Arrears Bond,
Series PDI, LIBOR plus .8125% (6.75%),
7/28/11. . . . . . . . . . . . . . . . . . . . . . 1,544,375
-----------
5,602,500
-----------

Colombia 0.3% 500,000 Banco de Colombia, 7.5%, 10/21/98. . . . . . . . . . 482,500
-----------
Costa Rica 0.1% 200,000 Banco Central de Costa Rica, Principal B,
6.25%, 5/21/15 . . . . . . . . . . . . . . . . . . 104,000
-----------
Ecuador 3.9% 6,500,000 Republic of Ecuador, Collateralized Discount
Bond, Floating Rate Bond, LIBOR plus
.8125% (6.8125%), 2/28/25. . . . . . . . . . . . . 3,221,530
1,250,000 Republic of Ecuador, Collateralized Global
Par Bond, Step-up Coupon, 3%, 2/28/25. . . . . . . 414,062
9,193,375 Republic of Ecuador, Past Due Interest Bond,
LIBOR plus .8125% (6.8125%), 2/28/15 . . . . . . . 3,010,830
-----------
6,646,422
-----------

Jamaica 0.6% 1,500,000 Government of Jamaica Refinancing
Agreement, Tranche B, Floating Rate Bond,
LIBOR plus .8125% (7.125%), 11/15/04 . . . . . . . 990,000
-----------
Mexico 9.8% MXN 22,533,700 Certificados de la Tesoreria,12/21/95. . . . . . . . 3,020,723
14,750,000 United Mexican States, Collateralized Fixed
Par Bond, Series A, 6.25%, 12/31/19. . . . . . . . 8,665,625
3,250,000 United Mexican States, Collateralized Fixed
Par Bond, Series B, 6.25%, 12/31/19. . . . . . . . 1,909,375
4,500,000 United Mexican States, Collateralized
Discount Bond, Series A, Floating Rate Bond,
LIBOR plus .8125% (6.76563%), 12/31/19 . . . . . . 3,009,375
-----------
16,605,098
-----------

Morocco 3.9% 11,250,000 Kingdom of Morocco, Tranche A,
Restructuring and Consolidation Agreement,
LIBOR plus .8125% (6.6875%), 1/1/09. . . . . . . . 6,693,750
-----------
Panama 6.5% 9,250,000 Republic of Panama, Floating Rate Bond,
LIBOR plus 1% (7.25%), 5/10/02 . . . . . . . . . . 7,561,875
9,000,000 Republic of Panama, Interest Reduction
Bond, 3.5%, 12/29/49 (c) . . . . . . . . . . . . . 3,465,000
-----------
11,026,875
-----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
--
11

<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND

% of Principal Market
Portfolio Amount ($) (b) Value ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Poland 13.4% 26,100,000 Republic of Poland, Past Due Interest Bond,
Step-up Coupon, 3.75%, 10/27/14. . . . . . . . . . 16,769,250
6,000,000 Republic of Poland, Collateralized Discount
Bond, LIBOR plus .8125% (6.875%), 10/27/24 . . . . 4,590,000
PLZ 3,712,032 Morgan Guaranty Trust Company Time
Deposit, 24.5%, 3/20/96. . . . . . . . . . . . . . 1,520,223
-----------
22,879,473
-----------
Russia 1.9% 10,000,000 Vnesheconombank, Bilateral Non-Performing
Loan Agreement, 3.25%, 12/29/95* . . . . . . . . . 3,250,000
-----------
United States 0.8% 500,000 Comcast Corp., 9.5%, 1/15/08 (d) . . . . . . . . . . 515,000
500,000 Penn Traffic Co., 9.625%, 4/15/05 (d). . . . . . . . 362,500
500,000 Westpoint Stevens Inc., 9.375%, 12/15/05 . . . . . . 500,000
-----------
1,377,500
-----------

Venezuela 5.9% 20,500,000 Republic of Venezuela, Debt Conversion
Bond, Series DL, LIBOR plus .875%
(6.8125%), 12/18/07. . . . . . . . . . . . . . . . 10,096,250
-----------
Total Debt Obligations (Cost $162,686,923) . . . . . 161,419,484
-----------

0.1% PREFERRED STOCKS
Shares
-------------------------------------------------------------------------------------------
Argentina 13,400 Nortel Inversora "A" (ADR)
(Telecommunication services) (e)
(Cost $129,980). . . . . . . . . . . . . . . . . . 105,458
-----------

0.0% PURCHASED OPTIONS

Principal
Amount ($) (b)
-------------------------------------------------------------------------------------------
1,255,000 Put on German Deutschemark, strike price
1.5542, expires 3/14/96. . . . . . . . . . . . . . 3,279
20,500,000 Put on Venezuela Debt Conversion Bond,
strike price 47.625, expires 11/13/95. . . . . . . 67,220
-----------
Total Purchased Options (Cost $257,107). . . . . . . 70,499
-----------

- --------------------------------------------------------------------------------------------------------------

Total Investment Portfolio - 100.0%
(Cost $171,506,010) (a). . . . . . . . . . . . . . 170,027,441
-----------

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --
12

<PAGE>

INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $172,690,463. At October 31,
1995, net unrealized depreciation for all securities based on tax cost was
$2,663,022. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $2,466,492 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$5,129,514.

(b) Principal amount is stated in U.S. dollars unless otherwise noted.

(d) At October 31, 1995, these securities, in part, have been segregated to
cover when-issued or forward delivery securities.

(e) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities at October 31, 1995 aggregated
$129,980. See Note A of the Notes to Financial Statements.

* Non-income producing security.

WRITTEN OPTIONS
----------------------------------------------------------------------
At October 31, 1995 outstanding written options were as follows (Note
A):

Principal
Amount Expiration Strike Market
Call Options (U.S.$) Date Price Value($)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEM 1,255,000 3/14/96 DEM 1.39 . . . . . 24,322
------
Total outstanding written options (Premiums received $11,107). . . . 24,322
======
</TABLE>

CURRENCY ABBREVIATIONS
----------------------------------------------------------------------
ARP Argentine Peso DEM German Deutschemark
MXN Mexican Peso PLZ Polish Zloty

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
--
13
<PAGE>

FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES

OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $171,506,010)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . $ 170,027,441
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 778
Receivables:
Investments sold . . . . . . . . . . . . . . . . . . . 1,792,484
Interest . . . . . . . . . . . . . . . . . . . . . . . 2,815,590
Fund shares sold . . . . . . . . . . . . . . . . . . . 439,001
Deferred organization expenses (Note A). . . . . . . . . 48,616
-------------
Total assets . . . . . . . . . . . . . . . . . . . . . 175,123,910
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . $ 1,762,484
When-issued and forward delivery securities
(Note A). . . . . . . . . . . . . . . . . . . . . . 3,490,781
Fund shares redeemed . . . . . . . . . . . . . . . . . 121,707
Written options, at market (premium received $11,107)
(Note A). . . . . . . . . . . . . . . . . . . . . . 24,322
Accrued management fee (Note C). . . . . . . . . . . . 166,497
Other accrued expenses (Note C). . . . . . . . . . . . 155,318
-------------
Total liabilities. . . . . . . . . . . . . . . . . . . 5,721,109
-------------
Net assets, at market value. . . . . . . . . . . . . . . $169,402,801
-------------
-------------
NET ASSETS
Net assets consist of:
Undistributed net investment income. . . . . . . . . . $ 613,098
Unrealized depreciation on:
Investments . . . . . . . . . . . . . . . . . . . . (1,478,569)
Options . . . . . . . . . . . . . . . . . . . . . . (13,215)
Foreign currency related transactions . . . . . . . (58,565)
Accumulated net realized loss. . . . . . . . . . . . . (6,217,701)
Capital stock. . . . . . . . . . . . . . . . . . . . . 165,114
Additional Brazilian capital . . . . . . . . . . . . . . 176,392,639
-------------
Net assets, at market value. . . . . . . . . . . . . . . $169,402,801
-------------
-------------
NET ASSET VALUE, offering and redemption per price
($169,402,801 DIVIDED BY 16,511,433 shares of
capital stock outstanding, $.01 par value, 100,000,000
shares authorized) . . . . . . . . . . . . . . . . . . $10.26
------
------

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

- --
14

<PAGE>

FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS

YEAR ENDED OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Dividends. . . . . . . . . . . . . . . . . . . . . . . . $ 14,103
Interest (net of withholding taxes of $7,436). . . . . . 17,981,225
-------------
17,995,328

Expenses:
Management fee (Note C). . . . . . . . . . . . . . . . . $ 1,037,443
Services to shareholders (Note C). . . . . . . . . . . . 320,210
Directors' fees and expenses (Note C). . . . . . . . . . 54,889
Custodian fees . . . . . . . . . . . . . . . . . . . . . 258,217
Auditing . . . . . . . . . . . . . . . . . . . . . . . . 44,555
Reports to shareholders. . . . . . . . . . . . . . . . . 69,042
Federal registration . . . . . . . . . . . . . . . . . . 24,020
State registration . . . . . . . . . . . . . . . . . . . 34,951
Legal. . . . . . . . . . . . . . . . . . . . . . . . . . 17,119
Amortization of organization expense (Note A). . . . . . 15,312
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 9,585 1,885,343
---------------------------------
Net investment income. . . . . . . . . . . . . . . . . . 16,109,985
-------------
Net realized and unrealized loss on investment
transactions
Net realized loss from:
Investments. . . . . . . . . . . . . . . . . . . . . . (4,681,454)
Foreign currency related transactions. . . . . . . . . (452,415) (5,133,869)
-------------
Net unrealized depreciation during the period on:
Investments. . . . . . . . . . . . . . . . . . . . . . (28,985)
Written options. . . . . . . . . . . . . . . . . . . . (13,215)
Foreign currency related transactions. . . . . . . . . (34,988) (77,188)
------------- -------------
Net loss on investment transactions. . . . . . . . . . . (5,211,057)
-------------
Net increase in net assets resulting from operations . . $ 10,898,928
-------------
-------------

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
--
15

<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

STATEMENTS OF CHANGES IN NET ASSETS

For the Period
December 31, 1993
Year (commencement of
Ended operations) to
October 31, October 31,
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income. . . . . . . . . . . . . . . . $ 16,109,985 $ 4,571,406
Net realized loss on investment transactions . . . . (5,133,869) (2,784,125)
Net unrealized depreciation on investment
transactions during the period . . . . . . . . . . (77,188) (1,473,161)
------------- -------------
Net increase in net assets resulting
from operations. . . . . . . . . . . . . . . . . . 10,898,928 314,120
------------- -------------
Distributions to shareholders from
net investment income ($1.11 and $.51
per share, respectively) . . . . . . . . . . . . . (14,649,724) (3,742,297)
------------- -------------
Fund share transactions:
Proceeds from shares sold. . . . . . . . . . . . . . 141,506,487 126,227,847
Net asset value of shares issued to
shareholders in reinvestment of distributions. . . 12,247,689 3,183,825
Cost of shares redeemed. . . . . . . . . . . . . . . (75,352,525) (31,232,749)
------------- -------------
Net increase in net assets from Fund share
transactions . . . . . . . . . . . . . . . . . . . 78,401,651 98,178,923
------------- -------------
Increase in net assets . . . . . . . . . . . . . . . 74,650,855 94,750,746
Net assets at beginning of period. . . . . . . . . . 94,751,946 1,200
------------- -------------
Net assets at end of period (including
undistributed net investment income of
$613,098 and $743,590, respectively) . . . . . . . $ 169,402,801 $ 94,751,946
------------- -------------
------------- -------------
Other Information
Increase (decrease) in Fund shares
Shares outstanding at beginning of period. . . . . . 8,577,789 100
------------- -------------
Shares sold. . . . . . . . . . . . . . . . . . . . . 14,123,224 11,083,394
Shares issued to shareholders in
reinvestment of distributions. . . . . . . . . . . 1,216,165 294,323
Shares redeemed. . . . . . . . . . . . . . . . . . . (7,405,745) (2,800,028)
------------- -------------
Net increase in Fund shares. . . . . . . . . . . . . 7,933,644 8,577,689
------------- -------------
Shares outstanding at end of period. . . . . . . . . 16,511,433 8,577,789
------------- -------------
------------- -------------

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

- --
16
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.

<S> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . $ 11.05 $ 12.00
------- -------
Income from investment operations:
Net investment income (a). . . . . . . . . . . . . . . . . . . 1.14 0.60
Net realized and unrealized loss on investments. . . . . . . . (.82) (1.04)
------- -------
Total from investment operations . . . . . . . . . . . . . . . . .32 (.44)
------- -------
Less distributions from net investment income. . . . . . . . . . (1.11) (.51)
------- -------
Net asset value, end of period . . . . . . . . . . . . . . . . . $ 10.26 $ 11.05
------- -------
------- -------
Total Return (%) . . . . . . . . . . . . . . . . . . . . . . . . 3.46 (3.54)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) . . . . . . . . . . . . . 169 95
Ratio of operating expenses, net to average daily net assets (%) (a) 1.50 1.50*
Ratio of net investment income to average daily net assets (%) . 12.83 9.17*
Portfolio turnover rate (%). . . . . . . . . . . . . . . . . . . 302.2 180.6*
(a)Reflects a per share amount of management fee not imposed
by the Adviser. . . . . . . . . . . . . . . . . . . . . . . . $ .02 $ .05
Operating expense ratio including management fee
not imposed (%) . . . . . . . . . . . . . . . . . . . . . . . 1.68 2.23*

* Annualized
* * Not annualized

--
17
</TABLE>

<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

A. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
Scudder Emerging Markets Income Fund (the "Fund") is a non-diversified
series of Scudder Global Fund, Inc., a Maryland corporation registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The policies described below are followed consistently
by the Fund in the preparation of its financial statements in conformity
with generally accepted accounting principles.

SECURITY VALUATION. Portfolio debt securities with remaining maturities
greater than sixty days are valued by pricing agents approved by the
Officers of the Fund, which quotations reflect broker/dealer-supplied
valuations and electronic data processing techniques. If the pricing agents
are unable to provide such quotations, the most recent bid quotation
supplied by a bona fide market maker shall be used. Short-term investments
having a maturity of sixty days or less are valued at amortized cost.

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 $105,458 (.06% of net assets) and have been noted in
the investment portfolio as of October 31, 1995.

OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or
sell to (put option), the writer a designated instrument at a specified
price within a specified period of time. Certain options, including options
on indices, will require cash settlement by the Fund if the option is
exercised. During the year ended October 31, 1995, the Fund purchased put
options and wrote call options on securities and currencies as a hedge
against potential adverse price movements in the value of portfolio assets.

If the Fund writes an option and 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 Fund elects to close
out the option it would recognize a gain or loss based on the difference
between the cost of closing the option and the initial premium received. If
the Fund purchased an option and allows the option to expire it would
realize a loss to the extent of the premium

- --
18

<PAGE>

NOTES TO FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------
- ----

paid. If the Fund elects to close out the option it would recognize a gain
or loss equal to the difference between the cost of acquiring the option and
the amount realized upon the sale of the option.

The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last
sale price or, in the absence of a sale, the mean between the closing bid
and asked price or at the most recent asked price (bid for purchased
options) if no bid and asked price are available. Over-the-counter written
or purchased options are valued using dealer supplied quotations.

When the Fund writes a covered call option, the Fund foregoes, in exchange
for the premium, the opportunity to profit during the option period from an
increase in the market value of the underlying security or currency above
the exercise price. When the Fund writes a put option it accepts the risk of
a decline in the market value of the underlying security or currency below
the exercise price. Over-the-counter options have the risk of the potential
inability of counterparties to meet the terms of their contracts. The Fund's
maximum exposure to purchased options is limited to the premium initially
paid. In addition, certain risks may arise upon entering into option
contracts including the risk that an illiquid secondary market will limit
the Fund's ability to close out an option contract prior to the expiration
date and, that a change in the value of the option contract may not
correlate exactly with changes in the value of the securities or currencies
hedged.

FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated
into U.S. dollars on the following basis:

(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and

(ii) purchases and sales of investment securities, interest income and
certain expenses at the daily rates of exchange prevailing on the
respective dates of such transactions.

--
19

<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND
- -------------------------------------------------------------------------------

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.

WHEN-ISSUED AND FORWARD DELIVERY SECURITIES. The Fund may purchase
securities on a when-issued or forward delivery basis, for payment and
delivery at a later date. The price of such securities, which may be
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment take place at a later time.

At the time the Fund makes the commitment to purchase a security on a when-
issued basis or forward delivery basis, it will record the transaction and
reflect the value of the security in determining its net asset value. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. At the time of
settlement, the market value of the security may be more or less than the
purchase price.

At October 31, 1995, the Fund had a net tax basis capital loss carryforward
of approximately $5,033,000, which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
October 31, 2002 ($1,611,000), and October 31, 2003 ($3,422,000) the
respective expiration dates, whichever occurs first.

DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from
investment transactions, in excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed and,

- --
20

<PAGE>

NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

therefore, will be distributed to shareholders. An additional distribution
may be made to the extent necessary to avoid the payment of a four percent
federal excise tax.

The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences relate primarily to foreign denominated investments and
certain securities sold at a loss. As a result, net investment income (loss)
and net realized gain (loss) on investment transactions for a reporting
period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain
of its capital accounts without impacting the net asset value of the Fund.

The Fund uses the specific identified cost method for determining realized
gain or loss on investments for both financial and federal income tax
reporting purposes.

ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a trade-date basis over a trade-date period.

Other. Investment security transactions are accounted for on a trade date
basis. Distributions of net realized gains to shareholders are recorded on
the ex-dividend date. Interest income is recorded on the accrual basis. All
discounts are amortized/accreted for both tax and financial reporting
purposes.

B. PURCHASES AND SALES OF SECURITIES
- -------------------------------------------------------------------------------

For the year ended October 31, 1995, purchases and sales (including
maturities) of investment securities (excluding SSC investments)
aggregated $420,326,658 and $329,623,762, respectively.

In addition, the Fund wrote and the holder exercised options during the
period, principal amount U.S. $5,500,000 on Republic of Argentina Floating
Rate Bonds, 3/31/05 (premium received $91,500) and wrote options during the
period, principal amount U.S. $1,255,000 on March 1996 German Deutschemark
(premium received $11,107).

--
21

<PAGE>

SCUDDER EMERGING MARKETS INCOME FUND
- -------------------------------------------------------------------------------

C. RELATED PARTIES
- -------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the investments
of the Fund in accordance with its investment objectives, policies, and
restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by
the Fund. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Agreement. The
management fee payable under the Agreement is equal to an annual rate of
1.00% of the Fund's average daily nets assets, computed and accrued daily
and payable monthly. The Agreement also provides that if the Fund's expenses
exceed specified limits, such excess, up to the amount of the management
fee, will be paid by the Adviser. In addition, the Adviser agreed not to
impose all or a portion of its management fee until February 29, 1996, and
during such period to maintain the annualized expenses of the Fund at not
more than 1.50% of average daily net assets. For the year ended October 31,
1995, the Adviser did not impose a portion of its fee amounting to $223,375,
and the portion imposed amounted to $1,037,443.

Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the
Adviser, is the transfer, dividend paying and shareholder service agent for
the Fund. For the year ended October 31, 1995, the amount charged by SSC
aggregated $260,181, of which $23,796 is unpaid at October 31, 1995.

The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the
year ended October 31, 1995, Directors' fees aggregated $54,889.

D. INVESTING IN EMERGING MARKETS
- -------------------------------------------------------------------------------
Investing in emerging markets may involve special risks and considerations
not typically associated with investing in the United States. These risks
include revaluation of currencies and future adverse political and economic
developments. Moreover, securities issued in these markets may be less
liquid and their prices more volatile than those of comparable securities in
the United States.

- --
22

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF SCUDDER GLOBAL FUND, INC. AND THE SHAREHOLDERS
OF SCUDDER EMERGING MARKETS INCOME FUND:

We have audited the accompanying statement of assets and liabilities of
Scudder Emerging Markets Income Fund, including the investment portfolio, as
of October 31, 1995, and the related statements of operations for the year
then ended, the statement of changes in net assets, and the financial
highlights for the year then ended and for the period December 31, 1993
(commencement of operations) to October 31, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995 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 Emerging Markets Income Fund as of October 31, 1995, the results of
its operations for the year then ended, the changes in its net assets and
the financial highlights for the year then ended and for the period December
31, 1993 (commencement of operations) to October 31, 1994 in conformity with
generally accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 8, 1995

--
23

<PAGE>

SHAREHOLDER MEETING RESULTS
- --------------------------------------------------------------------------------

A Special Meeting of Shareholders of Scudder Global Fund, Inc., consisting
of Scudder Emerging Markets Income Fund, Scudder Global Fund, Scudder Global
Small Company Fund, Scudder International Bond Fund and Scudder Short Term
Global Income Fund was held on Wednesday, December 6, 1995, at the offices of
Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue, New York, New York
10154. The two matters voted upon by Shareholders of Scudder Emerging Markets
Income Fund and the resulting votes for each matter are presented below.

1. The election of eight Directors to hold office until their respective successors shall have been
duly elected and qualified.

Director: Number of Votes:
For Withheld Broker Non-Votes*
<S> <C> <C> <C>
Edmond D. Villani 10,896,113 140,506 0
Nicholas Bratt 10,897,114 139,505 0
Daniel Pierce 10,894,862 141,757 0
Paul Bancroft III 10,883,917 152,702 0
Sheryle J. Bolton 10,851,231 185,388 0
Thomas J. Devine 10,863,922 172,697 0
William H. Gleysteen, Jr. 10,868,907 167,712 0
William H. Luers 10,856,319 180,299 0

2. Ratification or rejection of the action taken by the Board of Directors in selecting Coopers &
Lybrand L.L.P. as independent accountants for the fiscal year ending October 31, 1996.

Number of Votes:
For Against Abstain Broker Non-Votes*
10,800,265 53,582 182,772 0

</TABLE>

<PAGE>

OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------

Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Sheryle J. Bolton
Director; Consultant
Thomas J. Devine
Director; Consultant
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Daniel Pierce*
Director and Vice President
Robert G. Stone, Jr.
Honorary 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
Adam Greshin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Douglas M. Loudon*
Vice President
Gerald J. Moran*
Vice President
M. Isabel Saltzman*
Vice President
Cornelia Small*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and 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.

<PAGE>

INVESTMENT PRODUCTS AND SERVICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <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 Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
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>

26
<PAGE>

HOW TO CONTACT SCUDDER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------

For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163

To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470

Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.

<PAGE>

Celebrating Over 75 Years of Serving Investors
- --------------------------------------------------------------------------------

Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark 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 37 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.