Filed electronically with the Securities and Exchange Commission on
August 25, 1999
File No. 33-5724
File No. 811-4670
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
____
Post-Effective Amendment No. 38
____
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 41
____
Global/International Fund, Inc.
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(Exact name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
----------------------------- ------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
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Caroline Pearson
Scudder Kemper Investments, Inc.
Two International Place, Boston, MA 02110
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
-------
on _________________ pursuant to paragraph (b)
-------
60 days after filing pursuant to paragraph (a)(1)
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X on November 1, 1999 pursuant to paragraph (a)(1)
-------
75 days after filing pursuant to paragraph (a)(2)
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on pursuant to paragraph (a)(2) of
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Rule 485
If appropriate, check the following:
this post-effective amendment designates a new effective date
----- for a previously filed post-effective amendment
<PAGE>
SCUDDER
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GLOBAL EQUITY
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Scudder Global
Fund Fund #007
Prospectus
November 1, 1999
As with all mutual funds, the
Securities and Exchange
Commission (SEC) does not
approve or disapprove these
shares or determine whether the
information in this prospectus is
truthful or complete. It is a
criminal offense for anyone to
inform you otherwise.
<PAGE>
Scudder Global Fund
How the fund works
2 Investment Approach
3 Main Risks to Investors
4 The Fund's Track Record
5 How Much Investors Pay
6 Other Policies and Risks
7 Who Manages and Oversees the Fund
9 Financial Highlights
How to invest in the fund
11 How to Buy Shares
12 How to Exchange or Sell Shares
13 Policies You Should Know About
18 Understanding Distributions and Taxes
<PAGE>
How the fund works
On the next few pages, you'll find information about this fund's investment
goal, the main strategies it uses to pursue that goal, and the main risks that
could affect its performance.
You'll also be able to look at the fund's track record and get an idea of the
costs you should expect to pay as a fund shareholder.
Whether you are considering investing in the fund or are already a shareholder,
you'll probably want to look this information over carefully. You may want to
keep it on hand for reference as well.
Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other organization. Their share prices
will go up and down, so be aware that you could lose money.
You can access all Scudder fund prospectuses online at: www.scudder.com
<PAGE>
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ticker symbol | XXXXX fund number | 007
Scudder Global Fund
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Investment Approach
The fund seeks long-term growth of capital by investing mainly in U.S. and
foreign equities. Although the fund can invest in companies of any size, it
generally focuses on established companies whose stocks are listed on a
recognized exchange.
In choosing stocks, the portfolio managers use a combination of two analytical
disciplines:
Bottom-up research. Relying on fundamental analysis as well as field research,
the managers look for companies that have strong finances and management, are
reasonably valued, and appear able to make the most of local, regional, and
global opportunities.
Analysis of global themes. The managers look for significant social, economic,
industrial, and demographic changes, with an eye toward identifying industries
and companies that may benefit from these changes.
The managers intend to keep the fund's holdings diversified across industries
and geographical areas, although, depending on their outlook, they may increase
or reduce the fund's exposure to a given industry or area.
The fund will normally sell a stock when the managers believe it has reached its
fair value, its underlying investment theme has matured, its fundamental
qualities have deteriorated, or other investments offer better opportunities.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING THREE PARAGRAPHS.
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OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks, preferred stocks, and depositary receipts.
The fund may also buy investment-grade debt securities when it believes they may
perform at least as well as equities.
Although the managers are permitted to use various types of derivatives
(contracts whose value is based on, for example, indices, commodities,
currencies, or securities), the managers don't intend to use them as principal
investments.
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2 | Scudder Global Fund
<PAGE>
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[ICON] Long-term investors who want a fund with a broadly
diversified approach to global investing may want to
consider this fund.
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Main Risks to Investors
There are several risk factors that could hurt the fund's performance, cause you
to lose money, or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform, both in the U.S. and abroad. When stock prices fall, you should
expect the value of your investment to fall as well. Foreign stocks tend to be
more volatile than their U.S. counterparts, for reasons ranging from political
and economic uncertainties to a higher risk that essential information may be
incomplete or wrong. These risks tend to be greater in emerging markets, so to
the extent that the fund emphasizes emerging markets (such as Latin America and
most Pacific Basin countries), it takes on greater risks. Because a stock
represents ownership in its issuer, stock prices can be hurt by poor management,
shrinking product demand, and other business risks. These may affect single
companies as well as groups of companies.
A second major factor is currency exchange rates. When the dollar value of a
foreign currency falls, so does the value of any investments the fund owns that
are denominated in that currency. This is separate from market risk, and may add
to market losses or reduce market gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of companies, industries,
themes, geographical areas, or other matters, including the relative
attractiveness of bonds as compared to stocks
o some derivatives could produce disproportionate losses
o at times, market conditions might make it hard to value some investments or
to get an attractive price for them
Scudder Global Fund | 3
<PAGE>
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[ICON] While a fund's past performance isn't necessarily a sign of
how it will do in the future, it can be valuable for an
investor to know. This page looks at fund performance two
different ways: year by year and over time.
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The Fund's Track Record
The bar chart shows how much fund returns have varied from year to year, which
may give some idea of risk. The table shows how the fund's returns over
different periods average out. For context, the table also includes a
broad-based market index (which, unlike the fund, does not have any fees or
expenses). All figures on this page assume reinvestment of dividends and
distributions.
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Annual Total Returns (%) as of 12/31 each year
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
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`89 `90 `91 `92 `93 `94 `95 `96 `97 `98
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1999 Total Return as of September 30: 0.00%
Best Quarter: 0.00%, Q0 '90 Worst Quarter: -0.00%, Q0 '90
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Average Annual Total Returns (%) as of 12/31/98
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1 Year 5 Years 10 Years
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Fund __ __ __
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Index __ __ __
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Index: MSCI World Index, an unmanaged capitalization weighted measure of global
stock markets including the U.S., Canada, Europe, Australia, and the Far East.
4 | Scudder Global Fund
<PAGE>
How Much Investors Pay
Because this is a no-load fund, it doesn't charge you any shareholder fees. The
fund does have annual operating expenses, and as a shareholder you pay them
indirectly.
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Fee Table
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Shareholder Fees (paid directly from your investment)
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Sales Charges/Redemption Fees None
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Annual Operating Expenses (deducted from fund assets)
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Management Fee 0.00%
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Distribution (12b-1) Fee None
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Other Expenses* 0.00%
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Total Annual Operating Expenses 0.00%
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* Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
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Expense Example
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Based on the costs above, this example is designed to help you compare this
fund's expenses to those of other funds. The example assumes you invested
$10,000, earned 5% annual returns, reinvested all dividends and distributions,
and sold your shares at the end of each period. Remember that this is only an
example, and that your actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
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$00 $000 $000 $0,000
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Scudder Global Fund | 5
<PAGE>
Other Policies and Risks
While the sections on the previous pages describe the main points of the fund's
strategy and risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, the fund's Board of Directors
could change the fund's investment goals and other policies without seeking
shareholder approval.
o As a temporary measure, the funds could shift up to 100% of assets into
defensive investments such as money market securities. This could prevent
losses, but would mean that the fund was not pursuing its goal.
Year 2000 and euro readiness
Like all mutual funds, this fund could be affected by the inability of some
computer systems to recognize the year 2000. Also, because it invests in foreign
securities, the fund could be affected by accounting differences, changes in tax
treatment or other issues related to the conversion of certain European
currencies into the euro. Scudder Kemper has readiness programs designed to
address these problems, and is also researching the readiness of suppliers and
business partners as well as issuers of securities the fund owns. Still, there's
some risk that one or both of these problems could materially affect the fund's
operations (such as its ability to calculate net asset value and to handle
purchases and redemptions), its investments, or securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPH.
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FOR MORE INFORMATION
This prospectus doesn't tell you about every policy or risk of investing in the
fund.
If you want more information on the fund's allowable securities and investment
practices and the characteristics and risks of each one, you may want to request
a copy of the SAI (the back cover has information on how to do this).
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6 | Other Policies and Procedures
<PAGE>
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[ICON] Scudder Kemper, the company with overall responsibility for
managing the fund, takes a team approach to asset
management.
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Who Manages and Oversees the Fund
The investment adviser
The fund's investment adviser is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY 10154-0010. Scudder Kemper has more than 70 years
of experience managing mutual funds, and currently has more than $XXX billion in
assets under management.
The fund is managed by a team of investment professionals, who individually
represent different areas of expertise and who together develop investment
strategies and make buy and sell decisions. Supporting the fund managers are
Scudder Kemper's many economists, research analysts, traders, and other
investment specialists, located in offices across the United States and around
the world.
As payment for serving as investment adviser, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
paid in management fees was ___% of the fund's average daily net assets.
The portfolio managers
Below are the people who handle the day-to-day management of the fund.
William E. Holzer Diego Espinosa
Lead Portfolio Manager Portfolio Manager
o Began investment career o Began investment career
over 20 years ago in 1991
o Joined the adviser in 1980 o Joined Adviser in 1996
o Joined the fund team in o Joined the fund team in
1986 at the fund's inception 1997
Nicholas Bratt
Portfolio Manager
o Began investment career
in 1976
o Joined the adviser in 1976
o Joined the fund team in 1986
Who Manages and Oversees the Fund | 7
<PAGE>
The directors
A mutual fund's Board of Directors is responsible for the general oversight of
the fund's business. A majority of the directors are not affiliated with Scudder
Kemper. The independent directors have primary responsibility for assuring that
the fund is managed in the best interests of its shareholders.
Lynn S. Birdsong Kathryn L. Quirk
o Chairman of the Board and o Director; Managing
Director; Managing Director of Scudder Kemper
Director of Scudder Investments, Inc.
Kemper Investments, Inc.
Joan E. Spero
Paul Bancroft III
o Director; President, Doris
o Director; Venture Duke Charitable Foundation
Capitalist and Consultant
Thomas J. Devine
Sheryle J. Bolton
o Honorary Director;
o Director; Chief Executive Consultant
Officer, Scientific
Learning Corporation William H. Gleysteen, Jr.
William T. Burgin o Honorary Director;
Consultant; Guest Scholar,
o Director; General Brookings Institute
Partner, Bessemer Venture
Partners Robert G. Stone, Jr.
Keith R. Fox o Honorary Director;
Chairman Emeritus and
o Director; Private Equity Director, Kirby Corporation
Investor
William H. Luers
o Director; Chairman and
President, U.N.
Association of the U.S.A.
8 | Who Manages and Oversees the Fund
<PAGE>
Financial Highlights
This table is designed to help you understand the fund's financial performance
in recent years. The figures in the first part of the table are for a single
share. The total return figures represent the percentage that an investor in the
fund would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the fund's financial statements, is included in the
annual report (see "Shareholder reports" on the back cover).
To be updated
Financial Highlights | 9
<PAGE>
How to invest in the fund
The following pages tell you how to invest in the fund and what to expect as a
shareholder. If you're investing directly with Scudder, all of this information
applies to you.
If you're investing through a "third party provider" -- for example, a workplace
retirement plan, financial supermarket or financial adviser -- your provider may
have its own policies or instructions, and you should follow those.
<PAGE>
How to Buy Shares
Use these instructions to invest directly with Scudder. Make out your check to
"The Scudder Funds."
<TABLE>
<CAPTION>
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First investment Additional investments
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<S> <C> <C>
$2,500 or more for regular $100 or more for regular
accounts accounts
$1,000 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic
Investment Plan
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By mail or o Fill out and sign an o Send a check and a Scudder
express application investment slip to us at the
(see below) appropriate address below
o Send it to us at the
appropriate address, along o If you don't have an
with an investment check investment slip, simply
include a letter with your
name, account number, the
full name of the fund, and
your investment instructions
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By wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
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By phone -- o Call 1-800-SCUDDER for
instructions
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With an automatic -- o To set up regular investments
investment from a bank checking account,
plan call 1-800-SCUDDER
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Using QuickBuy -- o Call 1-800-SCUDDER
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</TABLE>
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[ICON} Regular mail:
The Scudder Funds, PO Box 2291, Boston, MA 02107-2291
Express, registered or certified mail:
The Scudder Funds, 66 Brooks Drive, Braintree, MA 02184-3839
Fax number: 1-800-821-6234 (for exchanging and selling only)
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How to Buy Shares | 11
<PAGE>
How to Exchange or Sell Shares
Use these instructions to exchange or sell shares in an account opened directly
with Scudder.
<TABLE>
<CAPTION>
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Exchanging into another fund Selling shares
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<S> <C> <C>
$2,500 or more to open a new Some transactions, including
account ($1,000 for IRAs) most for over $100,000, can
only be ordered in writing; if
$100 or more for exchanges you're in doubt, see page __
between existing accounts
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By phone or wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
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Using SAIL(TM) o Call 1-800-343-2890 and o Call 1-800-343-2890 and
follow the instructions follow the instructions
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By mail, express, Write a letter that includes: Write a letter that includes:
or fax (see
previous page) o the fund, class, and account o the fund, class, and account
number you're exchanging out number from which you want to
of sell shares
o the dollar amount or number o the dollar amount or number
of shares you want to exchange of shares you want to sell
o the name and class of the o your name(s), signature(s),
fund you want to exchange into and address, as they appear
on your account
o your name(s), signature(s),
and address, as they appear o a daytime telephone number
on your account
o a daytime telephone number
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With an automatic -- o To set up regular cash
withdrawal payments from a Scudder fund
plan account, call 1-800-SCUDDER
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Using QuickSell -- o Call 1-800-SCUDDER
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</TABLE>
12 | How to Exchange or Sell Shares
<PAGE>
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[ICON] Questions? You can speak to a Scudder
representative between 8 a.m. and 8 p.m.
eastern time on any fund business day by
calling 1-800-SCUDDER.
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Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder. Some of this information, such as the section on dividends
and taxes, applies to all investors, including those investing through
investment providers.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
Policies about transactions
The fund is open for business whenever the New York Stock Exchange is open. The
fund calculates its share price every business day, as of the close of regular
trading on the Exchange (typically 4 p.m. eastern time, but sometimes earlier,
as in the case of scheduled half-day trading or unscheduled suspensions of
trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Scudder Service Corporation, and they have determined that it is a
"good order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Scudder
Service Corporation before they can be processed, you'll need to allow extra
time. A representative of your investment provider should be able to tell you
when your order will be processed.
Policies You Should Know About | 13
<PAGE>
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[ICON] The Scudder Web site can be a valuable resource for
shareholders with Internet access. Go to www.scudder.com to
get up-to-date information, review balances or even place
orders for exchanges.
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SAIL(TM), the Scudder Automated Information Line, is available 24 hours a day by
calling 1-800-343-2890. You can use SAIL to get information on Scudder funds
generally and on accounts held directly at Scudder. You can also use it to make
exchanges and sell shares.
QuickBuy and QuickSell let you set up a link between a Scudder account and a
bank account. Once this link is in place, you can move money between the two
with a phone call. You'll need to make sure your bank has Automated Clearing
House (ACH) services. To set up QuickBuy or QuickSell on a new account, see the
account application; to add it to an existing account, call 1-800-SCUDDER.
When you call us to sell shares, we may record the call, ask you for certain
information, or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to receive wires, we will deduct a $5 fee from all wires sent from
us to your bank. Your bank may charge its own fees for handling wires. The fund
can only accept wires of $100 or more.
14 | Policies You Should Know About
<PAGE>
Exchanges among Scudder funds are an option for shareholders who bought their
fund shares directly from Scudder and many other investors as well. Exchanges
are a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject purchase orders, for these or
other reasons.
When you want to sell more than $100,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers and
most banks, savings institutions, and credit unions. Note that you can't get a
signature guarantee from a notary public.
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 15 days) or when unusual circumstances prompt the
SEC to allow further delays.
Policies You Should Know About | 15
<PAGE>
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[ICON] If you ever have difficulty placing an order by phone or
fax, you can always send us your order in writing.
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How the fund calculates share price
For the fund the share price is the net asset value per share, or NAV. To
calculate NAV, the fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
- ------------------------------------ = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by the fund's Board of
Directors. In such a case, the fund's value for a security is likely to be
different from quoted market prices.
To the extent that a fund invests in securities that are traded primarily in
foreign markets, the value of its holdings could change at a time when you
aren't able to buy or sell fund shares. This is because some foreign markets are
open on days when the fund doesn't price its shares.
16 | Policies You Should Know About
<PAGE>
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o charge you $10 a year if your account balance falls below $2,500, and close
your account and send you the proceeds if your balance falls below $1,000;
in either case, we will give you 60 days' notice so you can either increase
your balance or close your account (these policies don't apply to
retirement accounts, to investors with $100,000 or more in Scudder fund
shares, or in any case where a fall in share price created the low balance)
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; in most cases, the fund won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the fund's assets, whichever is less
o change, add, or withdraw various services, fees, and account policies (for
example, we may change or terminate the exchange privilege at any time)
Policies You Should Know About | 17
<PAGE>
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[ICON] Because each shareholder's tax situation is unique, it's
always a good idea to ask your tax professional about the
tax consequences of your investments, including any state
and local tax consequences.
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Understanding Distributions and Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The fund intends to pay dividends and distributions to its shareholders in
November or December and, if necessary, may do so at other times as well.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares or all sent to you by check.
Tell us your preference on your application. If you don't indicate a preference,
your dividends and distributions will all be reinvested. For retirement plans,
reinvestment is the only option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
18 | Understanding Disttributions and Taxes
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:
Generally taxed at ordinary income rates
- ---------------------------------------------------------------
o short-term capital gains from selling fund shares
- ---------------------------------------------------------------
o taxable income dividends you receive from a fund
- ---------------------------------------------------------------
o short-term capital gains distributions you receive from a
fund
- ---------------------------------------------------------------
Generally taxed at capital gains rates
- ---------------------------------------------------------------
o long-term capital gains from selling fund shares
- ---------------------------------------------------------------
o long-term capital gains distributions you receive from a
fund
- ---------------------------------------------------------------
You may be able to claim a tax credit or deduction for your shares of any
foreign taxes that the fund pays.
The fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
If you invest right before the fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.
Corporations may be able to take a dividends-received deduction for a portion of
income dividends they receive.
Understanding Distributions and Taxes | 19
<PAGE>
To Get More Information
Shareholder reports -- These include commentary from the fund's management team
about recent market conditions and the effect of the fund's strategies on its
performance. They also have detailed performance figures, a list of everything
the fund owns, and the fund's financial statements. Shareholders get these
reports automatically. To reduce costs, we mail one copy per household. For more
copies, call 1-800-SCUDDER.
Statements of Additional Information (SAI) -- This tells you more about the
fund's features and policies, including additional risk information. The fund's
SAI is incorporated by reference into this document (meaning that its legally
part of this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Scudder or the SEC (see below). Materials you
get from Scudder are free; those from the SEC involve a copying fee. If you
like, you can look over these materials in person at the SEC's Public Reference
Room in Washington, DC.
Scudder Funds SEC
PO Box 2291 450 Fifth Street, N.W.
Boston, MA 02107-2291 Washington, DC 20549-6009
1-800-SCUDDER 1-800-SEC-0330
www.scudder.com www.sec.gov
SEC File Number 811-XXX
<PAGE>
SCUDDER GLOBAL FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund
Series Which Seeks Long-Term Growth of Capital
By Investing Mainly in U.S. and Foreign Equities
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STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information provides information about
Scudder Global Fund, a portfolio of Global/International Fund, Inc. an open-end
management company. This Statement of Additional Information is not a prospectus
and should be read in conjunction with the prospectus of Scudder Global Fund
dated November 1, 1999 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>
<S> <C>
THE FUND'S INVESTMENT OBJECTIVES AND POLICIES.........................................................................3
General Investment Objective and Policies of Global Fund.....................................................3
Master/feeder structure......................................................................................4
Special Investment Considerations of the Fund................................................................4
Investments and Investment Techniques........................................................................6
Investment Restrictions.....................................................................................16
Other Investment Policies...................................................................................17
PURCHASES............................................................................................................18
Additional Information About Opening An Account.............................................................18
Minimum Balances............................................................................................18
Additional Information About Making Subsequent Investments..................................................19
Additional Information About Making Subsequent Investments by QuickBuy......................................19
Checks......................................................................................................20
Wire Transfer of Federal Funds..............................................................................20
Share Price.................................................................................................20
Share Certificates..........................................................................................21
Other Information...........................................................................................21
EXCHANGES AND REDEMPTIONS............................................................................................21
Exchanges...................................................................................................21
Redemption by Telephone.....................................................................................22
Redemption by QuickSell.....................................................................................23
Redemption by Mail or Fax...................................................................................23
Redemption-in-Kind..........................................................................................24
Other Information...........................................................................................24
FEATURES AND SERVICES OFFERED BY THE FUND............................................................................25
The Pure No-Load(TM)Concept.................................................................................25
Internet access.............................................................................................26
Dividends and Capital Gains Distribution Options............................................................27
Scudder Investor Centers....................................................................................27
Reports to Shareholders.....................................................................................27
Transaction Summaries.......................................................................................27
THE SCUDDER FAMILY OF FUNDS..........................................................................................27
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and Self-
Employed Individuals................................................................................. 33
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.........33
Scudder IRA: Individual Retirement Account.................................................................33
Scudder Roth IRA: Individual Retirement Account............................................................34
Scudder 403(b) Plan.........................................................................................35
Automatic Withdrawal Plan...................................................................................35
Group or Salary Deduction Plan..............................................................................35
Automatic Investment Plan...................................................................................36
Uniform Transfers/Gifts to Minors Act.......................................................................36
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................36
PERFORMANCE INFORMATION..............................................................................................37
Average Annual Total Return.................................................................................37
Cumulative Total Return.....................................................................................37
Total Return................................................................................................38
Comparison of Fund Performance..............................................................................38
<PAGE>
ORGANIZATION OF THE FUND.............................................................................................42
Investment Adviser..........................................................................................43
AMA InvestmentLink(SM) Program..............................................................................45
Personal Investments by Employees of the Adviser............................................................47
DIRECTORS AND OFFICERS...............................................................................................47
REMUNERATION.........................................................................................................52
Responsibilities of the Board -- Board and Committee Meetings...............................................52
Compensation of Officers and Directors......................................................................52
DISTRIBUTOR..........................................................................................................54
TAXES................................................................................................................54
PORTFOLIO TRANSACTIONS...............................................................................................59
Brokerage Commissions.......................................................................................59
Portfolio Turnover..........................................................................................60
NET ASSET VALUE......................................................................................................60
ADDITIONAL INFORMATION...............................................................................................61
Experts.....................................................................................................61
Other Information...........................................................................................61
FINANCIAL STATEMENTS.................................................................................................62
</TABLE>
APPENDIX
ii
<PAGE>
THE FUND'S INVESTMENT OBJECTIVES AND POLICIES
(See Scudder Global Fund -- "Investment Approach"
and "Other Policies and Risks," in the Fund's prospectus.)
Global/International Fund, Inc., a Maryland corporation of which
Scudder Global Fund (the "Fund") is no-load series, is referred to herein as the
"Corporation." The Corporation is an open-end, management investment company
which continuously offers and redeems its shares. The Corporation is a company
of the type commonly known as a mutual fund. The Fund is a diversified series of
the Corporation.
Except as otherwise indicated, the Fund's objectives and policies are
not fundamental and may be changed without a shareholder vote. There can be no
assurance that the Fund will achieve its objectives.
Changes in portfolio securities are made on the basis of investment
considerations, and it is against the policy of management to make changes for
trading purposes.
General Investment Objective and Policies of Global Fund
Global Fund seeks long-term growth of capital through a diversified
portfolio of marketable securities, primarily equity securities, including
common stocks, preferred stocks and debt securities convertible into common
stocks. The Fund invests on a worldwide basis in equity securities of companies
which are incorporated in the U.S. or in foreign countries. It may also invest
in the debt securities of U.S. and foreign issuers. Income is an incidental
consideration.
The management of the Fund believes that there is substantial
opportunity for long-term capital growth from a professionally managed portfolio
of securities selected from the U.S. and foreign equity markets. Through this
global investment framework, management seeks to take advantage of the
investment opportunities created by the global economy. The world has become
highly integrated in economic, industrial and financial terms. Companies
increasingly operate globally as they purchase raw materials, produce and sell
their products, and raise capital. As a result, international trends such as
movements in currency and trading relationships are becoming more important to
many industries than purely domestic influences. To understand a company's
business, it is frequently more important to understand how it is linked to the
world economy than whether or not it is, for example, a U.S., French or Swiss
company. Just as a company takes a global perspective in deciding where to
operate, so too may an investor benefit from looking globally in deciding which
industries are growing, which producers are efficient and which companies'
shares are undervalued. The Fund affords the investor access to potential
opportunities wherever they arise, without being constrained by the location of
a company's headquarters or the trading market for its shares.
The Fund invests in companies that its investment adviser, Scudder
Kemper Investments, Inc. (the "Adviser"), believes will benefit from global
economic trends, promising technologies or products and specific country
opportunities resulting from changing geopolitical, currency, or economic
considerations. It is expected that investments will be spread broadly around
the world. The Fund will be invested usually in securities of issuers located in
at least three countries, one of which may be the U.S. The Fund may be invested
100% in non-U.S. issues, and for temporary defensive purposes may be invested
100% in U.S. issues, although under normal circumstances it is expected that
both foreign and U.S. investments will be represented in the Fund's portfolio.
It is expected that investments will include companies of varying sizes as
measured by assets, sales, or capitalization. The Fund generally invests in
equity securities of established companies listed on U.S. or foreign securities
exchanges, but also may invest in securities traded over-the-counter. It also
may invest in debt securities convertible into common stock, and convertible and
non-convertible preferred stock, and fixed-income securities of governments,
governmental agencies, supranational agencies and companies when the Adviser
believes the potential for appreciation will equal or exceed that available from
investments in equity securities. In addition, for temporary defensive purposes,
the Fund may vary from its investment
<PAGE>
policies during periods when the Adviser determines that it is advisable to do
so because of conditions in the securities markets or other economic or
political conditions. During such periods, the Fund may hold without limit cash
and cash equivalents. It is impossible to accurately predict for how long such
alternative strategies may be utilized. The Fund may not invest more than 5% of
its total assets in debt securities that are rated Baa or below by Moody's
Investors Service, Inc. ("Moody's") or BBB or below by Standard and Poor's
Ratings Servies, a division of The McGraw-Hill Companies, Inc. ("S&P"), or
deemed by the Adviser to be of comparable quality (commonly referred to as "high
yield" or "junk" bonds). More information about these investment techniques is
provided under "Investments and Investment Techniques."
Master/feeder structure
The Board of Directors has the discretion to retain the current
distribution arrangement for the Fund while investing in a master fund in a
master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder
fund"), instead of investing directly in a portfolio of securities, invests most
or all of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
Special Investment Considerations of the Fund
The Fund is intended to provide individual and institutional investors
with an opportunity to invest a portion of their assets in a globally oriented
portfolio, and is designed for long-term investors who can accept international
investment risk. Management of the Fund believes that allocation of 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, thus providing investment opportunities; although there can be
no assurance that this will be true in the future. As with any long-term
investment, the value of the Fund's shares when sold may be higher or lower than
when purchased.
<PAGE>
Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
favorably or unfavorably affect the Fund's performance. As foreign companies are
not generally subject to uniform standards, practices and requirements, with
respect to accounting, auditing and financial reporting, as are domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond markets is less than in the U.S. and, at times, volatility of
price can be greater than in the U.S. Further, foreign markets have different
clearance and settlement procedures and in certain markets there have been times
when settlements have been unable to keep pace with the volume of securities
transactions making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Fixed commissions on some foreign securities
exchanges and bid to asked spreads in foreign bond markets are generally higher
than negotiated commissions on U.S. exchanges and bid to asked spreads in the
U.S. bond market, although the Fund will endeavor to achieve the most favorable
net results on their portfolio transactions. Further, the Fund may encounter
difficulties or be unable to pursue legal remedies and obtain judgments in
foreign courts. There is generally less governmental supervision and regulation
of business and industry practices, securities exchanges, brokers and listed
companies than in the U.S. It may be more difficult for the 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. Payment for securities without
delivery may be required in certain foreign markets. In addition, with respect
to certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries. Investments
in foreign securities may also entail certain risks, such as possible currency
blockages or transfer restrictions, and the difficulty of enforcing rights in
other countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. The management of the Fund seeks to mitigate the
risks associated with the foregoing considerations through continuous
professional management.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in these countries than in developed
countries. Investments in companies domiciled in developing countries may be
subject to potentially greater risks than investments in developed countries.
Investments in foreign securities usually will involve currencies of
foreign countries. Because of the considerations discussed above, the value of
the assets of the Fund as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Fund may incur costs in connection with conversions between
various currencies. Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign currencies into
U.S. dollars on a daily basis. It 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 the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into strategic transactions involving currencies (see "Strategic
Transactions and Derivatives").
Because the Fund may be invested in both U.S. and foreign securities
markets, changes in the Fund's share price may have a low correlation with
movements in the U.S. markets. The Fund's share price will reflect the movements
of both the different stock and bond markets in which it is invested and 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. Foreign securities such as those purchased by the Fund
may be subject to
<PAGE>
foreign governmental taxes which could reduce the yield on such securities,
although a shareholder of the Fund may, subject to certain limitations, be
entitled to claim a credit or deduction for U.S. federal income tax purposes for
his or her proportionate share of such foreign taxes paid by the Fund (see
"TAXES"). U.S. and foreign securities markets do not always move in step with
each other, and the total returns from different markets may vary significantly.
The Fund invests in many securities markets around the world in an attempt to
take advantage of opportunities wherever they may arise.
Because of the Fund's investment considerations discussed above and the
investment policies, investment in shares of the Fund is not intended to provide
a complete investment program for an investor.
The Fund cannot guarantee a gain or eliminate the risk of loss. The net
asset value of the Fund's shares will increase or decrease with changes in the
market price of the Fund's investments, and there is no assurance that the
Fund's objectives will be achieved.
Investments and Investment Techniques
Repurchase Agreements. The Fund may enter into repurchase agreements with member
banks of the Federal Reserve System, any foreign bank or with any domestic or
foreign broker/dealer which is recognized as a reporting government securities
dealer, if the creditworthiness of the bank or broker/dealer has been determined
by the Adviser to be at least as high as that of other obligations the Fund may
purchase.
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a debt security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and the value of such securities is kept at least equal to
the repurchase price on a daily basis. The repurchase price may be higher than
the purchase price, the difference being income to 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 on repurchase. In either case, the
income to the Fund is unrelated to the interest rate on the Obligation itself.
Obligations will be physically held by the Fund's custodian (Brown Brothers
Harriman and Co.) or in the Federal Reserve Book Entry system.
For purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), a repurchase agreement is deemed to be a loan from the Fund to the
seller of the Obligation subject to the repurchase agreement and is therefore
subject to the Fund's investment restrictions applicable to loans. It is not
clear whether a court would consider the Obligation purchased by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the Obligation before repurchase of the Obligation under a repurchase
agreement, the Fund may encounter delay and incur costs before being able to
sell the security. Delays may 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 security. However,
if the market value of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Fund will
direct the seller of the Obligation to deliver additional securities so that the
market value of all securities subject to the repurchase agreement will equal or
exceed the repurchase price. It is possible that the Fund will be unsuccessful
in seeking to enforce the seller's contractual obligation to deliver additional
securities. A repurchase agreement with foreign banks may be available with
respect to government securities of the particular foreign jurisdiction, and
such repurchase agreements involve risks similar to repurchase agreements with
U.S. entities.
<PAGE>
Debt Securities. The Fund may purchase "investment-grade" bonds, which are those
rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if unrated,
judged to be of equivalent quality as determined by the Adviser. Bonds rated Baa
or BBB may have speculative elements as well as investment-grade
characteristics. The Fund may also invest up to 5% of its net assets in
securities rated Baa/BBB or lower and in unrated securities of equivalent
quality in the Adviser's judgment. 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. (See "Appendix").
High Yield, High Risk Securities. Below investment grade securities (rated below
Baa by Moody's and below BBB by S&P and commonly referred to as "high yield" or
"junk" bonds) or unrated securities of equivalent quality in the Adviser's
judgment, carry a high degree of risk (including the possibility of default or
bankruptcy of the issuers of such securities), generally involve greater
volatility of price and risk of principal and income, and may be less liquid,
than securities in the higher rating categories and are considered speculative.
The lower the ratings of such debt securities, the greater their risks render
them like equity securities. See the Appendix to this Statement of Additional
Information for a more complete description of the ratings assigned by ratings
organizations and their respective characteristics.
An economic downturn could disrupt the high-yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates would likely have a greater adverse impact on the value of such
obligations than on higher quality debt securities. During an economic downturn
or period of rising interest rates, highly leveraged issues may experience
financial stress which could adversely affect their ability to service their
principal and interest payment obligations. Prices and yields of high-yield
securities will fluctuate over time and, during periods of economic uncertainty,
volatility of high-yield securities may adversely affect the Fund's net asset
value. In addition, investments in high-yield zero coupon or pay-in-kind bonds,
rather than income-bearing high-yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in interest
rates.
The trading market for high-yield securities may be thin to the extent
that there is no established retail secondary market. A thin trading market may
limit the ability of the Fund to accurately value high-yield securities in its
portfolio and to dispose of those securities. Adverse publicity and investor
perceptions may decrease the values and liquidity of high-yield securities.
These securities may also involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties.
Credit quality in the high-yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high-yield security. For these reasons,
it is the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the Fund's
investment objective by investment in such securities may be more dependent on
the Adviser's credit analysis than is the case for higher quality bonds. Should
the rating of a portfolio security be downgraded, the Adviser will determine
whether it is in the best interest of the Fund to retain or dispose of such
security.
Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, new federal rules require
savings and loan institutions to gradually reduce their holdings of this type of
security. Also, recent legislation restricts the issuer's tax deduction for
interest payments on these securities. Such legislation may significantly
depress the prices of outstanding securities of this type. For more information
regarding tax issues related to high-yield securities (see "TAXES").
Illiquid Investments. The Fund may invest a portion of its assets in securities
for which there is not an active trading market including securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 or which are otherwise not readily marketable. 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. The Fund
may have to bear the extra expense of registering such securities for resale and
the risk of substantial delay in effecting such registration. Also market
quotations are less readily available. The judgment of the Adviser may at times
play a greater role in valuing these securities than in the case of unrestricted
securities.
<PAGE>
Zero Coupon Securities. The Fund may invest in zero coupon securities which pay
no cash income and are sold at substantial discounts from their value at
maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest (cash). Zero
coupon securities which are convertible into common stock offer the opportunity
for capital appreciation as increases (or decreases) in market value of such
securities closely follows the movements in the market value of the underlying
common stock. Zero coupon convertible securities generally are expected to be
less volatile than the underlying common stocks, as they usually are issued with
maturities of 15 years or less and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.
Zero coupon securities include securities issued directly by the U.S.
Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons
and receipts for their underlying principal ("coupons") which have been
separated by their holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the underlying principal
(the "corpus") of the U.S. Treasury security. A number of securities firms and
banks have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" (TIGRS(TM)) and Certificate of Accrual on Treasuries
(CATS(TM)). The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S.
Treasury securities have stated that, for federal tax and securities purposes,
in their opinion purchasers of such certificates, such as the Fund, most likely
will be deemed the beneficial holder of the underlying U.S. Government
securities. The Fund understands that the staff of the Division of Investment
Management of the Securities and Exchange Commission (the "SEC") no longer
considers such privately stripped obligations to be U.S. Government securities,
as defined in the 1940 Act; therefore, the Fund intends to adhere to this staff
position and will not treat such privately stripped obligations to be U.S.
Government securities for the purpose of determining if the Global Fund is
"diversified" under the 1940 Act.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Under the STRIPS program,
the Fund will be able to have its beneficial ownership of zero coupon securities
recorded directly in the book-entry record-keeping system in lieu of having to
hold certificates or other evidences of ownership of the underlying U.S.
Treasury securities.
When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the principal or corpus is sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold bundled in such form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells
itself (see "TAXES").
Convertible Securities. The Fund may invest in convertible securities, that is,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into common stock. Investments in convertible securities can provide
an opportunity for capital appreciation and/or income through interest and
dividend payments by virtue of their conversion or exchange features.
The convertible securities in which the Fund may invest are either
fixed income or zero coupon debt securities which may be converted or exchanged
at a stated or determinable exchange ratio into underlying shares of common
stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity
<PAGE>
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)).
<PAGE>
Lending of Portfolio Securities. The Fund may seek to increase its income by
lending portfolio securities. Such loans may be made to registered
broker/dealers and are required to be secured continuously by collateral in
cash, U.S. Government Securities and liquid high grade debt obligations
maintained on a current basis at an amount at least equal to the market value
and accrued interest of the securities loaned. The Fund has the right to call a
loan and obtain the securities loaned on no more than five days' notice. During
the existence of a loan, the Fund will continue to receive the equivalent of any
distributions paid by the issuer on the securities loaned and will 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 will be made only to firms deemed by the Adviser to be in good standing.
The value of the securities loaned will not exceed 5% of the value of the Fund's
total assets at the time any loan is made.
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 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 the fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary
<PAGE>
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 and not to create leveraged
exposure in the Fund.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell. The
use of currency transactions can result in the Fund incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the
<PAGE>
value of the underlying instrument exceeds, in the case of a call option, or is
less than, in the case of a put option, the exercise price of the option) at the
time the option is exercised. Frequently, rather than taking or making delivery
of the underlying instrument through the process of exercising the option,
listed options are closed by entering into offsetting purchase or sale
transactions that do not result in ownership of the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. The Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the SEC currently takes the position that OTC options purchased by
the Fund, and portfolio securities "covering" the amount of the Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back plus
the in-the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on investing no more than 10% of its total assets in illiquid
securities.
If the Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it
<PAGE>
against loss, a call sold by the Fund exposes the Fund during the term of the
option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or instrument and may require the Fund to hold
a security or instrument which it might otherwise have sold.
The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above
securities in its portfolio), and on securities indices, currencies and futures
contracts other than futures on individual corporate debt and individual equity
securities. The Fund will not sell put options if, as a result, more than 50% of
the Fund's assets would be required to be segregated to cover its potential
obligations under such put options other than those with respect to futures and
options thereon. In selling put options, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price above the
market price.
General Characteristics of Futures. The Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by the Fund, as seller, to deliver to the
buyer the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
The Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.
The Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of the Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
<PAGE>
Currency Transactions. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. The Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or are determined to be of
equivalent credit quality by the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio positions
except as described below. Transaction hedging is entering into a currency
transaction with respect to specific assets or liabilities of the Fund, which
will generally arise in connection with the purchase or sale of its portfolio
securities or the receipt of income therefrom. Position hedging is entering into
a currency transaction with respect to portfolio security positions denominated
or generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Fund is engaging in proxy hedging. If the
Fund enters into a currency hedging transaction, the Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
<PAGE>
Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. The Fund intends to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
<PAGE>
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid assets at least equal to
the current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by the Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by the Fund on an index will require the Fund to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate cash or liquid assets equal to the amount of the Fund's
obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid assets
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
Investment Restrictions
The policies set forth below are fundamental policies of the Fund and
may not be changed without approval of a majority of the outstanding voting
securities of the Fund. As used in this Statement of
<PAGE>
Additional Information a "majority of the outstanding voting securities of the
Fund" means the lesser of (1) 67% or more of the voting securities present at
such meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or (2) more than 50%
of the outstanding voting securities of the Fund.
As a matter of fundamental policy, the Fund may not:
1. borrow money, except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
2. issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
3. purchase physical commodities or contracts relating to physical
commodities;
4. concentrate its investments in a particular industry, as that term is
used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time;
5. engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an underwriter
in connection with the disposition of portfolio securities;
6. purchase or sell real estate, which term does not include securities or
companies which deal in real estate or interests therein, except 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
7. make loans to other persons, except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the
purchase of debt instruments or interests in indebtedness in accordance
with the Fund's investment objective and policies may be deemed to be
loans.
Other Investment Policies
The Directors of the Corporation have voluntarily adopted certain
policies and restrictions which are observed in the conduct of the Fund's
affairs. These represent intentions of the Directors based upon current
circumstances. They differ from fundamental investment policies in that they may
be changed or amended by action of the Directors without requiring prior notice
to or approval of shareholders.
As a matter of nonfundamental policy, the Fund may not:
(a) borrow money in an amount greater than 5% of its total assets, except
(i) for temporary or emergency purposes and (ii) by engaging in reverse
repurchase agreements, dollar rolls, or other investments or
transactions described in the Fund's registration statement which may
be deemed to be borrowings;
(b) enter into either of reverse repurchase agreements or dollar rolls in
an amount greater than 5% of its total assets;
(c) purchase securities on margin or make short sales, except (i) short
sales against the box, (ii) in connection with arbitrage transactions,
(iii) for margin deposits in connection with futures contracts, options
or other permitted investments, (iv) that transactions in futures
contracts and options shall not be deemed to constitute selling
securities short, and (v) that the Fund may obtain such short-term
credits as may be necessary for the clearance of securities
transactions;
(d) purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of its total
assets;
<PAGE>
(e) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf of
the Fund and the premiums paid for such options on futures contracts do
not exceed 5% of the fair market value 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;
(f) purchase warrants if as a result, such securities, taken at the lower
of cost or market value, would represent more than 5% of the value of
the Fund's total assets (for this purpose, warrants acquired in units
or attached to securities will be deemed to have no value); and
(g) lend portfolio securities in an amount greater than 5% of its total
assets.
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 the Fund's assets will
not be considered a violation of the restriction.
PURCHASES
(See "How to Buy Shares" and "Policies You Should Know About"
in the Fund's prospectus.)
Additional Information About Opening An Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $2,500 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX, or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified Tax Identification Number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD,
and banks may open an account by wire. These investors must call 1-800-SCUDDER
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($2,500 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the taxpayer identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02110, ABA Number 011000028, DDA Account Number: 9903-5552. The investor must
give the Scudder fund name, account name and the new account number. Finally,
the investor must send the completed and signed application to the Fund
promptly.
The minimum initial purchase amount is less than $2,500 under certain
special plan accounts.
Minimum Balances
Shareholders should maintain a share balance worth at least $2,500
($1,000 for fiduciary accounts such as IRAs, and custodial accounts such as
Uniform Gift to Minor Act, and Uniform Trust to Minor Act accounts), which
amount may be changed by the Board of Directors. A shareholder may open an
account with at least $1,000 ($500 for fiduciary/custodial accounts), if an
automatic investment plan (AIP) of $100/month ($50/month for fiduciary/custodial
accounts) is established. Scudder group retirement plans and certain other
accounts have similar or lower minimum share balance requirements.
<PAGE>
The Fund reserves the right, following 60 days' written notice to
applicable shareholders, to:
o assess an annual $10 per Fund charge (with the fee to be paid
to the Fund) for any non-fiduciary/non-custodial account
without an automatic investment plan (AIP) in place and a
balance of less than $2,500; and
o redeem all shares in Fund accounts below $1,000 where a
reduction in value has occurred due to a redemption, exchange
or transfer out of the account. The Fund will mail the
proceeds of the redeemed account to the shareholder.
Reductions in value that result solely from market activity will not
trigger an involuntary redemption. Shareholders with a combined household
account balance in any of the Scudder Funds of $100,000 or more, as well as
group retirement and certain other accounts will not be subject to a fee or
automatic redemption.
Fiduciary (e.g., IRA or Roth IRA) and custodial accounts (e.g., UGMA or
UTMA) with balances below $100 are subject to automatic redemption following 60
days' written notice to applicable shareholders.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by established shareholders (except by Scudder Individual
Retirement Account (IRA), Scudder Horizon Plan, Scudder Profit Sharing and Money
Purchase Pension Plans, Scudder 401(k) and Scudder 403(b) Plan holders), members
of the NASD, and banks. Orders placed in this manner may be directed to any
office of the Distributor listed in the Fund's prospectus. A confirmation of the
purchase will be mailed out promptly following receipt of a request to buy.
Federal regulations require that payment be received within three business days.
If payment is not received within that time, the order is subject to
cancellation. In the event of such cancellation or cancellation at the
purchaser's request, the purchaser will be responsible for any loss incurred by
the Fund or the principal underwriter by reason of such cancellation. If the
purchaser is a shareholder, the Corporation shall have the authority, as agent
of the shareholder, to redeem shares in the account in order to reimburse the
Fund or the principal underwriter for the loss incurred. Net losses on such
transactions which are not recovered from the purchaser will be absorbed by the
principal underwriter. Any net profit on the liquidation of unpaid shares will
accrue to the Fund.
Additional Information About Making Subsequent Investments by QuickBuy
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 QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on the
New York Stock Exchange, Inc. (the "Exchange"), normally 4 p.m. eastern time.
Proceeds in the amount of your purchase will be transferred from your bank
checking account 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. QuickBuy 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
QuickBuy and redeem them within seven days of the purchase, the Fund may hold
the redemption proceeds for a period of up to seven 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. QuickBuy transactions are not available for most retirement plan
accounts. However, QuickBuy transactions are available for Scudder IRA accounts.
In order to request purchases by QuickBuy, 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 QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form,
shareholders should allow 15 days for this service to be available.
<PAGE>
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 of the Fund 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
Trust or the principal underwriter by reason of such cancellation. If the
purchaser is a shareholder, the Corporation will have the authority, as agent of
the shareholder, to redeem shares in the account in order to reimburse the Fund
or the principal underwriter for the loss incurred. Investors whose orders have
been canceled may be prohibited from, or restricted in, placing future orders in
any of the Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on 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 (the "Custodian") of "wired funds," but the right
to charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include Columbus Day (the 2nd Monday in October) and
Veterans Day (November 11). Investors are not able to purchase shares by wiring
federal funds on such holidays because the Custodian is not open to receive such
federal funds on behalf of the Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on 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
Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to Scudder Service Corporation (the
"Transfer Agent") by the close of regular trading on the Exchange.
<PAGE>
Share Certificates
Due to the desire of the Corporation's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Share certificates now in a shareholder's possession may be sent to the Transfer
Agent for cancellation and credit to such shareholder's account. Shareholders
who prefer may hold the certificates in their possession until they wish to
exchange or redeem such shares.
Other Information
The Fund has authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for its shares. Those
brokers may also designate other parties to accept purchase and redemption
orders on the Fund's behalf. Orders for purchase or redemption will be deemed to
have been received by the Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between the Fund and the
broker, ordinarily orders will be priced at the Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of the Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Directors and the Distributor, also the Fund's principal underwriter,
each has the right to limit the amount of purchases by, and to refuse to sell
to, any person. The Directors and the Distributor may suspend or terminate the
offering of Fund shares at any time for any reason.
The Board of Directors and the Distributor each has the right to limit,
for any reason, the amount of purchases by, and to refuse to, sell to any
person, and each may suspend or terminate the offering of Fund shares at any
time for any reasons.
The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders without a
correct certified tax identification number and certain other certified
information (e.g. from exempt organizations, certification of exempt status)
will be returned to the investor. The Fund reserves the right, following 30
days' notice, to redeem all shares in accounts without a correct 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.
The Corporation may issue shares at net asset value in connection with
any merger or consolidation with, or acquisition of the assets of, any
investment company or personal holding company, subject to the requirements of
the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "How to Exchange or Sell Shares" and
"Policies You Should Know About" in the Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and
purchase into another Scudder fund. The purchase side of the exchange may be
either an additional investment into an existing account or may involve opening
a new account in another fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "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 into a new fund account must be for a minimum of $2,500. 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.
<PAGE>
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.
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.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder fund is a redemption of shares, and therefore
may result in tax consequences (gain or loss) to the shareholder and the
proceeds of such exchange may be subject to backup withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The 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. The Fund
and the Transfer Agent each reserves the right to suspend or terminate the
privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated. The exchange privilege may not be
available for certain Scudder funds or classes thereof. For more information,
please call 1-800-SCUDDER.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $50,000 and have the proceeds mailed
to their address of record. Shareholders may request to have the proceeds mailed
or wired to their predesignated bank account. In order to request redemptions by
telephone, shareholders must have completed and returned to the Transfer Agent
an application, including the designation of a bank account to which the
redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish the telephone redemption
privilege must complete the appropriate section on the
application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder pension and profit-sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a predesignated bank account or who want to change the bank
account previously designated to receive redemption proceeds
should either return a Telephone Redemption Option Form
(available upon request), or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. An original signature and an original
signature guarantee are required for each person in whose name
the account is registered.
<PAGE>
If a request for a redemption to a shareholder's bank account is made
by telephone or fax, payment will be made by Federal Reserve bank wire to the
bank account designated on the application, unless a request is made that the
redemption be mailed to the designated bank account. There will be a $5 charge
for all wire redemptions.
Note: Investors designating a savings bank to receive their
telephone redemption proceeds are advised that if the savings
bank is not a participant in the Federal Reserve System,
redemption proceeds must be wired through a commercial bank
which is a correspondent of the savings bank. As this may
delay receipt by the shareholder's account, it is suggested
that investors wishing to use a savings bank discuss wire
procedures with their bank and submit any special wire
transfer information with the telephone redemption
authorization. If appropriate wire information is not
supplied, redemption proceeds will be mailed to the designated
bank.
The 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 QuickSell
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 QuickSell program may sell shares of the Fund by telephone. Redemptions
must be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account two or three business days following
your call. For requests received by the close of regular trading on the
Exchange, normally 4:00 p.m. eastern time, shares will be redeemed at the net
asset value per share calculated at the close of trading on the day of your
call. QuickSell 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. QuickSell transactions are not available
for Scudder IRA accounts and most other retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which redemption proceeds will be credited. New
investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing a QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow 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
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with a signature guarantee as explained in the
Fund's prospectuses.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax required in
some states when settling estates.
It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
redemptions to ensure that all necessary documents accompany the request. When
shares are held in the name of a corporation, trust, fiduciary agent, attorney
or partnership, the Transfer Agent requires, in addition to the stock power,
certified evidence of authority to sign. These procedures are for the protection
of
<PAGE>
shareholders and should be followed to ensure prompt payment. Redemption
requests must not be conditional as to date or price of the redemption. Proceeds
of a redemption will be sent within seven business days after receipt by the
Transfer Agent of a request for redemption that complies with the above
requirements. Delays of more than seven days of payment for shares tendered for
redemption may result but only until the purchase check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information, please call 1-800-SCUDDER.
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 the Fund's net
asset value (a redemption-in-kind). If payment is made in securities, a
shareholder may incur transaction expenses in converting these securities into
cash. The Corporation has elected, however, to be governed by Rule 18f-1 under
the 1940 Act as a result of which the Fund is obligated to redeem shares, with
respect to any one shareholder during any 90-day period, solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the relevant Fund at the
beginning of the period.
Other Information
Clients, officers or employees of the Adviser or of an affiliated
organization, and members of such clients', officers' or employees' immediate
families, banks and members of the NASD may direct repurchase requests to the
Fund through Scudder Investor Services, Inc. at Two International Place, Boston,
Massachusetts 02110-4103 by letter, fax, TWX, or telephone. A two-part
confirmation will be mailed out promptly after receipt of the repurchase
request. A written request in good order with a proper original signature
guarantee, as described in the Fund's prospectus under "Transaction information
- -- Signature guarantees," should be sent with a copy of the invoice to Scudder
Funds, c/o Scudder Confirmed Processing, Two International Place, Boston,
Massachusetts 02110-4103. Failure to deliver shares or required documents (see
above) by the settlement date may result in cancellation of the trade and the
shareholder will be responsible for any loss incurred by the Fund or the
principal underwriter by reason of such cancellation. Net losses on such
transactions which are not recovered from the shareholder will be absorbed by
the principal underwriter. Any net gains so resulting will accrue to the Fund.
For this group, repurchases will be carried out at the net asset value next
computed after such repurchase requests have been received. The arrangements
described in this paragraph for repurchasing shares are discretionary and may be
discontinued at any time.
If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder will receive in addition to the net asset
value thereof, all declared but unpaid dividends thereon. The value of shares
redeemed or repurchased may be more or less than the shareholder's cost
depending on the net asset value at the time of redemption or repurchase. The
Corporation does not impose a redemption or repurchase charge. Redemption of
shares, including an exchange into another Scudder fund, may result in tax
consequences (gain or loss) to the shareholder and the proceeds of such
redemptions may be subject to backup withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The determination of net asset value 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 the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) the SEC may
by order permit such a suspension for the protection of the Corporation's
shareholders; provided that applicable rules and regulations of the SEC (or any
succeeding governmental authority) shall govern as to whether the conditions
prescribed in (b) or (c) exist.
Shareholders should maintain a share balance worth at least $2,500
($1,000 for IRAs, Uniform Gift to Minor Act, and Uniform Trust to Minor Act
accounts), which amount may be changed by the Board of Directors. Scudder
retirement plans have similar or lower minimum balance requirements. A
shareholder may open an account with at least
<PAGE>
$1,000 ($500 for an UGMA, UTMA, IRA and other retirement accounts), if an
automatic investment plan (AIP) of $100/month ($50/month for an UGMA, UTMA, IRA
and other retirement accounts) is established.
Shareholders who maintain a non-fiduciary account balance of less than
$2,500 in the Fund, without establishing an AIP, will be assessed an annual
$10.00 per fund charge with the fee to be reinvested in the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $100,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder at the address
of record. Reductions in value that result solely from market activity will not
trigger an involuntary redemption. UGMA, UTMA, IRA and other retirement accounts
will not be assessed the $10.00 charge or be subject to automatic liquidation.
FEATURES AND SERVICES OFFERED BY THE FUND
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 Scudder Family
of 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 the
Fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Conduct Rules, a mutual fund can call
itself a "no-load" fund only if the 12b-1 fee and/or service fee do not exceed
0.25% of a fund's average annual net assets.
Because funds in the Scudder Family of 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.
<PAGE>
Investors are encouraged to review the fee tables on page 5 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
<PAGE>
Dividends and Capital Gains 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 Fund. A change of instructions for the method
of payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders also may change their dividend option either
by calling 1-800-SCUDDER or by sending written instructions to the Transfer
Agent. Please include your account number with your written request. See "How to
Buy Shares" in the 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 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-SCUDDER. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
Scudder Investor Centers
Investors may visit any of the Investor Centers (located in Boca Raton,
Boston, Chicago, New York, and San Francisco) maintained by the Distributor. 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 Buy Shares" in the
prospectuses.
Reports to Shareholders
The Corporation issues shareholders unaudited semiannual financial
statements 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.
Transaction Summaries
Annual summaries of all transactions in the Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-SCUDDER.
THE SCUDDER FAMILY OF FUNDS
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds; a list of Scudder's
funds follows:
<PAGE>
MONEY MARKET
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series
Scudder Government Money Market Series
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund.
Scudder Tax Free Money Market Series
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
TAX FREE
Scudder Limited Term Tax Free Fund
<PAGE>
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds.
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*.
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. INCOME
Scudder Short Term Bond Fund.
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
- -------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
<PAGE>
Scudder High Yield Bond Fund
GLOBAL INCOME
Scudder Global Bond Fund
Scudder International Bond Fund.
Scudder Emerging Markets Income Fund
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio
Scudder Pathway Series: Balanced Portfolio
Scudder Pathway Series: Growth Portfolio
Scudder Pathway Series: International Portfolio
U.S. GROWTH AND INCOME
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
<PAGE>
U.S. GROWTH
Value
Scudder Large Company Value Fund
Scudder Value Fund**
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund**
Scudder Large Company Growth Fund.
Scudder Development Fund.
Scudder 21st Century Growth Fund
GLOBAL EQUITY
Worldwide
Scudder Global Fund
Scudder International Value Fund.
Scudder International Growth and Income Fund
Scudder International Fund***
- -----------------------
** Only the Scudder Shares are part of the Scudder Family of Funds.
*** Only the International Shares are part of the Scudder Family of Funds.
<PAGE>
Scudder International Growth Fund
Scudder Global Discovery Fund**
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
INDUSTRY SECTOR FUNDS
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund.
Scudder Technology Fund
SCUDDER PREFERRED SERIES
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
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.
- ------------------------
** Only the Scudder Shares are part of the Scudder Family of Funds.
<PAGE>
Certain Scudder funds or classes thereof may not be available for
purchase or exchange. For more information, please call 1-800-SCUDDER.
SPECIAL PLAN ACCOUNTS
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-SCUDDER. The discussions
of the plans below describe only certain aspects of the federal income tax
treatment of the plan. The state tax treatment may be different and may vary
from state to state. It is advisable for an investor considering the funding of
the investment plans described below to consult with an attorney or other
investment or tax adviser with respect to the suitability requirements and tax
aspects thereof.
Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code as to form.
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
<PAGE>
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 $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Starting
Age of Annual Rate of Return
------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <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
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%
- -----------------------------------------------------------------------------------------------------------
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 Roth IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for a
Roth Individual Retirement Account which meets the requirements of Section 408A
of the Internal Revenue Code.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.
<PAGE>
All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions of earnings from a Roth IRA
are taxable and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical expenses, the
purchase of health insurance for an unemployed individual and qualified higher
education expenses.
An individual with an income of $100,000 or less (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.
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. Shareholders may designate
which day they want the automatic withdrawal to be processed. 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 and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the 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 ten days prior to the date of the first automatic
withdrawal. 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-SCUDDER.
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
<PAGE>
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 "Understanding Distributions and Taxes"
in the Fund's prospectus.)
The Fund intends to follow the practice of distributing substantially
all and in no event less than 90% of its investment company taxable income
including any excess of net realized short-term capital gains over net realized
long-term capital losses. The Fund may follow the practice of distributing the
entire excess of net realized long-term capital gains over net realized
short-term capital losses. However, the Fund may retain all or part of such gain
for reinvestment, after paying the related federal income taxes for which the
shareholders may then claim a credit against their federal income tax liability.
If the Fund does not distribute an amount of capital gains and/or ordinary
income required to be distributed by an excise tax provision of the Code, it may
be subject to such tax. In certain circumstances, the Fund may determine that it
is in the interest of shareholders to distribute less than such an amount. (See
"TAXES.")
The Fund intends to distribute in December substantially all of its
investment company taxable income and any net realized capital gains resulting
from Fund investment activity. An additional distribution may be made, if
necessary.
<PAGE>
All distributions will be made in shares of the Fund and confirmations
will be mailed to each shareholder unless a shareholder has elected to receive
cash, in which case a check will be sent. Distributions are taxable, whether
made in shares or cash. (See "TAXES.")
PERFORMANCE INFORMATION
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner:
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for the periods of one year, five years and the life of the Fund, each
ended on the last day of a recent calendar quarter. Average annual total return
quotations reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the respective periods were
reinvested in Fund shares. Average annual total return is calculated by
computing the average annual compound rates of return of a hypothetical
investment over such periods, according to the following formula (average annual
total return is then expressed as a percentage):
T = (ERV/P)1/n - 1
Where:
P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
n = number of years
ERV = ending redeemable value: ERV is
the value, at the end of the
applicable period, of a
hypothetical $1,000 investment
made at the beginning of the
applicable period.
Average Annual Total Return for periods ended June 30, 1999
One Year Five Year Ten Year Life of the Fund(1)
-----% ----% ----% --
(1) For the period beginning July 6, 1988.
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of the Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by computing
the cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) -1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is
the value, at the end of the
applicable period, of a
hypothetical $1,000 investment
made at the beginning of the
applicable period.
<PAGE>
Cumulative Total Return for periods ended June 30, 1999
One Year Five Year Ten Year Life of the Fund(1)
-----% -----% ------% --
(1) For the period beginning July 6, 1988.
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.
Comparison of Fund Performance
In connection with communicating its performance to current or
prospective shareholders, the Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest
<PAGE>
but generally do not reflect deductions for administrative and management costs.
Historical information on the value of the dollar versus foreign
currencies may be used from time to time in advertisements concerning the Fund.
Such historical information is not indicative of future fluctuations in the
value of the U.S. dollar against these currencies. In addition, marketing
materials may cite country and economic statistics and historical stock market
performance for any of the countries in which the Fund invests.
From time to time, in advertising and marketing literature, the Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations.
From time to time, in marketing and other Fund literature, Directors
and officers of the Fund, its portfolio manager, or members of the portfolio
management team may be depicted and quoted to give prospective and current
shareholders a better sense of the outlook and approach of those who manage the
Fund. In addition, the amount of assets that the Adviser has under management in
various geographical areas may be quoted in advertising and marketing materials.
The Fund may be advertised as an investment choice in Scudder's college
planning program.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
<PAGE>
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.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about the Fund.
<PAGE>
ORGANIZATION OF THE FUND
<PAGE>
Investment Adviser
Scudder Kemper Investments, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization, the
predecessor of which is Scudder, Stevens & Clark, Inc., is one of the most
experienced investment counsel 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
predecessor firm reorganized from a partnership to a corporation on June 28,
1985. On December 31, 1997, Zurich Insurance Company ("Zurich") acquired a
majority interest in the Adviser, and Zurich Kemper Investments, Inc., a Zurich
subsidiary, became part of the Adviser. The Adviser's name changed to Scudder
Kemper Investments,
<PAGE>
Inc. On September 7, 1998, the businesses of Zurich (including Zurich's 70%
interest in Scudder Kemper) and the financial services businesses of B.A.T
Industries p.l.c. ("B.A.T") were combined to form a new global insurance and
financial services company known as Zurich Financial Services Group. By way of a
dual holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services Group, with the balance initially
owned by former B.A.T shareholders.
Founded in 1872, Zurich is a multinational, public corporation
organized under the laws of Switzerland. Its home office is located at
Mythenquai 2, 8002 Zurich, Switzerland. Historically, Zurich's earnings have
resulted from its operations as an insurer as well as from its ownership of its
subsidiaries and affiliated companies (the "Zurich Insurance Group"). Zurich and
the Zurich Insurance Group provide an extensive range of insurance products and
services and have branch offices and subsidiaries in more than 40 countries
throughout the world.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations as well as providing investment advice to over [XX] open and
closed-end mutual 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. The Adviser receives published
reports and statistical compilations from issuers and other sources, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. The Adviser's international
investment management team travels the world, researching hundreds of companies.
In selecting the securities in which the Fund may invest, the conclusions and
investment decisions of the Adviser with respect to the Funds are based
primarily on the analyses of its own research department.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for a fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the
<PAGE>
size of their investments generally. Frequently, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all clients. Likewise, a particular
security may be bought for one or more clients when one or more other clients
are selling the security. In addition, purchases or sales of the same security
may be made for two or more clients on the same day. In such event, such
transactions will be allocated among the clients in a manner believed by the
Adviser to be equitable to each. In some cases, this procedure could have an
adverse effect on the price or amount of the securities purchased or sold by a
fund. Purchase and sale orders for a fund may be combined with those of other
clients of the Adviser in the interest of achieving the most favorable net
results to that fund.
In certain cases, the investments for the fund are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser,
that have similar names, objectives and investment styles. You should be aware
that the Fund is likely to differ from these other mutual funds in size, cash
flow pattern and tax matters. Accordingly, the holdings and performance of the
Fund can be expected to vary from those of these other mutual funds.
The present investment management agreements (the "Agreement") was
approved by the Directors on August 6, 1998, became effective September 7, 1998,
and was approved at a shareholder meeting held on December 15, 1998. The
Agreement will continue in effect until September 30, 1999 and from year to year
thereafter only if its continuance is approved annually by the vote of a
majority of those Directors who are not parties to such Agreement or interested
persons of the Adviser or the Corporation, cast in person at a meeting called
for the purpose of voting on such approval, and either by a vote of the
Corporation's Directors or of a majority of the outstanding voting securities of
the Fund. The Agreement may be terminated at any time without payment of penalty
by either party on sixty days' written notice and automatically terminate in the
event of its assignment.
AMA InvestmentLink(SM) Program
Pursuant to an Agreement between the Adviser and AMA Solutions, Inc., a
subsidiary of the American Medical Association (the "AMA"), dated May 9, 1997,
the Adviser has agreed, subject to applicable state regulations, to pay
<PAGE>
AMA Solutions, Inc. royalties in an amount equal to 5% of the management fee
received by the Adviser with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLinkSM Program. The Adviser
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment adviser
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLink(SM) Program will be a customer of the Adviser (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLink(SM) is a service mark of AMA Solutions, Inc.
Under the Agreement, the Adviser regularly provides the Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objectives, policies and restrictions and determines what
securities shall be purchased for the portfolio of the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of the Fund's
assets shall be held uninvested, subject always to the provisions of the
Corporation's Articles of Incorporation and By-Laws, of the 1940 Act and the
Code and to the Fund's investment objectives, policies and restrictions, and
subject, further, to such policies and instructions as the Directors of the
Corporation may from time to time establish. The Adviser also advises and
assists the officers of the Corporation in taking such steps as are necessary or
appropriate to carry out the decisions of its Directors and the appropriate
committees of the Directors regarding the conduct of the business of the
Corporation.
Under the Agreement, the Adviser also renders significant
administrative services (not otherwise provided by third parties) necessary for
the Fund's operations as an open-end investment company including, but not
limited to, preparing reports and notices to the Directors and shareholders,
supervising, negotiating contractual arrangements with, and monitoring various
third-party service providers to the Fund (such as the Fund's transfer agent,
pricing agents, custodians, accountants and others); preparing and making
filings with the SEC and other regulatory agencies; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of securities and the calculation of
net asset value; monitoring the registration of shares of the Fund under
applicable federal and state securities laws; maintaining the Fund's books and
records to the extent not otherwise maintained by a third party; assisting in
establishing accounting policies of the Fund; assisting in the resolution of
accounting and legal issues; establishing and monitoring the Fund's operating
budget; processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Directors.
The Adviser pays the compensation and expenses (except those of
attending Board and committee meetings outside New York, New York and Boston,
Massachusetts) of all directors, officers and executive employees of the
Corporation affiliated with the Adviser and makes available, without expense to
the Fund, the services of such directors, officers and employees as may duly be
elected officers, subject to their individual consent to serve and to any
limitations imposed by law, and provides the Fund's office space and facilities.
For the Adviser's services, effective September 11, 1997, Global Fund
pays the Adviser an annual fee equal to 1.00% on the first $500 million of
average daily net assets, 0.95% on such assets in excess of $500 million, 0.90%
on such assets in excess of $1 billion and 0.85% on such assets in excess of
$1.5 billion. The fee is payable monthly, provided the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid.
The investment advisory fees for the Global Fund for the fiscal years
ended June 30, 1999, 1998 and 1997, were $______________, $15,502,974 and
$13,450,790, respectively.
<PAGE>
Under the Agreement, the Fund is responsible for all of its other
expenses including organization expenses; fees and expenses incurred in
connection with membership in investment company organizations; broker's
commissions; legal, auditing and accounting expenses; taxes and governmental
fees; the fees and expenses of the Transfer Agent; the cost of preparing share
certificates or any other expenses, including clerical expenses of issue,
redemption or repurchase of shares of capital stock; the expenses of and the
fees for registering or qualifying securities for sale; the fees and expenses of
the Directors, officers and employees who are not affiliated with the Adviser;
the cost of printing and distributing reports and notices to shareholders; and
the fees and disbursements of custodians. The Corporation may arrange to have
third parties assume all or part of the expenses of sale, underwriting and
distribution of shares of Fund. The Fund is also responsible for its expenses
incurred in connection with litigation, proceedings and claims and the legal
obligation it may have to indemnify its officers and Directors with respect
thereto. The custodian agreements provide that the custodian shall compute the
Fund's net asset value. The Agreements expressly provide that the Adviser shall
not be required to pay a pricing agent of the Fund for portfolio pricing
services, if any.
The Agreement identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder, Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Corporation, with respect to the Fund, has the
non-exclusive right to use and sublicense the Scudder name and marks as part of
its name, and to use the Scudder Marks in the Corporation's investment products
and services.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian banks. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
The Adviser may serve as Adviser to other funds with investment
objectives and policies similar to those of the Fund that may have different
distribution arrangements or expenses, which may affect performance.
None of the officers or Directors may have dealings with the Fund as
principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Fund.
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 Fund. 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
<PAGE>
<TABLE>
<CAPTION>
Position with
Underwriter,
Name, Age and Position Scudder Investor
Address With Corporation Principal Occupation** Services, Inc.
- ------- ---------------- ---------------------- --------------
<S> <C> <C> <C>
Lynn Birdsong++* (___) Chairman of the Board,
Director
William E. Holzer++@ (50) President, Scudder Global Managing Director of Scudder --
Fund Kemper Investments, Inc.
Paul Bancroft III (69) Director Venture Capitalist and --
79 Pine Lane Consultant; Retired President,
Box 6639 Chief Executive Officer and
Snowmass Village, CO 81615 Director, Bessemer Securities
Corporation
Sheryle J. Bolton (53) Director Chief Executive Officer, --
5576 Glenbrook Drive Scientific Learning Corporation
Oakland, CA 94618
William T. Burgin (56) Director General Partner, Bessemer --
83 Walnut Street Venture Partners
Wellesley, MA 02181-2101
Thomas J. Devine (72) Director Consultant --
149 East 73rd Street
New York, NY 10021
<PAGE>
Position with
Underwriter,
Name, Age and Position Scudder Investor
Address With Corporation Principal Occupation** Services, Inc.
- ------- ---------------- ---------------------- --------------
Keith R. Fox (45) Director President, Exeter Capital --
10 East 53rd Street Management Corporation
New York, NY 10022
William H. Gleysteen, Jr. (73) Director Consultant; President, The --
4937 Crescent Street Japan Society, Inc.
Bethesda, MD 20816 (1989-December 1995); Vice
President of Studies, Council
on Foreign Relations (until
1989)
William H. Luers (70) Director President, The Metropolitan --
801 Second Avenue Museum of Art (1986 until
New York, NY 10017-4708 present)
Kathryn L. Quirk#++* (46) Director, Vice President Managing Director of Scudder Director, Senior Vice
and Assistant Secretary Kemper Investments, Inc. President, Chief Legal
Officer and Assistant
Clerk
Joan E. Spero (55) Director President, The Doris Duke __
Charitable Foundation
Robert G. Stone, Jr. (76) Honorary Director Chairman Emeritus and --
405 Lexington Avenue Director, Kirby Corporation
New York, NY 10174 (inland and offshore marine
transportation and diesel
repairs)
<PAGE>
Position with
Underwriter,
Name, Age and Position Scudder Investor
Address With Corporation Principal Occupation** Services, Inc.
- ------- ---------------- ---------------------- --------------
Susan E. Dahl+ (34) Vice President Managing Director of Scudder --
Kemper Investments, Inc.
Gerald J. Moran++ (60) Vice President Senior Vice President of --
Scudder Kemper Investments,
Inc.
Isabel M. Saltzman+ (45) Vice President Managing Director of Scudder --
Kemper Investments, Inc.
John R. Hebble+ (___) Treasurer Senior Vice President of --
Scudder Kemper Investments,
Inc.
<PAGE>
Position with
Underwriter,
Name, Age and Position Scudder Investor
Address With Corporation Principal Occupation** Services, Inc.
- ------- ---------------- ---------------------- --------------
Caroline Pearson+ (37) Assistant Secretary Senior Vice President of --
Scudder Kemper Investments,
Inc.; Associate, Dechert Price
& Rhoads (law firm) 1989 - 1997
Ann McCeary ++( ) Vice President Managing Director of Scudder __
Kemper Investments, Inc.
John Millette+( ) Vice President & Secretary Vice President of Scudder --
Kemper Investments, inc.
</TABLE>
* Mr. Birdsong and Ms. Quirk, are considered by the Corporation and its
counsel to be persons who are "interested persons" of the Adviser or of
the Corporation.
** 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.
# Ms. Quirk is a member of the Executive Committee, which may exercise
the powers of the Directors when they are not in session.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
@ The President of a series shall have the status of Vice President of
the Corporation.
To the knowledge of the Corporation, as of September 30, 1999, all
Directors and Officers as a group owned beneficially (as that term is defined in
Section 13(d) of the Securities Exchange Act of 1934) ______ shares, or _____%
of the shares of the Fund outstanding on such date.
To the knowledge of the Corporation, as of September 30, 1999, ______
shares in the aggregate, ____% of the outstanding shares of the Fund, were held
in the name ______________________, who may be deemed to be the beneficial owner
of certain of these shares, but disclaims any beneficial ownership therein.
<PAGE>
Except as stated above, to the knowledge of the Corporation, as of
September 30, 1999, no person owned beneficially more than 5% of the Fund's
outstanding shares.
The Directors and officers also serve in similar capacities with other
Scudder funds.
REMUNERATION
Responsibilities of the Board -- Board and Committee Meetings
The Board of Directors is responsible for the general oversight of the
Fund's business. A majority of the Board's members are not affiliated with
Scudder Kemper Investments, Inc. These "Independent Directors" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
The Board of Directors meets at least quarterly to review the
investment performance of the Fund and other operational matters, including
policies and procedures designed to ensure compliance with various regulatory
requirements. At least annually, the Independent Directors review the fees paid
to the Adviser and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, the Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Adviser and its
affiliates and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by the Fund's independent
public accountants and by independent legal counsel selected by the Independent
Directors.
All the Independent Directors serve on the Committee on Independent
Directors, which nominates Independent Directors and considers other related
matters, and the Audit Committee, which selects the Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Directors from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
Compensation of Officers and Directors
The Independent Directors receive the following compensation from the
Funds of Global/International Fund, Inc.: an annual trustee's fee of $3,500; a
fee of $325 for attendance at each board meeting, audit committee meeting or
other meeting held for the purposes of considering arrangements between the
Corporation on behalf of the Fund and the Adviser or any affiliate of the
Adviser; $100 for all other committee meetings; and reimbursement of expenses
incurred for travel to and from Board Meetings. No additional compensation is
paid to any Independent Director for travel time to meetings, attendance at
directors' educational seminars or conferences, service on industry or
association committees, participation as speakers at directors' conferences or
service on special trustee task forces or subcommittees. Independent Directors
do not receive any employee benefits such as pension or retirement benefits or
health insurance. Notwithstanding the schedule of fees, the Independent
Directors have in the past and may in the future waive a portion of their
compensation.
The Independent Directors also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and complexity
and in some cases have substantially different Director fee schedules. The
following table shows the aggregate compensation received by each Independent
Director during 1997 from the Trust and from all of the Scudder funds as a
group.
<TABLE>
<CAPTION>
Global/International Fund, Inc.* All Scudder Funds
-------------------------------- -----------------
Paid by Paid by Paid by Paid by
Name the Fund the Adviser the Funds the Adviser**
- ---- -------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Paul Bancroft III, $___ $____ $____ $_____ ( funds)
Trustee
<PAGE>
Global/International Fund, Inc.* All Scudder Funds
-------------------------------- -----------------
Paid by Paid by Paid by Paid by
Name the Fund the Adviser the Funds the Adviser**
- ---- -------- ----------- --------- -------------
Sheryle J. Bolton, $___ $____ $____ $____ ( funds)
Trustee
William T. Burgin, $___ $____ $____ $____ ( funds)
Director
Thomas J. Devine, $____ $____ $____ $____ ( funds)
Trustee
Keith R. Fox, Director $_____ $_____ $______ $___ ( funds)
William H. Gleysteen, $____ $_____ $_____@ $____ ( funds)
Jr., Director
William H. Luers, $____ $____ $_____ $___ ( funds)
Director
Robert G. Stone, Jr., $__ $__ $_____+ $___ ( funds)
Honorary Director
</TABLE>
* Global/International Fund, Inc. consists of five funds: Scudder Global
Fund, Scudder International Bond Fund, Scudder Global Bond Fund, Global
Discovery Fund and Scudder Emerging Markets Income Fund.
** Meetings associated with the Adviser's alliance with Zurich Insurance
Company. See "Insurance Adviser" for additional information.
@ This amount does not reflect $____ in retirement benefits accrued as
part of Fund Complex expenses, and $_____ in estimated annual benefits
payable upon retirement. Retirement benefits accrued and proposed are
to be paid to Mr. Gleysteen as additional compensation for serving on
the Board of The Japan Fund, Inc.
<PAGE>
+ This amount does not reflect $____in retirement benefits accrued as
part of Fund Complex expenses, and $____in estimated annual benefits
payable upon retirement. Retirement benefits accrued and proposed are
to be paid to Mr. Stone as additional compensation for serving on the
Board of The Japan Fund, Inc.
Members of the Board of Directors who are employees of the Adviser or
its affiliates receive no direct compensation from the Corporation, although
they are compensated as employees of the Adviser, or its affiliates, as a result
of which they may be deemed to participate in fees paid by the Fund.
DISTRIBUTOR
The Corporation has an underwriting agreement with Scudder Investor
Services, Inc., a Massachusetts corporation, which is a wholly-owned subsidiary
of the Adviser, a Delaware corporation. The Corporation's underwriting agreement
dated September 7, 1998 will remain in effect until September 30, 1999 and from
year to year thereafter only if its continuance is approved annually by a
majority of the Board of Directors who are not parties to such agreement or
interested persons of any such party and either by a 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 August
6, 1998.
Under the principal underwriting agreement, the Corporation is
responsible for: the payment of all fees and expenses in connection with the
preparation and filing with the SEC of the Fund's registration statement and
prospectuses and any amendments and supplements thereto, the registration and
qualification of shares for sale in the various states, including registering
the Corporation as a broker/dealer in various states; the fees and expenses of
preparing, printing and mailing prospectuses annually to existing shareholders
(see below for expenses relating to prospectuses paid by the Distributor),
notices, proxy statements, reports or other communications to shareholders of
the Fund; the cost of printing and mailing confirmations of purchases of shares
and any prospectuses accompanying such confirmations; any issue taxes or any
initial transfer taxes; a portion of shareholder toll-free telephone charges and
expenses of shareholder service representatives, the cost of wiring funds for
share purchases and redemptions (unless paid by the shareholder who initiates
the transaction); the cost of printing and postage of business reply envelopes;
and a portion of the cost of computer terminals used by both the Corporation and
the Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of the Fund to the public.
The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
service representatives, a portion of the cost of computer terminals, and of any
activity which is primarily intended to result in the sale of shares issued by
the Corporation unless a Rule 12b-1 Plan is in effect which provides that the
Fund shall bear some or all of such expenses.
Note: Although the Fund does not have a 12b-1 Plan and the Directors
have no current intention of adopting one, the Fund would also
pay those fees and expenses permitted to be paid or assumed by
the Fund pursuant to a 12b-1 Plan, if any, adopted by the
Fund, notwithstanding any other provision to the contrary in
the underwriting agreement.
As agent, the Distributor currently offers the 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 the investor. The Distributor has made no firm
commitment to acquire shares of the Corporation.
TAXES
(See "Understanding Distributions and Taxes" in the Fund's prospectus.)
The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code, and each has qualified as such
<PAGE>
since its inception. It 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) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code. The Fund intends to distribute at least
annually substantially all, and in no event less than 90%, of their investment
company taxable income and net realized capital gains.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim his/her share of federal income taxes paid by the
Fund on such gains as a credit against his/her own federal income tax liability,
and will be entitled to increase the adjusted tax basis of his/her Fund shares
by the difference between such reported gains and his/her tax credit.
Net investment income is made up of dividends and interest, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward or post-October loss of the Fund. the
Fund intends to offset realized capital gains by using its capital loss
carryforwards, if any, before distributing any capital gains. In addition, the
Fund intends to offset realized capital gains by using its post-October losses,
if any, before distributing any capital gains. As of June 30, 1999, Global Fund
had no capital loss carryforward.
The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of the Fund's ordinary income for the calendar year,
at least 98% of the excess of its capital gains over capital losses (adjusted
for certain ordinary losses prescribed by the Code) realized during the one-year
period ending October 31 during such year, and all ordinary income and capital
gains for prior years that were not previously distributed.
Dividends from domestic corporations are expected to comprise some
portion of the Fund's gross income. To the extent that such dividends constitute
a portion of the Fund's gross income, a portion of the income distributions of
the Fund may be eligible for the deduction for dividends received by
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the Fund
shares with respect to which the dividends are received are treated as
debt-financed under federal income tax law, and is eliminated if either those
shares or the shares of the Fund are deemed to have been held by the Fund or the
shareholder, as the case may be, for less than 46 days during the 90-day period
beginning 45 days before the shares become ex-dividend.
Properly designated distributions of the excess of net long-term
capital gain over net short-term capital loss are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Such distributions are not eligible for the
dividends-received deduction discussed above. Any loss realized upon the
redemption of shares held at the time of redemption for six months or less from
the date of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain during
such six-month period.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income. Investment company taxable income generally
includes dividends, interest, net short-term capital gains in excess of net
long-term capital losses, and net foreign currency gains, if any, less expenses.
Net realized capital gains for a fiscal year are computed by taking into account
any capital loss carryforward of the Fund.
<PAGE>
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.
A qualifying 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
$2,000 per individual for married couples if only one spouse has earned income
for that year). There are special rules for determining how withdrawals are to
be taxed if an IRA contains both deductible and nondeductible amounts. In
general, a proportionate amount of each withdrawal will be deemed to be made
from nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
spousal IRA even if the spouse has earnings in a given year if the spouse elects
to be treated as having no earnings (for IRA contribution purposes) for the
year.
Distributions by the Fund result in a reduction in the net asset value
of such Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
The 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 may be required to treat as part of the amounts distributed to them, their
pro rata portion of qualified taxes paid by the Fund to foreign countries (which
taxes relate primarily to investment income). 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, except in the case of
certain electing individual taxpayers who have limited creditable foreign taxes
and no foreign source income other than passive investment-type income.
Furthermore, the foreign tax credit is eliminated with respect to foreign taxes
withheld on dividends if the dividend-paying shares or the shares of the Fund
are held by the Fund or the shareholder, as the case may be, for less than 16
days (46 days in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for preferred shares)
before the shares become ex-dividend. In addition, if the Fund fails to satisfy
these holding period requirements, it cannot elect under Section 853 to pass
through to shareholders the ability to claim a deduction for the related foreign
taxes.
If the Fund invests in stock of certain foreign investment companies,
that Fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the Fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the Fund, other than the taxable
year of the excess distribution or disposition, would be taxed to the Fund at
the highest ordinary income rate in effect for such year, and the tax would be
further increased by an interest charge to reflect the value of the tax deferral
deemed to have resulted from the ownership of the foreign company's stock. Any
amount of distribution or gain allocated to the taxable year of the
<PAGE>
distribution or disposition would be included in the Fund's investment company
taxable income and, accordingly, would not be taxable to the Fund to the extent
distributed by the Fund as a dividend to its shareholders.
The Fund may make an election to mark to market its shares of these
foreign investment companies in lieu of being subject to U.S. federal income
taxation. At the end of each taxable year to which the election applies, the
Fund would report as ordinary income the amount by which the fair market value
of the foreign company's stock exceeds the Fund's adjusted basis in these
shares; any mark to market losses and any loss from an actual disposition of
shares would be reported as ordinary loss to the extent of any net mark-to
market gains included in income in prior years. The effect of the election would
be to treat excess distributions and gain on dispositions as ordinary income
which is not subject to a fund level tax when distributed to shareholders as a
dividend. Alternatively, the Fund may elect to include as income and gain their
share of the ordinary earnings and net capital gain of certain foreign
investment companies in lieu of being taxed in the manner described above.
Equity options (including options on stock and options on narrow-based
stock indices) and over-the-counter options on debt securities written or
purchased by the Fund will be subject to tax under Section 1234 of the Code. In
general, no loss is recognized by the Fund upon payment of a premium in
connection with the purchase of a put or call option. The character of any gain
or loss recognized (i.e., long-term or short-term) will generally depend in the
case of a lapse or sale of the option on the Fund's holding period for the
option and in the case of an exercise of the option on the Fund's holding period
for the underlying stock. The purchase of a put option may constitute a short
sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying stock or substantially identical stock in the Fund's
portfolio. If the Fund writes a put or call option, no gain is recognized upon
its receipt of a premium. If the option lapses or is closed out, any gain or
loss is treated as a short-term capital gain or loss. If a call option is
exercised the character of the gain or loss depends on the holding period of the
underlying stock.
Many futures and forward contracts entered into by the Fund, and all
listed nonequity options written or purchased by the 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, and on the last trading day of the Fund's
fiscal year, all outstanding Section 1256 positions will be marked to market
(i.e. treated as if such positions were closed out at their closing price on
such day), with any resulting gain or loss recognized. Under certain
circumstances, entry into a futures contract to sell a security may constitute a
short sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security in the
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 the Fund
will be treated as ordinary income or loss.
Positions of the Fund which consist of at least one stock and at least
one stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by the Fund.
Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one futures contract or forward contract
or nonequity option governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such other position will be treated as a
"mixed straddle." Although mixed straddles are subject to the straddle rules of
Section 1092 of the Code, certain tax elections exist for them which reduce or
eliminate the operation of these rules. The Fund will monitor its transactions
in options and futures and may make certain tax elections in connection with
these investments.
Notwithstanding any of the foregoing, the Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if the Fund enters into a short sale, offsetting notional principal contract,
futures or forward contract transaction with respect to the appreciated position
or substantially appreciated property. Appreciated financial positions subject
to this constructive sale treatment are interests (including options, futures
and forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt
<PAGE>
instruments. Constructive sale treatment of appreciated financial positions does
not apply to certain transactions closed in the 90-day period ending with the
30th day after the close of the Fund's taxable year, if certain conditions are
met.
Similarly, if the Fund enters into a short sale of property that
becomes substantially worthless, the Fund will recognize gain at that time as
though it had closed the short sale. Future regulations may apply similar
treatment to other transactions with respect to property that becomes
substantially worthless.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues receivables or
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables, or pays such liabilities, generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain futures and
forward contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of the Fund's investment company taxable income
to be distributed to its shareholders as ordinary income.
A portion of the difference between the issue price of zero coupon
securities and their face value ("original issue discount") is considered to be
income to the Fund each year, even though the Fund will not receive cash
interest payments from these securities. This original issue discount imputed
income will comprise a part of the investment company taxable income of the Fund
which must be distributed to shareholders in order to maintain the qualification
of the Fund as regulated investment companies and to avoid federal income tax at
the Fund's level. In addition, if the Fund invests in certain high yield
original issue discount obligations issued by corporations, a portion of the
original discount accruing on the obligation may be eligible for the deduction
for dividends received by corporations. In such an event, dividends of
investment company taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of accrued original
issue discount, may be eligible for this deduction for dividends received by
corporations if so designated by the Fund in a written notice to shareholders.
The 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 the Fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the 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 the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
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.
<PAGE>
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for the Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Fund to reported commissions paid by
others. The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Fund's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
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 brokerage and research services to the Adviser of the
Fund. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions for the Fund to pay a
brokerage commission in excess of that which another broker might charge for
executing the same transaction on account of execution services and the receipt
of research services. The Adviser has negotiated arrangements which are not
applicable to most fixed-income transactions, with certain broker/dealers
pursuant to which a broker/dealer will provide research services, to the Adviser
or the Fund in exchange for the direction by the Adviser of brokerage
transaction to the broker dealer. These arrangements regarding research services
generally apply to equity transactions. The Adviser will not place orders with
broker/dealers on the basis that the broker/dealer has or has not sold shares of
the Fund. In effecting transactions in over-the-counter securities, orders are
placed with the principal market makers for the security being traded unless,
after exercising care, it appears that more favorable results are available
elsewhere.
To the maximum extent feasible, it is expected that the Adviser will
place orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker-dealer and a subsidiary of the Adviser; the
Distributor will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Fund for this service.
Although certain research services from broker/dealers may be useful to
the Fund and to the Adviser, it is the opinion of the Adviser that such
information only supplements the Adviser's own research effort since the
information must still be analyzed, weighed, and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund, and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to
the Fund.
The Directors review from time to time whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
For the fiscal years ended June 30, 1999, 1998 and 1997, Global Fund
paid brokerage commissions of $_____________, $2,451,495 and $2,465,215,
respectively. For the fiscal year ended June 30, 1999, $_____, (_____ of the
total brokerage commissions
<PAGE>
paid by the Fund) resulted from orders placed, consistent with the policy of
obtaining the most favorable net results, with brokers and dealers who provided
supplementary research, market and statistical information to the Fund or the
Adviser. The total amount of brokerage transactions aggregated $______________,
of which ________________ (________% of all brokerage transactions) were
transactions which included research commissions. Such brokerage was not
allocated to any particular brokers or dealers or with any regard to the
provision of market quotations for purposes of valuing the Fund's portfolio or
to any other special factors.
Portfolio Turnover
Average annual portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio securities
owned during the year, excluding from both the numerator and the denominator all
securities with maturities at the time of acquisition of one year or less.
Global Fund's portfolio turnover rate for each of the fiscal years ended June
30, 1999, 1998 and 1997 was __%, 51.3% and 40.5%, respectively. [Recent economic
and market conditions necessitated more active trading, resulting in the higher
portfolio turnover rates.] A higher rate involves greater transaction expenses
to the Fund and may result in the realization of net capital gains, which would
be taxable to shareholders when distributed. Purchases and sales are made for
the Fund's portfolio whenever necessary, in management's opinion, to meet the
Fund's objectives.
NET ASSET VALUE
The net asset value of shares of the Fund is computed as of the close
of regular trading on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. (the "Value Time"). The Exchange is scheduled
to be closed on the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share is determined by dividing
the value of the total assets of the Fund, less all liabilities, by the total
number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price on such exchange as of the Value Time. 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") on such exchange as of the Value
Time. Lacking a Calculated Mean quotation , the security is valued at the most
recent bid quotation on such exchange as of the Value Time. An equity security
which is traded on the National Association of Securities Dealers Automated
Quotation ("Nasdaq") system will be valued at its most recent sale price on such
system as of the Value Time. Lacking any sales, the security will be valued at
the most recent bid quotation as of the Value Time. 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 if there are any sales of
such security on such market as of the Value Time. Lacking any sales, the
security is valued at the Calculated Mean quotation for such security as of the
Value Time. Lacking a Calculated Mean quotation, the security is valued at the
most recent bid quotation as of the Value Time .
Debt securities, other than money market instruments, are valued at
prices supplied by the Fund's pricing agent(s) which reflect broker/dealer
supplied valuations and electronic data processing techniques. Money market
instruments with an original maturity of sixty days or less maturity as par
shall be valued at amortized cost , 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
<PAGE>
the case of a written options contract. Futures contracts are valued at the most
recent settlement price. Foreign currency exchange forward contracts are valued
at the value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Financial highlights of the Fund included in the 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 PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts 02109, independent accountants, and given on the authority
of that firm as experts in accounting and auditing. Effective July 1, 1998,
Coopers & Lybrand L.L.P. and Price Waterhouse LLP merged to become
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP is responsible for
performing annual audits of the financial statements and financial highlights of
the Fund in accordance with generally accepted auditing standards, and the
preparation of federal tax returns.
Other Information
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in the light of the objectives and policies of the
Fund, and such factors as its other portfolio holdings and tax considerations
and should not be construed as recommendations for similar action by other
investors.
The CUSIP number of Global Fund is 378947-20-4.
The CUSIP number of International Bond Fund is 378947-30-3.
Global Fund and International Bond Fund each have fiscal years ending
on June 30.
The law firm of Dechert Price & Rhoads is counsel for the Fund.
The Corporation employs Brown Brothers Harriman and Co., 40 Water
Street, Boston, Massachusetts 02109 as Custodian for the Fund. Brown Brothers
Harriman and Co. has entered into agreements with foreign subcustodians approved
by the Directors of the Corporation pursuant to Rule 17f-5 of the 1940 Act.
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02210-4103, a subsidiary of the Adviser, computes net
asset value for the Fund. The 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.
<PAGE>
For the fiscal years ended June 30, 1997, 1998 and 1999, SFAC charged the Fund
aggregate fees of $552,664, $601,315 and $_____, respectively, of which $49,387,
$53,367 and $_____, respectively are unpaid.
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts
02107-2291, a subsidiary of the Adviser, is the transfer, dividend-paying and
shareholder service agent for the Fund. The Fund pays Scudder Service
Corporation an annual fee of $29.00 for each account maintained for a
participant. For the fiscal year ended June 30, 1999 Scudder Service Corporation
charged the Fund aggregate fees of $____, of which $_____ was unpaid at June 30,
1999.
Scudder Trust Company, an affiliate of the Adviser, provides
subaccounting and recordkeeping services for shareholder accounts in certain
retirement and employee benefit plans. Annual service fees are paid by the Fund
to Scudder Trust Company, Two International Place, Boston, Massachusetts
02110-4103 for such accounts. The Fund pays Scudder Trust Company an annual fee
of $29.00 per shareholder account. The Fund incurred fees of $_________ of which
$_________________ was unpaid at June 30, 1998.
The Fund, or the Adviser (including any affiliate of the Adviser), or
both, may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account.
The Fund's prospectuses and this Statement of Additional Information
omit certain information contained in the Registration Statement which the
Corporation has filed with the SEC under the Securities Act of 1933 and
reference is hereby made to the Registration Statement for further information
with respect to the Fund and the securities offered hereby. This Registration
Statement is available for inspection by the public at the SEC in Washington,
D.C.
FINANCIAL STATEMENTS
The financial statements, including the Investment Portfolio of the
Fund, together with the Report of Independent Accountants, Financial Highlights
and notes to financial statements, are incorporated by reference and attached
hereto in the Annual Report to Shareholders of the Fund dated June 30, 1999, and
are hereby deemed to be part of this Statement of Additional Information.
<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
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving
<PAGE>
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>
<TABLE>
<CAPTION>
Item 23. Exhibits:
<S> <C> <C> <C>
a. (1) Articles of Amendment and Restatement, dated December 13, 1990, is
incorporated by reference to Post-Effective Amendment No. 8 to the
Registration Statement.
(2) Articles of Amendment, dated December 29, 1997, is incorporated by
reference to Post-Effective Amendment No. 34 to the Registration
Statement.
(3) Articles of Amendment, dated May 29, 1998, is incorporated by
reference to Post-Effective Amendment No. 34 to the Registration
Statement.
(4) Articles Supplementary, dated February 14, 1991, is incorporated
by reference to Post-Effective Amendment No. 9 to the Registration
Statement.
(5) Articles Supplementary, dated July 11, 1991, is incorporated by
reference to Post-Effective Amendment No. 12 to the Registration
Statement.
(6) Articles Supplementary, dated November 24, 1992, is incorporated
by reference to Post-Effective Amendment No. 18 to the Registration
Statement.
(7) Articles Supplementary, dated October 20, 1993, is incorporated
by reference to Post-Effective Amendment No. 19 to the Registration
Statement.
(8) Articles Supplementary, dated December 14, 1995, is incorporated
by reference to Post-Effective Amendment No. 26 to the Registration
Statement.
(9) Articles Supplementary, dated March 6, 1996, is incorporated
by reference to Post-Effective Amendment No. 28 to the Registration
Statement.
(10) Articles Supplementary, dated April 15, 1998 is incorporated
by reference to Post-Effective Amendment No. 34 to the Registration
Statement.
b. (1) By-Laws, dated May 15, 1986, are incorporated by reference
to the original Registration Statement.
(2) Amendment, dated May 4, 1987, to the By-Laws is incorporated by
reference to Post-Effective Amendment No. 2 to the Registration
Statement.
(3) Amendment to the By-Laws, dated September 14, 1987, is
incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement.
(4) Amendment to the By-Laws, dated July 27, 1988, is incorporated
2
<PAGE>
by reference to Post-Effective Amendment No. 5 to the Registration
Statement.
(5) Amendment to the By-Laws, dated September 15, 1989, is incorporated
by reference to Post-Effective Amendment No. 7 to the Registration
Statement.
(6) Amended and Restated By-Laws, dated March 4, 1991, are
incorporated by reference to Post-Effective Amendment No. 12 to the
Registration Statement.
(7) Amendment to the By-Laws, dated September 20, 1991, is incorporated
by reference to Post-Effective Amendment No. 15 to the Registration
Statement.
(8) Amendment to the By-Laws, dated December 12, 1991, is incorporated
by reference to Post-Effective Amendment No. 23 to the
Registration Statement.
(9) Amendment to the By-Laws, dated October 1, 1996, is incorporated by
reference to Post-Effective Amendment No. 27 to the Registration
Statement.
(10) Amendment to the By-Laws, dated December 3, 1997, is incorporated
by reference to Post-Effective Amendment No. 34 to the Registration
Statement.
c. (1) Specimen Share Certificate representing shares of capital stock of
$.01 par value of Scudder Global Fund is incorporated by reference
to Post-Effective Amendment No. 6 to the Registration Statement.
(2) Specimen Share Certificate representing shares of capital stock of
$.01 par value of Scudder International Bond Fund is incorporated
by reference to Post-Effective Amendment No. 6 to the Registration
Statement.
d. (1) Investment Management Agreement between the Registrant (on behalf
of Scudder Global Fund) and Scudder Kemper Investments, Inc. dated
September 7, 1998 is incorporated by reference to Post-Effective
Amendment No. 36 to the Registration Statement.
(2) Investment Management Agreement between the Registrant (on behalf
of Scudder International Bond Fund) and Scudder Kemper Investments,
Inc., dated September 7, 1998, is incorporated by reference to
Post-Effective Amendment No. 36 to the Registration Statement.
(3) Investment Management Agreement between the Registrant (on behalf
of Scudder Global Bond Fund) and Scudder Kemper Investments, Inc.,
dated September 7, 1998, is incorporated by reference to
Post-Effective Amendment No. 36 to the Registration Statement.
3
<PAGE>
(4) Investment Management Agreement between the Registrant (on behalf
of Scudder Global Discovery Fund) and Scudder Kemper Investments,
Inc., dated September 7, 1998, is incorporated by reference to Post
Effective Amendment No. 36 to the Registration Statement.
(5) Investment Management Agreement between the Registrant (on behalf
of Scudder Emerging Markets Income Fund) and Scudder Kemper
Investments, Inc., dated September 7, 1998 is incorporated by
reference to Post-Effective Amendment No. 36 to the Registration
Statement.
e. (1) Underwriting Agreement between the Registrant and Scudder Investor
Services, Inc., dated September 7, 1998, is incorporated by
reference to Post-Effective Amendment No. 36 to the Registration
Statement.
(2) Underwriting and Distribution Services Agreement between the
Registrant (on behalf of Global Discovery Fund) and Kemper
Distributors, Inc., dated August 6, 1998 incorporated by reference
to Post Effective Amendment 36 to the Registration Statement.
(3) Underwriting and Distribution Services Agreement between the
Registrant, (on behalf of Global Discovery Fund) and Kemper
Distributors, Inc., dated September 7, 1998, is incorporated by
reference to Post Effective Amendment No. 37 to the Registration
Statement.
f. Inapplicable.
g. (1) Custodian Agreement between the Registrant and State Street Bank
and Trust Company, dated July 24, 1986, is incorporated by
reference to Post-Effective Amendment No. 1 to the Registration
Statement.
(2) Fee schedule for Exhibit (g)(1) is incorporated by reference to
Post-Effective Amendment No. 4 to the Registration Statement.
(3) Custodian Agreement between the Registrant (on behalf of Scudder
International Bond Fund) and Brown Brothers Harriman & Co., dated
July 1, 1988, is incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement.
(4) Fee schedule for Exhibit 8(g)(3) is incorporated by reference to
Post-Effective Amendment No. 5 to the Registration Statement.
(5) Amendment, dated September 16, 1988, to the Custodian Contract
between the Registrant and State Street Bank and Trust Company
dated July 24, 1986 is Incorporated by reference to Post-Effective
Amendment No. 6 to the Registration Statement.
(6) Amendment, dated December 7, 1988, to the Custodian Contract
between the Registrant and State Street Bank and Trust Company
dated July 24, 1986 is incorporated by reference to Post-Effective
Amendment No. 6 to the Registration Statement.
4
<PAGE>
(7) Amendment, dated November 30, 1990, to the Custodian Contract
between the Registrant and State Street Bank and Trust Company,
dated July 24, 1986, is incorporated by reference to Post-Effective
Amendment No. 10 to the Registration Statement.
(8) Custodian Agreement between the Registrant (on behalf of Scudder
Short Term Global Income Fund) and Brown Brothers Harriman & Co.,
dated February 28, 1991, is incorporated by reference to
Post-Effective Amendment No. 15 to the Registration Statement.
(9) Custodian Agreement between the Registrant (on behalf of Scudder
Global Small Company Fund) and Brown Brothers Harriman & Co., dated
August 30, 1991, is incorporated by reference to Post-Effective
Amendment No. 16 to the Registration Statement.
(10) Custodian Agreement between the Registrant (on behalf of Scudder
Emerging Markets Income Fund) and Brown Brothers Harriman & Co.,
dated December 31, 1993, is incorporated by reference to
Post-Effective Amendment No. 23 to the Registration Statement.
(11) Amendment (on behalf of Scudder Global Fund) dated October 3, 1995
to the Custodian Agreement between the Registrant and Brown
Brothers Harriman & Co., dated March 7, 1995, is incorporated by
reference to Post-Effective Amendment No. 24 to the Registration
Statement.
(12) Amendment, dated September 29, 1997, to the Custodian Contract
between the Registrant and Brown Brothers Harriman & Co. dated,
March 7, 1995, is incorporated by reference to Post-Effective
Amendment No. 32 to the Registration Statement.
(13) Amendment (on behalf of Scudder International Bond Fund), dated
April 16, 1998, to the Custodian Agreement between the Registrant
and Brown Brothers Harriman & Co., dated March 7, 1995, is
incorporated by reference to Post-Effective Amendment No. 34 to the
Registration Statement.
(14) Amendment (on behalf of Scudder Global Discovery Fund), dated April
16, 1998, to the Custodian Agreement between the Registrant and
Brown Brothers Harriman & Co., dated March 7, 1998, is incorporated
by reference to Post-Effective Amendment No. 34 to the Registration
Statement.
(15) Amendment (on behalf of Scudder Emerging Markets Income Fund),
dated June 17, 1998, to the Custodian Agreement between the
Registrant and Brown Brothers Harriman & Co., dated March 7, 1995,
is incorporated by reference to Post-Effective Amendment No. 34 to
the Registration Statement.
h. (1) Transfer Agency and Service Agreement between the Registrant and
Scudder Service Corporation, dated October 2, 1989, is incorporated
by reference to Post-Effective Amendment No. 7 to the Registration
Statement.
5
<PAGE>
(2) Revised fee schedule dated October 1, 1996 for Exhibit 9(a)(1) is
incorporated by reference to Post-Effective Amendment No. 28 to the
Registration Statement.
(3) Agency agreement between the Registrant, (on behalf of Global
Discovery Fund) and Kemper Service Company ,dated April 16,1998, is
incorporated by reference to Post-Effective Amendment No. 35 to the
Registration Statement.
(4) COMPASS Service Agreement between Scudder Trust Company and the
Registrant, dated October 1, 1995, is incorporated by reference to
Post-Effective Amendment No. 26 to the Registration Statement.
(5) Revised fee schedule, dated October 1, 1996, for Exhibit 9(b)(4) is
incorporated by reference to Post-Effective Amendment No. 28 to the
Registration Statement.
(6) Shareholder Services Agreement with Charles Schwab & Co., Inc.,
dated June 1, 1990, is incorporated by reference to Post-Effective
Amendment No. 7 to the Registration Statement.
(7) Service Agreement between Copeland Associates, Inc. and Scudder
Service Corporation (on behalf of Scudder Global Fund and Scudder
Global Small Company Fund), dated June 8, 1995, is incorporated by
reference to Post-Effective Amendment No. 24 to the Registration
Statement.
(8) Administrative Services Agreement between McGladvey & Pullen, Inc.
and the Registrant ,dated September 30, 1995, is incorporated by
reference to Post-Effective Amendment No. 26 to the Registration
Statement.
(9) Administrative Services Agreement between the Registrant (on behalf
of Global Discovery Fund) and Kemper Distributors, Inc., dated
April 16, 1998, is incorporated by reference to Post-Effective
Amendment No. 34 to the Registration Statement.
(10) Fund Accounting Services Agreement between the Registrant (on
behalf of Scudder Global Fund) and Scudder Fund Accounting
Corporation, dated March 14, 1995, is incorporated by reference to
Post-Effective Amendment No. 24 to the Registration Statement.
(11) Fund Accounting Services Agreement between the Registrant (on
behalf of Scudder International Bond Fund) and Scudder Fund
Accounting Corporation, dated August 3, 1995, is incorporated by
reference to Post-Effective Amendment No. 25 to the Registration
Statement.
(12) Fund Accounting Services Agreement between the Registrant (on
behalf of Scudder Global Small Company Fund) and Scudder Fund
Accounting Corporation, dated June 15, 1995, is incorporated by
reference to Post-Effective Amendment No. 25 to the Registration
Statement.
6
<PAGE>
(13) Fund Accounting Services Agreement between the Registrant (on
behalf of Scudder Global Bond Fund (formerly Scudder Short Term
Global Income Fund)) and Scudder Fund Accounting Corporation, dated
November 29, 1995, is incorporated by to Post-Effective Amendment
No. 26 to the Registration Statement.
(14) Fund Accounting Services Agreement between the Registrant (on
behalf of Scudder Emerging Markets Income Fund) and Scudder Fund
Accounting Corporation, dated February 1, 1996, is incorporated by
referecne to Post-Effective Amendment No. 27 to the Registration
Statement.
i Opinion of Counsel to be filed by subsequent amendment.
j. Consents of Independent Accountants to be filed by subsequent
amendment.
k. Inapplicable.
l. Inapplicable.
m. (1) Amended and Restated Rule 12b-1 Plan for Global Discovery Fund
Class B Shares, dated August 6, 1998, is incorporated by reference
to Post Effective Amendment No. 36 to the Registration Statement.
(2) Amended and Restated Rule 12b-1 Plan for Global Discovery Fund
Class C Shares dated August 6, 1998 is incorporated by reference to
Post Effective Amendment No. 36 to the Registration Statement.
n. Inapplicable.
o. Mutual Funds Multi-Distribution System Plan pursuant to Rule
18f-3 is incorporated by reference to Post-Effective Amendment No.
33 to the Registration Statement.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Registrant
- -------- -------------------------------------------------------------
None
Item 25. Indemnification.
- -------- ----------------
A policy of insurance covering Scudder Kemper Investments,
Inc., its subsidiaries including Scudder Investor Services,
Inc., and all of the registered investment companies advised
by Scudder Kemper Investments, Inc. insures the Registrant's
Directors and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent
error or accidental omission in the scope of their duties.
Article Tenth of Registrant's Articles of Incorporation state as
follows:
TENTH: Liability and Indemnification
- ------ -----------------------------
To the fullest extent permitted by the Maryland General Corporation Law
and the Investment Company Act of 1940, no director or officer of the
Corporation shall be liable to the Corporation or to its stockholders for
damages. This limitation on liability applies to events occurring at the time a
person serves as a director or officer of the Corporation, whether or not such
person is a director or officer at the time of any proceeding in which
7
<PAGE>
liability is asserted. No amendment to these Articles of Amendment and
Restatement or repeal of any of its provisions shall limit or eliminate the
benefits provided to directors and officers under this provision with respect to
any act or omission which occurred prior to such amendment or repeal.
The Corporation, including its successors and assigns, shall indemnify
its directors and officers and make advance payment of related expenses to the
fullest extent permitted, and in accordance with the procedures required by
Maryland law, including Section 2-418 of the Maryland General Corporation Law,
as may be amended from time to time, and the Investment Company Act of 1940. The
By-laws may provide that the Corporation shall indemnify its employees and/or
agents in any manner and within such limits as permitted by applicable law. Such
indemnification shall be in addition to any other right or claim to which any
director, officer, employee or agent may otherwise be entitled.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
Corporation would have had the power to indemnify against such liability.
The rights provided to any person by this Article shall be enforceable
against the Corporation by such person who shall be presumed to have relied upon
such rights in serving or continuing to serve in the capacities indicated
herein. No amendment of these Articles of Amendment and Restatement shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment.
Nothing in these Articles of Amendment and Restatement shall be deemed
to (i) require a waiver of compliance with any provision of the Securities Act
of 1933, as amended, or the Investment Company Act of 1940, as amended, or of
any valid rule, regulation or order of the Securities and Exchange Commission
under those Acts or (ii) protect any director or officer of the Corporation
against any liability to the Corporation or its stockholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of his or her duties or by reason of his or her
reckless disregard of his or her obligations and duties hereunder.
Item 26. Business or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 28.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
8
<PAGE>
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Financial Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
9
<PAGE>
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other
funds managed by Scudder Kemper Investments, Inc.
10
<PAGE>
(b)
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 27.
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
<S> <C> <C> <C>
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY 10154
Mary Elizabeth Beams Vice President None
Two International Place
Boston, MA 02110
Mark S. Casady Director, President and Assistant None
Two International Place Treasurer
Boston, MA 02110
Linda Coughlin Director and Senior Vice President None
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154
Philip S. Fortuna Vice President None
101 California Street
San Francisco, CA 94111
11
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
William F. Glavin Vice President None
Two International Place
Boston, MA 02110
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
James J. McGovern Chief Financial Officer None
345 Park Avenue
New York, NY 10154
Lorie C. O'Malley Vice President None
Two International Place
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President, Chief Director, Vice President
345 Park Avenue Legal Officer and Assistant Clerk and Assistant Secretary
New York, NY 10154
Robert A. Rudell Director and Vice President None
Two International Place
Boston, MA 02110
William M. Thomas Vice President None
Two International Place
Boston, MA 02110
Benjamin Thorndike Vice President None
Two International Place
Boston, MA 02110
Sydney S. Tucker Vice President None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President and Chief Compliance None
Two International Place Officer
Boston, MA 02110
David B. Watts Assistant Treasurer None
Two International Place
Boston, MA 02110
</TABLE>
12
<PAGE>
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Scudder Investor None None None None
Services, Inc.
</TABLE>
(d)
Kemper Distributors, Inc. acts as principal underwriters of the
Registrant's shares (on behalf of Global Discovery Fund - Class A,
Class B and Class C Shares) and acts as principal underwriters of the
Kemper Funds.
13
<PAGE>
(e)
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None
Thomas W.Littauer Director, Chief Executive Officer Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Officer & Vice Vice President
President
James J. McGovern Chief Financial Officer & Vice President None
Linda J. Wondrack Vice President & Chief Compliance Officer None
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Elizabeth C. Werth Vice President None
Todd N. Gierke Vice President None
Phillip J. Collora Assistant Secretary None
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director, Vice Chairman None
Stephen R. Beckwith Director None
</TABLE>
Item 28. Location of Accounts and Records.
- -------- ---------------------------------
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder Kemper
Investments, Inc., 345 Park Avenue, New York, NY 10154.
Records relating to the duties of the Registrant's custodian
(on behalf of Scudder Global Fund) are maintained by State
Street Bank and Trust Company, Heritage Drive, North Quincy,
Massachusetts. Records relating to the duties of the
Registrant's custodian (on behalf of Scudder International
Bond Fund, Scudder Short Term Global Income Fund, Scudder
Global Small Company Fund and Scudder Emerging Markets Income
Fund) are maintained by Brown Brothers Harriman & Co., 40
Water Street, Boston, Massachusetts.
14
<PAGE>
Item 29. Management Services.
- -------- --------------------
Inapplicable.
Item 30. Undertakings.
- -------- -------------
None.
15
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(a) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 25th day of August, 1999.
GLOBAL/INTERNATIONAL FUND, INC.
By /s/ John Millette
-----------------
John Millette
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Lynn Birdsong
- --------------------------------------
Lynn Birdsong Chairman of the Board and Director August 25, 1999
/s/ Paul Bancroft III
- --------------------------------------
Paul Bancroft III* Director August 25, 1999
/s/ Sheryle J. Bolton
- --------------------------------------
Sheryle J. Bolton* Director August 25, 1999
/s/ William T. Burgin
- --------------------------------------
William T. Burgin* Director August 25, 1999
/s/ Thomas J. Devine
- --------------------------------------
Thomas J. Devine* Director August 25, 1999
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Keith R. Fox
- --------------------------------------
Keith R. Fox* Director August 25, 1999
/s/ William H. Gleysteen, Jr.
- --------------------------------------
William H. Gleysteen, Jr.* Director August 25, 1999
/s/ William H. Luers
- --------------------------------------
William H. Luers* Director August 25, 1999
/s/ Kathryn L. Quirk
- --------------------------------------
Kathryn L. Quirk* Director August 25, 1999
/s/ Thomas J. Devine
- --------------------------------------
Thomas J. Devine* Director August 25, 1999
/s/ Joan E. Spero
- --------------------------------------
Joan E. Spero* Director August 25, 1999
</TABLE>
*By: /s/ Sheldon A. Jones
-----------------------------------
Sheldon A. Jones
Attorney-in-fact pursuant to powers of
attorney included with the signature pages
of Post-Effective Amendment No. 10 to the
Registration Statement filed July 1, 1991,
Post-Effective Amendment No. 18 to the
Registration Statement filed September 2,
1993, Post-Effective Amendment No. 19 to the
Registration Statement filed November 1,
1993, Post-Effective Amendment No. 26 to the
Registration Statement filed February 28,
1996, Post-Effective Amendment No. 27 to the
Registration Statement filed October 29,
1996, Post-Effective Amendment No. 29 to the
Registration Statement filed August 26,
1997, Post-Effective Amendment No. 30 to the
Registration Statement filed October 28,
1997 and Post-Effective Amendment. No. 35 to
the Registration Statement filed October 22,
1998.
2
<PAGE>
File No. 33-5724
File No. 811-4670
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 38
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 41
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
GLOBAL/INTERNATIONAL FUND, INC.
<PAGE>
GLOBAL/INTERNATIONAL FUND, INC.
Exhibit Index
