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SCUDDER INVESTMENT LOGO
IMPORTANT NEWS FOR
SCUDDER INTERNATIONAL BOND FUND SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement/Prospectus, here's a brief overview of some matters affecting your
Fund that will be the subject of a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to vote on a proposed combination of your Fund into
Scudder Global Bond Fund. This proposal is part of a larger effort to
restructure the Scudder Family of Funds. THE BOARD OF YOUR FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF THIS PROPOSAL.
Q: WHY HAS THE BOARD RECOMMENDED THAT I VOTE IN FAVOR OF THE COMBINATION?
A: The Board of your Fund is recommending that shareholders vote in favor of
this proposal for the following reasons:
- LOWER EXPENSES. The combination of the two Funds would result in REDUCED
expenses for shareholders of your Fund.
- GREATER PREDICTABILITY OF EXPENSES. As part of the proposal to combine
funds, a new fixed administrative fee rate arrangement would be
implemented. The arrangement protects shareholders from most
administrative expense increases for a minimum of three years.
- LARGER FUND. The combined fund would likely have the ability to effect
portfolio transactions on more favorable terms and provide Scudder Kemper
Investments, the investment manager of each Fund, with greater investment
flexibility and the ability to increase diversification through the
purchase of portfolio issues.
- TAX-FREE REORGANIZATION. It is a condition of the proposed combination
that your Fund receive an opinion of tax counsel that the transaction
would be a TAX-FREE transaction.
<PAGE>
Q: ARE THE INVESTMENT POLICIES OF SCUDDER GLOBAL BOND FUND SIMILAR TO THOSE OF
MY FUND?
A: Except for the extent to which each Fund may invest in domestic bonds, the
investment objectives and policies of Scudder Global Bond Fund are similar
to those of your Fund.
Q: ARE THERE OTHER PROPOSALS I WILL BE VOTING ON?
A: You are also being asked to vote on the election of Board members for your
Fund. As part of a larger effort to restructure the Scudder Family of Funds,
the Board of your Fund has voted in favor of creating a single board of
trustees/directors responsible for most Scudder Funds. It is the Board's
belief that this has the potential for increasing efficiency and benefiting
fund shareholders. The Board also believes that a single board, responsible
for overseeing most of the no-load funds advised by Scudder Kemper, can more
effectively represent shareholder interests. THE BOARD OF YOUR FUND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF EACH NOMINEE.
You are also being asked to ratify the selection of PricewaterhouseCoopers
LLP as the independent accountants of your Fund for the current fiscal year.
THE BOARD OF YOUR FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THIS
PROPOSAL.
Q: WHEN WILL THESE CHANGES TAKE EFFECT?
A: The Board expects that the proposed changes will take effect during the third
calendar quarter of this year if the proposed combination is approved.
Q: WHOM SHOULD I CALL FOR MORE INFORMATION ABOUT THIS PROXY STATEMENT?
A: Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-603-1915.
<PAGE>
April 18, 2000
Dear Shareholder,
To continue to provide you with the highest level of investment management
and service, we're making some important changes to the Scudder Funds. Scudder
Kemper Investments, with the strong support of your Fund's Board, is proposing a
series of measures to streamline the Scudder Family of Funds. The goals are to
reduce costs and make Scudder's lineup of fund offerings easier for investors to
utilize and understand. We believe these proposals will benefit Scudder Fund
shareholders over time. We need your participation in order to make the
necessary changes.
Along with this letter, you'll find a packet of materials that we ask you to
read and, where applicable, fill out and return to us. The Q&A that begins on
the front cover of the proxy statement explains the proposals we're making, why
we're making them, and how they apply to your Scudder Fund. The packet also
contains a proxy card and a prospectus for the fund that we are proposing to
merge your Fund into.
After careful review, the members of your Fund's Board have unanimously
approved each of the proposals explained in the Q&A and described in the proxy
statement. THE BOARD RECOMMENDS THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY
AND THEN VOTE FOR ALL THE PROPOSALS. (Because many of the funds for which
Scudder Kemper acts as investment manager are holding shareholder meetings, you
may receive more than one proxy card. If so, please vote each one.)
Your vote is important to us. Once you've voted, please sign and date the
proxy card and return it in the enclosed postpaid envelope; or help us save time
and postage cost by voting on the Internet or by telephone -- the enclosed flyer
describes how. If we do not hear from you by May 17, our proxy solicitor may
contact you.
Thank you for your response and for your continued investment in the Scudder
Funds.
<TABLE>
<S> <C>
Respectfully,
/s/ Edmond D. Villani /s/ Nicholas Bratt
Edmond D. Villani Nicholas Bratt
Chief Executive Officer President
Scudder Kemper Investments, Inc. Global/International Fund, Inc.
(all Series except Scudder Global Fund)
</TABLE>
<PAGE>
SCUDDER INTERNATIONAL BOND FUND
--------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
GLOBAL/INTERNATIONAL FUND, INC.
Please take notice that a Special Meeting of Shareholders (the "Meeting") of
Scudder International Bond Fund (the "Fund"), a series of Global/International
Fund, Inc. (the "Corporation"), will be held at the offices of Scudder Kemper
Investments, Inc., 13th Floor, Two International Place, Boston, MA 02110-4103,
on July 13, 2000, at 3:00 p.m., Eastern time, for the following purposes:
<TABLE>
<S> <C>
PROPOSAL 1: To elect Directors of the Corporation;
PROPOSAL 2: To approve an Agreement and Plan of Reorganization
whereby all of the issued and outstanding shares of
capital stock of the Fund will be reclassified into
shares of the S Class of the Corporation's Scudder
Global Bond Fund series, which will be effected by an
amendment to the Corporation's charter; and
PROPOSAL 3: To ratify the selection of PricewaterhouseCoopers LLP
as the independent accountants for the Fund for the
Fund's current fiscal year.
</TABLE>
The appointed proxies will vote in their discretion on any other business
that may properly come before the Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of business on
April 17, 2000 are entitled to vote at the Meeting and at any adjournments
thereof.
In the event that the necessary quorum to transact business or the vote
required to approve any Proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies. Any
such adjournment as to a matter will require the affirmative vote of the holders
of a majority of the Fund's shares present in person or by proxy at the Meeting.
The persons named as proxies will vote FOR any such adjournment those proxies
which they are entitled to vote in favor of that Proposal and will vote AGAINST
any such adjournment those proxies to be voted against that Proposal.
By Order of the Board,
/s/ John Millette
John Millette
Secretary
April 18, 2000
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND
RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE (OR TO TAKE
ADVANTAGE OF THE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES DESCRIBED ON THE
PROXY CARD(S)). YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) (OR YOUR VOTING
BY OTHER AVAILABLE MEANS) MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER
SOLICITATIONS. IF YOU WISH TO ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON
AT THAT TIME, YOU WILL STILL BE ABLE TO DO SO.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION................................................ 1
PROPOSAL 1: ELECTION OF DIRECTORS OF THE CORPORATION........ 3
PROPOSAL 2: APPROVAL OF AGREEMENT AND PLAN OF
REORGANIZATION.................................. 15
SYNOPSIS...................................... 15
PRINCIPAL RISK FACTORS........................ 26
THE PROPOSED TRANSACTION...................... 26
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS......................... 33
ADDITIONAL INFORMATION...................................... 34
</TABLE>
i
<PAGE>
PROXY STATEMENT/PROSPECTUS
APRIL 18, 2000
RELATING TO THE REORGANIZATION OF THE ISSUED AND OUTSTANDING SHARES OF
SCUDDER INTERNATIONAL BOND FUND (THE "ACQUIRED FUND"),
A SEPARATE SERIES OF
GLOBAL/INTERNATIONAL FUND, INC. (THE "CORPORATION")
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(800) 728-3337
--------------------------
INTO THE S CLASS OF SHARES OF CAPITAL STOCK OF
SCUDDER GLOBAL BOND FUND (THE "ACQUIRING FUND"),
A SEPARATE SERIES OF THE CORPORATION
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(800) 728-3337
--------------------------
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of the
Acquired Fund in connection with three proposals (each a "Proposal,"
collectively, the "Proposals"). Proposal 1 describes the election of Directors,
and Proposal 3 proposes the ratification of the selection of the Acquired Fund's
accountants.
In Proposal 2, shareholders are asked to approve a proposed reorganization
in which all of the issued and outstanding shares of capital stock of the
Acquired Fund will be reclassified into shares of the S Class of the Acquiring
Fund ("S Class Shares") and, accordingly, all of the assets and liabilities of
the Acquired Fund would be acquired by the Acquiring Fund, as described more
fully below (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Acquired Fund would receive that number of S Class Shares
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares of the Acquired Fund held as of the close of business
on the business day preceding the closing of the
--------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Reorganization (the "Valuation Date"), and the Acquired Fund would be abolished
as a series of the Corporation. Shareholders of the Acquired Fund will vote on
an Agreement and Plan of Reorganization (the "Plan") pursuant to which the
Reorganization would be consummated. A copy of the Plan is attached hereto as
Exhibit A. The closing of the Reorganization (the "Closing") is contingent upon
shareholder approval of the Plan. The Reorganization is expected to occur on or
about September 25, 2000.
Proposals 1 and 2 relate to a restructuring program proposed by Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager"), and
described in more detail below.
In the descriptions of the Proposals below, the word "fund" is sometimes
used to mean an investment company or series thereof in general, and not the
Acquired Fund whose proxy statement this is. In addition, for simplicity,
actions are described in this Proxy Statement/Prospectus as being taken by
either the Acquired Fund or the Acquiring Fund (each a "Fund" and collectively
the "Funds"), although all actions are actually taken by the Corporation, on
behalf of the applicable Fund.
This Proxy Statement/Prospectus sets forth concisely the information about
the Acquiring Fund that a prospective investor should know before investing and
should be retained for future reference. For a more detailed discussion of the
investment objective, policies, restrictions and risks of the Acquiring Fund,
see the Acquiring Fund's prospectus, dated March 1, 2000, as supplemented from
time to time, which is included herewith and incorporated herein by reference.
For a more detailed discussion of the investment objective, policies,
restrictions and risks of the Acquired Fund, see the Acquired Fund's prospectus,
dated March 1, 2000, as supplemented from time to time, which is incorporated
herein by reference and a copy of which may be obtained upon request and without
charge by calling or writing the Acquired Fund at the telephone number or
address set forth on the preceding page.
The Acquiring Fund's statement of additional information, dated March 1,
2000, as supplemented from time to time, is incorporated herein by reference and
may be obtained upon request and without charge by calling or writing the
Acquiring Fund at the telephone number or address set forth on the preceding
page. A Statement of Additional Information dated April 18, 2000, containing
additional information about the Reorganization and the parties thereto has been
filed with the Securities and Exchange Commission (the "SEC" or the
"Commission") and is incorporated by reference into this Proxy Statement/
Prospectus. A copy of the Statement of Additional Information relating to the
Reorganization is available upon request and without charge by calling or
writing the Acquiring Fund at the telephone number or address set forth above.
2
<PAGE>
Shareholder inquiries regarding either Fund may be made by calling
(800) 728-3337. The information contained herein concerning the Acquired Fund
has been provided by, and is included herein in reliance upon, the Acquired
Fund. The information contained herein concerning the Acquiring Fund has been
provided by, and is included herein in reliance upon, the Acquiring Fund. It is
anticipated that existing Acquiring Fund shares will be redesignated as S Class
Shares. (Please see "Description of the Securities to be Issued" below.)
The Acquiring Fund and the Acquired Fund are non-diversified series of
capital stock of the Corporation. The Corporation is an open-end management
investment company organized as a Maryland corporation.
The Board of Directors (except as otherwise noted, "Directors" refers to the
Directors of the Corporation and "Board" refers to the Board of Directors of the
Corporation) is soliciting proxies from the shareholders of the Acquired Fund,
on behalf of the Acquired Fund, for the Special Meeting of Shareholders to be
held on July 13, 2000, at Scudder Kemper's offices, 13th Floor, Two
International Place, Boston, MA 02110-4103, at 3:00 p.m. (Eastern time), or at
such later time made necessary by adjournment (the "Meeting"). This Proxy
Statement/Prospectus, the Notice of Special Meeting and the proxy card(s) are
first being mailed to shareholders on or about April 18, 2000 or as soon as
practicable thereafter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
NOMINEES LISTED IN PROPOSAL 1, AND FOR PROPOSALS 2 AND 3.
PROPOSAL 1: ELECTION OF DIRECTORS OF THE CORPORATION
At the Meeting, shareholders will be asked to elect nine individuals to
constitute the Board of Directors of the Corporation. These individuals were
nominated after a careful and deliberate selection process by the present Board
of Directors of the Corporation. The nominees for election, who are listed
below, include seven persons who currently serve as Independent Directors (as
defined below) of the Corporation or as independent trustees or directors of
other no-load funds advised by Scudder Kemper and who have no affiliation with
Scudder Kemper or the American Association of Retired Persons ("AARP"). The
nominees listed below are also being nominated for election as trustees or
directors of all of the other AARP Funds (as defined below) and open-end,
directly-distributed, no-load Scudder Funds.
Currently, five different boards of trustees or directors are responsible
for overseeing different groups of no-load funds advised by Scudder Kemper. As
part of a broader restructuring effort described below under Proposal 2,
3
<PAGE>
Scudder Kemper has recommended, and the Board of Directors has agreed, that
shareholder interests can more effectively be represented by a single board with
responsibility for overseeing substantially all of the Scudder no-load funds.
Creation of a single, consolidated board should also provide certain
administrative efficiencies and potential future cost savings for both the Funds
and Scudder Kemper.
Election of each of the listed nominees for Director on the Board of the
Corporation requires the affirmative vote of a plurality of the votes cast at
the Meeting, in person or by proxy. The persons named as proxies on the enclosed
proxy card(s) will vote for the election of the nominees named below unless
authority to vote for any or all of the nominees is withheld in the proxy. Each
Director so elected will serve as a Director of the Corporation until the next
meeting of shareholders, if any, called for the purpose of electing Directors
and until the election and qualification of a successor or until such Director
sooner dies, resigns or is removed as provided in the governing documents of the
Corporation. Each of the nominees has indicated that he or she is willing to
serve as a Director. If any or all of the nominees should become unavailable for
election due to events not now known or anticipated, the persons named as
proxies will vote for such other nominee or nominees as the current Directors
may recommend. The following paragraphs and table set forth information
concerning the nominees and the Directors not standing for re-election. Each
nominee's or Director's age is in parentheses after his or her name. Unless
otherwise noted, (i) each of the nominees and Directors has engaged in the
principal occupation(s) noted in the following paragraphs and table for at least
the most recent five years, although not necessarily in the same capacity, and
(ii) the address of each nominee is c/o Scudder Kemper Investments, Inc., Two
International Place, Boston, MA 02110-4103.
NOMINEES FOR ELECTION AS DIRECTORS:
HENRY P. BECTON, JR. (56)
Henry P. Becton, Jr. is president of the WGBH Educational Foundation, producer
and distributor of public broadcasting programming and educational and
interactive software. He graduated from Yale University in 1965, where he was
elected to Phi Beta Kappa. He received his J.D. degree CUM LAUDE from Harvard
Law School in 1968. Mr. Becton is a member of the PBS Board of Directors, a
Trustee of American Public Television, the New England Aquarium, the Boston
Museum of Science, Concord Academy, and the Massachusetts Corporation for
Educational Telecommunications, an Overseer of the Boston Museum of Fine Arts,
and a member of the Board of Governors of the Banff International Television
Festival Foundation. He is also a Director of Becton
4
<PAGE>
Dickinson and Company and A.H. Belo Company, a Trustee of the Committee for
Economic Development, and a member of the Board of Visitors of the Dimock
Community Health Center, the Dean's Council of Harvard University's Graduate
School of Education, and the Massachusetts Bar. Mr. Becton has served as a
trustee or director of various mutual funds advised by Scudder Kemper since
1990.
LINDA C. COUGHLIN (48)*
Linda C. Coughlin, a Managing Director of Scudder Kemper, is head of Scudder
Kemper's U.S. Retail Mutual Funds Business. Ms. Coughlin joined Scudder Kemper
in 1986 and was a member of the firm's Board of Directors. She currently
oversees the marketing, service and operations of Scudder Kemper retail
businesses in the United States, which include the Scudder, Kemper, AARP, and
closed-end fund families, and the direct and intermediary channels. She also
serves as Chairperson of the AARP Investment Program from Scudder and as a
Trustee of the Program's mutual funds. Ms. Coughlin is also a member of the
Mutual Funds Management Group. Previously, she served as a regional Marketing
Director in the retail banking division of Citibank and at the American Express
Company as Director of Consumer Marketing for the mutual fund group. Ms.
Coughlin received a B.A. degree in economics SUMMA CUM LAUDE from Fordham
University. Ms. Coughlin has served on the boards of various funds advised by
Scudder Kemper, including the AARP Investment Program Funds, since 1996.
DAWN-MARIE DRISCOLL (53)
Dawn-Marie Driscoll is an Executive Fellow and Advisory Board member of the
Center for Business Ethics at Bentley College, one of the nation's leading
institutes devoted to the study and practice of business ethics. Ms. Driscoll is
also president of Driscoll Associates, a consulting firm. She is a member of the
Board of Governors of the Investment Company Institute and serves as Chairman of
the Directors Services Committee. Ms. Driscoll was recently named 1999 "Fund
Trustee of the Year" by Fund Directions, a publication of Institutional
Investor, Inc. She has been a director, trustee and overseer of many civic and
business institutions, including The Massachusetts Bay United Way and Regis
College. Ms. Driscoll was formerly a law partner at Palmer & Dodge in Boston and
served for over a decade as Vice President of Corporate Affairs and General
Counsel of Filene's, the Boston-based department store chain. Ms. Driscoll
received a B.A. from Regis College, a J.D. from Suffolk University Law School, a
D.H.L. (honorary) from Suffolk University and a D.C.S. (honorary) from Bentley
College Graduate School of Business. Ms. Driscoll has
5
<PAGE>
served as a trustee or director of various mutual funds advised by Scudder
Kemper since 1987.
EDGAR R. FIEDLER (70)
Edgar R. Fiedler is Senior Fellow and Economic Counselor at The Conference
Board. He served as the Board's Vice President, Economic Research from 1975 to
1986 and as Vice President and Economic Counselor from 1986 to 1996.
Mr. Fiedler's business experience includes positions at Eastman Kodak in
Rochester (1956-59), Doubleday and Company in New York City (1959-60), and
Bankers Trust Company in New York City (1960-69). He also served as Assistant
Secretary of the Treasury for Economic Policy from 1971 to 1975. Mr. Fiedler
graduated from the University of Wisconsin in 1951. He received his M.B.A. from
the University of Michigan and his doctorate from New York University. During
the 1980's, Mr. Fiedler was an Adjunct Professor of Economics at the Columbia
University Graduate School of Business. From 1990 to 1991, he was the Stephen
Edward Scarff Distinguished Professor at Lawrence University in Wisconsin.
Mr. Fiedler is a Director of The Stanley Works, Harris Insight Funds, Brazil
Fund, and PEG Capital Management, Inc. He has served as a board member of
various mutual funds advised by Scudder Kemper, including the AARP Investment
Program Funds, since 1984.
KEITH R. FOX (46)
Keith R. Fox is the managing partner of the Exeter Group of Funds, a series of
private equity funds with offices in New York and Boston, which he founded in
1986. The Exeter Group invests in a wide range of private equity situations,
including venture capital, expansion financings, recapitalizations and
management buyouts. Prior to forming Exeter, Mr. Fox was a director and vice
president of BT Capital Corporation, a subsidiary of Bankers Trust New York
Corporation organized as a small business investment company and based in New
York City. Mr. Fox graduated from Oxford University in 1976, and in 1981
received an M.B.A. degree from the Harvard Business School. Mr. Fox is also a
qualified accountant. He is a board member and former Chairman of the National
Association of Small Business Investment Companies, and a director of Golden
State Vintners, K-Communications, Progressive Holding Corporation and Facts On
File, as well as a former director of over twenty companies. Mr. Fox is a
Director of the Corporation and has served as a trustee or director of various
mutual funds advised by Scudder Kemper since 1996.
6
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JOAN EDELMAN SPERO (55)
Joan E. Spero is the president of the Doris Duke Charitable Foundation, a
position to which she was named in January 1997. From 1993 to 1997, Ms. Spero
served as Undersecretary of State for Economic, Business and Agricultural
Affairs under President Clinton. From 1981 to 1993, she was an executive at the
American Express Company, where her last position was executive vice president
for Corporate Affairs and Communications. Ms. Spero served as U.N. Ambassador to
the United Nations Economic and Social Council under President Carter from 1980
to 1981. She was an assistant professor at Columbia University from 1973 to
1979. She graduated Phi Beta Kappa from the University of Wisconsin and holds a
master's degree in international affairs and a doctorate in political science
from Columbia University. Ms. Spero is a member of the Council on Foreign
Relations and the Council of American Ambassadors. She also serves as a trustee
of the Wisconsin Alumni Research Foundation, The Brookings Institution and
Columbia University and is a Director of First Data Corporation. Ms. Spero is a
Director of the Corporation and has served as a trustee or director of various
mutual funds advised by Scudder Kemper since 1998.
JEAN GLEASON STROMBERG (56)
Ms. Stromberg acts as a consultant on regulatory matters. From 1996 to 1997,
Ms. Stromberg represented the U.S. General Accounting Office before Congress and
elsewhere on issues involving banking, securities, securities markets, and
government-sponsored enterprises. Prior to that, Ms. Stromberg was a corporate
and securities law partner at the Washington, D.C. law office of Fulbright and
Jaworski, a national law firm. She served as Associate Director of the SEC's
Division of Investment Management from 1977 to 1979 and prior to that was
Special Counsel for the Division of Corporation Finance from 1972 to 1977.
Ms. Stromberg graduated Phi Beta Kappa from Wellesley College and received her
law degree from Harvard Law School. From 1988 to 1991 and 1993 to 1996, she was
a Trustee of the American Bar Retirement Association, the funding vehicle for
American Bar Association-sponsored retirement plans. Ms. Stromberg serves on the
Wellesley College Business Leadership Council and the Council for Mutual Fund
Director Education at Northwestern University Law School and was a panelist at
the SEC's Investment Company Director's Roundtable. Ms. Stromberg has served as
a board member of the AARP Investment Program Funds since 1997.
7
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JEAN C. TEMPEL (56)
Jean C. Tempel is a venture partner for Internet Capital Group, a strategic
network of Internet partnership companies whose principal offices are in Wayne,
Pennsylvania. Ms. Tempel concentrates on investment opportunities in the Boston
area. She spent 25 years in technology/operations executive management at
various New England banks, building custody operations and real time
financial/securities processing systems, most recently as Chief Operations
Officer at The Boston Company. From 1991 until 1993 she was president/COO of
Safeguard Scientifics, a Pennsylvania technology venture company. In that role
she was a founding investor, director and vice chairman of Cambridge Technology
Partners. She is a director of XLVision, Inc., Marathon Technologies, Inc.,
Aberdeen Group and Sonesta Hotels International, and is a Trustee of
Northeastern University, Connecticut College, and The Commonwealth Institute.
She received a B.A. from Connecticut College, an M.S. from Rensselaer
Polytechnic Institute of New York, and attended Harvard Business School's
Advanced Management Program. Ms. Tempel has served as a trustee or director of
various mutual funds advised by Scudder Kemper since 1994.
STEVEN ZALEZNICK (45)*
Steven Zaleznick is President and CEO of AARP Services, Inc., a wholly-owned and
independently-operated subsidiary of AARP which manages a range of products and
services offered to AARP members, provides marketing services to AARP and its
member service providers and establishes an electronic commerce presence for
AARP members. Mr. Zaleznick previously served as AARP's general counsel for nine
years. He was responsible for the legal affairs of AARP, which included tax and
legal matters affecting non-profit organizations, contract negotiations,
publication review and public policy litigation. In 1979, he joined AARP as a
legislation representative responsible for issues involving taxes, pensions, age
discrimination, and other national issues affecting older Americans.
Mr. Zaleznick is President of the Board of Cradle of Hope Adoption Center in
Washington, D.C. He is a former treasurer and currently a board member of the
National Senior Citizens Law Center. Mr. Zaleznick received his B.A. in
economics from Brown University. He received his J.D. degree from Georgetown
University Law Center and is a member of the District of Columbia Bar
Association.
8
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DIRECTORS NOT STANDING FOR RE-ELECTION:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE CORPORATION;
PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME (AGE) AND DIRECTORSHIPS
- ---------- ------------------------------------
<S> <C>
Sheryle J. Bolton (53)............... Director; CEO and Director, Board of
Directors, Scientific Learning
Corporation. Ms. Bolton serves on
the boards of various other trusts
or corporations whose funds are
advised by Scudder Kemper.
William T. Burgin (56)............... Director; General Partner, Bessemer
Venture Partners. Mr. Burgin serves
on the boards of various other
trusts or corporations whose funds
are advised by Scudder Kemper.
William H. Luers (70)................ Director; Chairman and President,
United Nations Association of
America. Mr. Luers serves on the
boards of various other trusts or
corporations whose funds are advised
by Scudder Kemper.
Kathryn L. Quirk (47)*............... Director, Vice President and
Assistant Secretary; Managing
Director of Scudder Kemper.
Ms. Quirk serves on the boards of
various other trusts or corporations
whose funds are advised by Scudder
Kemper.
</TABLE>
- ------------------------
* Nominee or Director considered by the Corporation and its counsel to be an
"interested person" (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Corporation, the Investment Manager or AARP
because of his or her employment by the Investment Manager or AARP, and, in
some cases, holding offices with the Corporation.
Appendix 1 hereto sets forth the number of shares of each series of the
Corporation owned directly or beneficially by the Directors of the Corporation,
by the Presidents of the Corporation and by the nominees for election.
RESPONSIBILITIES OF THE BOARD -- BOARD AND COMMITTEE MEETINGS
A fund's board is responsible for the general oversight of fund business.
The board that is proposed for shareholder voting at this Meeting is comprised
of two individuals who are considered "interested" Directors, and seven
individuals who have no affiliation with Scudder Kemper or AARP and who are
called
9
<PAGE>
"independent" Directors (the "Independent Directors"). The SEC has recently
proposed a rule that would require a majority of the board members of a fund to
be "independent" if the fund were to take advantage of certain exemptive rules
under the 1940 Act. On the proposed Board of Directors, if approved by
shareholders, nearly 78% will be Independent Directors. The Independent
Directors have been nominated solely by the current Independent Directors of the
Corporation, a practice also favored by the SEC. The Independent Directors have
primary responsibility for assuring that the Acquired Fund is managed in the
best interests of its shareholders.
The Directors meet several times during the year to review the investment
performance of each fund of the Corporation and other operational matters,
including policies and procedures designed to assure compliance with regulatory
and other requirements. In 1999, the Directors conducted over 20 meetings to
deal with fund issues (including committee and subcommittee meetings and special
meetings of the Independent Directors). Furthermore, the Independent Directors
review the fees paid to the Investment Manager and its affiliates for investment
advisory services and other administrative and shareholder services. The
Directors have adopted several policies and practices which help ensure their
effectiveness and independence in reviewing fees and representing shareholders.
Many of these are similar to those suggested in the Investment Company
Institute's 1999 Report of the Advisory Group on Best Practices for Fund
Directors (the "Advisory Group Report"). For example, the Independent Directors
select independent legal counsel to work with them in reviewing fees, advisory
and other contracts and overseeing fund matters. The Directors are also assisted
in this regard by the funds' independent public accountants and other
independent experts retained from time to time for this purpose. The Independent
Directors regularly meet privately with their counsel and other advisors. In
addition, the Independent Directors from time to time have appointed task forces
and subcommittees from their members to focus on particular matters such as
investment, accounting and shareholder servicing issues.
The Board of the Corporation has an Audit Committee and a Committee on
Independent Directors, the responsibilities of which are described below. In
addition, the Corporation has an Executive Committee and a Valuation Committee.
AUDIT COMMITTEE
The Audit Committee reviews with management and the independent public
accountants for each series of the Corporation, among other things, the scope of
the audit and the internal controls of each series of the Corporation and its
agents, reviews and approves in advance the type of services to be
10
<PAGE>
rendered by independent accountants, recommends the selection of independent
accountants for each series of the Corporation to the Board, reviews the
independence of such firm and, in general, considers and reports to the Board on
matters regarding the accounting and financial reporting practices of each
series of the Corporation.
As suggested by the Advisory Group Report, the Corporation's Audit Committee
is comprised of only Independent Directors (all of whom serve on the committee),
meets privately with the independent accountants of each series of the
Corporation, will receive annual representations from the accountants as to
their independence, and has a written charter that delineates the committee's
duties and powers.
COMMITTEE ON INDEPENDENT DIRECTORS
The Board of Directors of the Corporation has a Committee on Independent
Directors, comprised of all of the Independent Directors, charged with the duty
of making all nominations of Independent Directors, establishing Directors'
compensation policies, retirement policies and fund ownership policies,
reviewing Directors' affiliations and relationships annually, and periodically
assessing and reviewing evaluations of the Board of Directors' effectiveness.
ATTENDANCE
As noted above, the Directors conducted over 20 meetings in calendar year
1999 to deal with fund matters, including various committee and subcommittee
meetings and special meetings of the Independent Directors. The full Board of
Directors of the Corporation met seven times, the Audit Committee met two times
and the Committee on Independent Directors met one time during calendar year
1999. Each then current Director attended 100% of the total meetings of the full
Board of Directors held during calendar year 1999. In addition, each Independent
Director attended 100% of the total meetings of the Audit Committee and the
Committee on Independent Directors held during that period.
HONORARY DIRECTORS
Paul Bancroft III, Thomas J. Devine, William H. Gleysteen, Jr. and
Robert G. Stone, Jr. currently serve as Honorary Directors of the Corporation.
Honorary Directors are invited to attend all Board meetings and to participate
in Board discussions, but are not entitled to vote on any matter presented to
the Board. Honorary Directors are appointed by the Board of Directors and will
continue to serve in their present capacities following the Reorganization.
11
<PAGE>
OFFICERS
The following persons are officers of the Corporation:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE CORPORATION;
PRINCIPAL OCCUPATION OR YEAR FIRST BECAME
NAME (AGE) EMPLOYMENT(1) AN OFFICER(2)
- ---------- ------------------------------------ -----------------
<S> <C> <C>
Nicholas Bratt (51).......... President (all series except Scudder
Global Fund); Managing Director of
Scudder Kemper 1985
William E. Holzer (50)....... President (Scudder Global Fund
series only); Managing Director of
Scudder Kemper 1989
Jan C. Faller (33)........... Vice President; Vice President of
Scudder Kemper 1999
Kathryn L. Quirk (47)........ Director, Vice President and
Assistant Secretary; Managing
Director of Scudder Kemper 1984
Gerald J. Moran (60)......... Vice President; Managing Director of
Scudder Kemper 1991
M. Isabel Saltzman (45)...... Vice President; Managing Director of
Scudder Kemper 1995
Susan E. Dahl (34)........... Vice President; Managing Director of
Scudder Kemper 1998
Ann M. McCreary (43)......... Vice President; Managing Director of
Scudder Kemper 1998
John Millette (37)........... Vice President and Secretary; Vice
President of Scudder Kemper 1999
John R. Hebble (41).......... Treasurer; Senior Vice President of
Scudder Kemper 1998
Caroline Pearson (38)........ Assistant Secretary; Senior Vice
President of Scudder Kemper;
Associate, Dechert Price & Rhoads
(law firm) 1989 to 1997 1997
</TABLE>
- ------------------------
(1) Unless otherwise stated, all of the officers have been associated with their
respective companies for more than five years, although not necessarily in
the same capacity.
12
<PAGE>
(2) The President, Treasurer and Secretary each holds office until his or her
successor has been duly elected and qualified, and all other officers hold
offices in accordance with the By-laws of the Corporation.
COMPENSATION OF DIRECTORS AND OFFICERS
The Corporation pays each Independent Director an annual Director's fee for
each series of the Corporation plus specified amounts for Board and committee
meetings attended and reimburses expenses related to the business of any series
of the Corporation. Each Independent Director receives an annual Director's fee
of $3,500 per fund. Each Independent Director also receives fees of $325 per
fund for attending each Board meeting, Audit Committee meeting or other meeting
held for the purpose of considering arrangements between the Corporation and
Scudder Kemper, or any of its affiliates. Each Independent Director also
receives $100 per fund for all other committee meetings attended. The
newly-constituted Board may determine to change its compensation structure.
The Independent Directors of the Corporation are not entitled to benefits
under any pension or retirement plan. A one-time benefit will be provided to
those Independent Directors who have volunteered to leave the Board prior to
their normal retirement date in order to facilitate the nomination of a
consolidated board. Inasmuch as Scudder Kemper will also benefit from the
administrative efficiencies of a consolidated board, Scudder Kemper has agreed
to pay one-half of the cost of this benefit. The remaining portion, ranging from
$7,422 to $10,515 per Director, will be paid by the Acquired Fund.
Scudder Kemper supervises the Corporation's investments, pays the
compensation and certain expenses of its personnel who serve as Directors and
officers of the Corporation and receives a management fee for its services.
Several of the Corporation's officers and Directors are also officers,
directors, employees or stockholders of Scudder Kemper and participate in the
fees paid to that firm, although the Corporation makes no direct payments to
them other than for reimbursement of travel expenses in connection with their
attendance at certain Board and committee meetings.
The following Compensation Table provides in tabular form the following
data:
COLUMN (1) All Directors who receive compensation from the Corporation.
COLUMN (2) Aggregate compensation received by each Director of the
Corporation during calendar year 1999.
13
<PAGE>
COLUMN (3) Total compensation received by each Director from funds managed
by Scudder Kemper (collectively, the "Fund Complex") during calendar year 1999.
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND COMPLEX
DIRECTORS (NUMBER OF SERIES) PAID TO DIRECTOR
- --------- ------------------ ---------------------
<S> <C> <C>
Sheryle J. Bolton............................ $38,000 (5 series) $179,860 (26 funds)
William T. Burgin............................ $36,375 (5 series) $160,325 (25 funds)
Keith R. Fox................................. $36,375 (5 series) $160,325 (25 funds)
William H. Luers............................. $39,625 (5 series) $212,596 (28 funds)
Joan E. Spero................................ $39,625 (5 series) $175,275 (25 funds)
Paul Bancroft III,*..........................
Honorary Director $31,500 (5 series) $159,991 (27 funds)
William H. Gleysteen, Jr.,...................
Honorary Director $0 (5 series) $19,933 (2 funds)
Thomas J. Devine,............................
Honorary Director $0 (5 series) $0 (0 funds)
Robert G. Stone, Jr.,........................
Honorary Director $0 (5 series) $9,000 (1 fund)
</TABLE>
* Prior to November 1, 1999, Mr. Bancroft served as a Director of the
Corporation. As of November 1, 1999, Mr. Bancroft serves in the capacity of
Honorary Director. The compensation in this table reflects any fees received
by Mr. Bancroft in both capacities.
THE BOARD OF DIRECTORS OF GLOBAL/INTERNATIONAL FUND, INC. UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF SCUDDER INTERNATIONAL BOND FUND VOTE FOR EACH NOMINEE.
14
<PAGE>
PROPOSAL 2: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
I. SYNOPSIS
The following is a summary of certain information contained in this Proxy
Statement/Prospectus relating to the Reorganization. This summary is qualified
by reference to the more complete information contained elsewhere in this Proxy
Statement/Prospectus, the prospectuses and statements of additional information
of the Funds, and the Plan. Shareholders should read this entire Proxy
Statement/Prospectus carefully.
INTRODUCTION
The Board of the Corporation, including all of the Independent Directors,
approved the Plan at a meeting held on February 7, 2000. Subject to its approval
by the shareholders of the Acquired Fund, the Plan provides for the
reclassification of the issued and outstanding shares of the Acquired Fund into
S Class Shares and the abolition of the Acquired Fund as a series of the
Corporation. As a result of the Reorganization, each shareholder of the Acquired
Fund will become a shareholder of the S Class Shares and will hold, immediately
after the Reorganization, S Class Shares having an aggregate net asset value
equal to the aggregate net asset value of such shareholder's shares of the
Acquired Fund on the Valuation Date. In addition, the completion of the
Reorganization will result in the acquisition by the Acquiring Fund of all of
the assets and liabilities of the Acquired Fund. The Reorganization will be
effected by an amendment to the Corporation's charter.
Scudder Kemper is the investment manager of both Funds. If the
Reorganization is completed, the Acquired Fund's shareholders will continue to
enjoy all of the same shareholder privileges as they currently enjoy, such as
the ability to buy, exchange and sell shares without paying a sales commission,
access to professional service representatives, and automatic dividend
reinvestment. All services provided to shareholders of the Acquiring Fund are
identical to those provided to shareholders of the Acquired Fund. See "Purchase,
Redemption and Exchange Information" below.
BACKGROUND OF THE REORGANIZATION
The Reorganization is part of a broader restructuring program proposed by
Scudder Kemper to respond to changing industry conditions and investor needs.
The mutual fund industry has grown dramatically over the last ten years. During
this period of rapid growth, investment managers expanded the range of fund
offerings that they make available to investors in an effort to meet the growing
15
<PAGE>
and changing needs and desires of an increasingly large and dynamic group of
investors. With this expansion has come increased complexity and competition
among mutual funds as well as increased confusion among investors. The group of
no-load funds advised by Scudder Kemper has followed this pattern, increasing
from 44 no-load funds in 1990 to 77 no-load funds at present.
As a result, Scudder Kemper has sought ways to restructure and streamline
the management and operations of the funds it advises. Scudder Kemper believes,
and has advised the boards, that the consolidation of certain funds advised by
it would benefit fund shareholders. Scudder Kemper has, therefore, proposed the
consolidation of a number of no-load funds advised by it that Scudder Kemper
believes have similar or compatible investment objectives and policies. In many
cases, the proposed consolidations are designed to eliminate the substantial
overlap in current offerings by the Scudder Funds and the funds offered through
the AARP Investment Program (the "AARP Funds"), all of which are advised by
Scudder Kemper. Consolidation plans are proposed for other funds that have not
gathered enough assets to operate efficiently and, in turn, have relatively high
expense ratios. Scudder Kemper believes that these consolidations may help to
enhance investment performance of funds and increase efficiency of operations.
The Reorganization is also expected to result in lower operating expenses for
Acquired Fund shareholders, as described in "Comparison of Expenses" below.
There are currently five different boards for the no-load funds advised by
Scudder Kemper. Scudder Kemper believes, and has proposed to the boards, that
creating a single board responsible for the AARP Funds and for the open-end,
directly-distributed, no-load Scudder Funds would increase efficiency and
benefit fund shareholders. (See Proposal 1 above.)
As part of this restructuring effort, Scudder Kemper has also proposed the
adoption of an administrative fee for most of the no-load funds advised by
Scudder Kemper. Under this fee structure, in exchange for payment by a fund of
an administrative fee, Scudder Kemper would agree to provide or pay for
substantially all services that the fund normally requires for its operations,
other than those provided under the fund's investment management agreement and
certain other expenses. Such an administrative fee would enable investors to
determine with greater certainty the expense level that a fund will experience,
and, for the term of the administrative agreement, would transfer substantially
all of the risk of increased costs to Scudder Kemper. Scudder Kemper has
proposed that the Acquiring Fund implement such an administrative fee upon the
Closing, as described in "Administrative Fee" below.
The fund consolidations, the adoption of an administrative fee and the
creation of a single board are expected to have a positive impact on Scudder
16
<PAGE>
Kemper, as well. These changes are likely to result in reduced costs (and the
potential for increased profitability) for Scudder Kemper in advising or
servicing funds.
REASONS FOR THE PROPOSED REORGANIZATION; BOARD APPROVAL
Since receiving Scudder Kemper's proposals on October 5, 1999, the
Independent Directors have conducted a thorough review of all aspects of the
proposed restructuring program. They have been assisted in this regard by their
independent counsel and by independent consultants with special expertise in
financial and mutual fund industry matters. In the course of discussions with
representatives of Scudder Kemper, the Independent Directors have requested, and
Scudder Kemper has accepted, numerous changes designed to protect and enhance
the interests of shareholders. See "The Proposed Transaction -- Board Approval
of the Proposed Transaction" below.
The Directors believe that the Reorganization may provide shareholders of
the Acquired Fund with the following benefits:
- LOWER EXPENSES. If the Reorganization is approved, Acquired Fund
shareholders will benefit from lower total Fund operating expenses. Please
refer to "Comparison of Expenses" below.
- GREATER PREDICTABILITY OF EXPENSES. On or prior to the Closing, the
Acquiring Fund and Scudder Kemper will enter into an administrative
services agreement pursuant to which Scudder Kemper will provide or pay
others to provide substantially all of the administrative services
required by the Acquiring Fund, and will pay most Acquiring Fund expenses,
in return for payment by the Acquiring Fund of a single administrative fee
rate. This agreement, which has an initial three year term, will protect
the Acquiring Fund's shareholders from increases in the Acquiring Fund's
expense ratio attributed to any increases in the costs of providing these
services.
- SIMILAR INVESTMENT OBJECTIVES AND POLICIES. Except for the extent to which
each Fund may invest in domestic fixed income issues, Scudder Kemper has
advised the Directors that the Funds have generally compatible investment
objectives and policies.
- INVESTMENT IN A LARGER FUND. Scudder Kemper has advised the Directors that
the Acquired Fund's shareholders will benefit from an investment in a
larger fund which will likely have the ability to effect portfolio
transactions on more favorable terms and provide Scudder Kemper with
greater investment flexibility and the ability to select a larger number
of portfolio securities for the combined fund, with the
17
<PAGE>
attendant ability to spread investment risks among a larger number of
portfolio securities.
- TAX-FREE REORGANIZATION. It is a condition of the Reorganization that each
Fund receive an opinion of tax counsel that the transaction would be a
TAX-FREE transaction.
For these reasons, as more fully described below under "The Proposed
Transaction - Board Approval of the Proposed Transaction," the Directors,
including the Independent Directors, have concluded that:
- the Reorganization is in the best interests of the Acquired Fund and its
shareholders; and
- the interests of the existing shareholders of the Acquired Fund will not
be diluted as a result of the Reorganization.
ACCORDINGLY, THE DIRECTORS UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN
EFFECTING THE REORGANIZATION. If the Plan is not approved, the Acquired Fund
will continue in existence unless other action is taken by the Directors.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF THE FUNDS
The investment objectives, policies and restrictions of the Acquired Fund
and the Acquiring Fund (and, consequently, the risks of investing in either
Fund) are similar. Some differences do exist. The investment objective of the
Acquiring Fund is to provide total return with an emphasis on current income.
Capital appreciation is a secondary objective. The Acquired Fund's investment
objective is high income and, secondarily, capital preservation and
appreciation. There can be no assurance that either Fund will achieve its
investment objectives. Both Funds have the same portfolio managers and are
managed in a substantially similar manner.
Each Fund invests primarily in high grade bonds of issuers from around the
world. The Acquired Fund invests at least 65% of its total assets in bonds of
any maturity that are in the top two grades of credit quality of issuers from
around the world, other than the U.S. The Acquiring Fund invests at least 65% of
its total assets in intermediate- and long-term bonds of the top two grades of
credit quality of issuers from around the world, including the U.S. Although
each Fund may adjust its duration (a measure of sensitivity to interest rate
movements), the Investment Manager generally intends to keep it between 4 and 6
years for each Fund.
Each Fund can buy many types of income-producing securities. The Acquired
Fund can buy, among other things, foreign government bonds, corporate bonds and
bonds issued by supranational organizations such as the World
18
<PAGE>
Bank. The Acquiring Fund can buy, among other things, U.S. and foreign
government bonds, corporate bonds and mortgage- and asset-backed securities.
While the Acquiring Fund invests at least 15% of its total assets in U.S.
dollar-denominated securities, the Acquired Fund has no such policy.
The Acquired Fund could invest up to 35% of its total assets in investment-
grade U.S. debt securities. Each Fund could invest up to 15% of its net assets
in "high-yield" or "junk" bonds, which are those below the fourth credit grade
(i.e., grade BB/Ba and below).
The Acquiring Fund's investment restrictions are identical to the Acquired
Fund's investment restrictions, as such restrictions are set forth under
"Investment Restrictions" in each Fund's statement of additional information.
Investment restrictions of each Fund that are fundamental policies may not be
changed without the approval of Fund shareholders. Investors should refer to the
respective statements of additional information of the Funds for a fuller
description of each Fund's investment policies and restrictions.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Acquiring Fund, i.e., the ratio of the
lesser of annual sales or purchases to the monthly average value of the
portfolio (excluding from both the numerator and the denominator securities with
maturities at the time of acquisition of one year or less), for the fiscal year
ended October 31, 1999 was 148.5%. The portfolio turnover rate for the Acquired
Fund for the fiscal year ended October 31, 1999 was 193.7%. A higher portfolio
turnover rate involves greater brokerage and transaction expenses to a fund and
may result in the realization of net capital gains, which would be taxable to
shareholders when distributed.
PERFORMANCE
The following table shows how each Fund's returns over different periods
average out. For context, the table also includes broad-based market indexes
(which, unlike the Funds, do not have any fees or expenses). The performances of
both Funds and the indexes vary over time. All figures assume reinvestment of
dividends and distributions.
19
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
ACQUIRING FUND'S ACQUIRED FUND'S
ACQUIRING FUND ACQUIRED FUND BENCHMARK INDEX** BENCHMARK INDEX***
-------------- ------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Past year............ (4.07%) (5.43%) (4.27%) (5.07%)
Past 5 years......... 3.58% 2.79% 6.42% 5.90%
Past 10 years........ N/A 6.83% N/A 8.60%
Since Inception...... 4.31%* N/A 7.45% N/A
</TABLE>
- ------------------------
* The inception date for the Acquiring Fund is March 1, 1991.
** The Acquiring Fund's benchmark index is the Salomon Brothers World Government
Bond Index, an unmanaged index consisting of worldwide fixed-rate government
bonds with remaining maturities greater than one year.
*** The Acquired Fund's benchmark index is the Salomon Brothers Non-U.S. World
Government Bond Index, an unmanaged index consisting of non-U.S. worldwide
fixed-rate government bonds with remaining maturities greater than one year.
Index returns are calculated monthly.
Total return for the Acquiring Fund would have been lower during all periods
noted in the table above if the Investment Manager had not maintained expenses
since inception. Total return for the Acquired Fund would have been lower from
1990 through 1994 and in 1998 and 1999 if the Investment Manager had not
maintained expenses during those years.
There may be differences in the Funds' yields. For information regarding
each Fund's current 30-day yield, please call (800) 728-3337.
For management's discussion of the Acquiring Fund's performance for the
fiscal year ended October 31, 1999, see Exhibit B attached hereto.
INVESTMENT MANAGER; FEES AND EXPENSES
Each Fund retains the investment management firm of Scudder Kemper, pursuant
to separate contracts, to manage its daily investment and business affairs,
subject to the policies established by the Fund's Directors. Shareholders pay no
direct charges or fees for investment management or other services. Scudder
Kemper is a Delaware corporation located at Two International Place, Boston,
Massachusetts 02110-4103.
The Investment Manager receives a fee for its services pursuant to its
investment management agreement with the Acquiring Fund. For these services,
20
<PAGE>
the Acquiring Fund pays the Investment Manager a fee at an annual rate of 0.75%
of the first $1 billion of average daily net assets and 0.70% of average daily
net assets in excess of $1 billion. The fee is graduated so that increases in
the Acquiring Fund's net assets may result in a lower annual fee rate and
decreases in its net assets may result in a higher annual fee rate. As of
October 31, 1999, the Acquiring Fund had total net assets of $84,963,743. For
the fiscal year ended October 31, 1999, the Acquiring Fund paid the Investment
Manager a fee of 0.50% of average daily net assets. By contract, the Acquiring
Fund's total annual Fund operating expenses were maintained at 1.00% of average
daily net assets until February 28, 1999 and are maintained at 1.25% of average
daily net assets until February 28, 2001.
The Investment Manager receives a fee pursuant to an investment management
agreement as compensation for its services on behalf of the Acquired Fund. For
these services, the Acquired Fund pays the Investment Manager a fee at an annual
rate of 0.85% of the first $1 billion of average daily net assets and 0.80% of
average daily net assets in excess of $1 billion. The fee is graduated so that
increases in the Acquired Fund's net assets may result in a lower annual fee
rate and decreases in its net assets may result in a higher annual fee rate. As
of October 31, 1999, the Acquired Fund had total net assets of $115,469,497. For
the fiscal year ended October 31, 1999, the Acquired Fund paid the Investment
Manager a fee of 0.69% of average daily net assets. By contract, the Acquired
Fund's total annual Fund operating expenses are maintained at 1.50% of average
daily net assets until February 28, 2001.
ADMINISTRATIVE FEE
On or prior to the Closing, the Acquiring Fund will have entered into an
administrative services agreement with Scudder Kemper (the "Administration
Agreement"), pursuant to which Scudder Kemper will provide or pay others to
provide substantially all of the administrative services required by the
Acquiring Fund (other than those provided by Scudder Kemper under its investment
management agreement with the Fund, as described above) in exchange for the
payment by the Acquiring Fund of an administrative services fee (the
"Administrative Fee") of 0.375% of average daily net assets. One effect of this
arrangement is to make the Acquiring Fund's future expense ratio more
predictable. The details of this arrangement (including expenses that are not
covered) are set out below.
Various third-party service providers (the "Service Providers"), some of
which are affiliated with Scudder Kemper, provide certain services to the
Acquiring Fund pursuant to separate agreements with the Fund, subject to
21
<PAGE>
oversight and approval by the Directors. Scudder Fund Accounting Corporation, a
subsidiary of Scudder Kemper, computes net asset value for the Acquiring Fund
and maintains its accounting records. Scudder Service Corporation, also a
subsidiary of Scudder Kemper, is the transfer, shareholder servicing and
dividend-paying agent for the shares of the Acquiring Fund. Scudder Trust
Company, an affiliate of Scudder Kemper, provides subaccounting and
recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. As custodian, Brown Brothers Harriman & Co. holds the
portfolio securities of the Acquiring Fund, pursuant to a custodian agreement.
PricewaterhouseCoopers LLP audits the financial statements of the Acquiring Fund
and provides other audit, tax, and related services. Dechert Price & Rhoads acts
as general counsel for the Acquiring Fund. In addition to the fees it pays under
its current investment management agreement with Scudder Kemper, the Acquiring
Fund pays the fees and expenses associated with these service arrangements, as
well as the Acquiring Fund's insurance, registration, printing, postage and
other costs.
Once the Administration Agreement becomes effective, each Service Provider
will continue to provide the services that it currently provides to the
Acquiring Fund, as described above, under the current arrangements, except that
Scudder Kemper will pay these entities for the provision of their services to
the Acquiring Fund and will pay most other Fund expenses, including insurance,
registration, printing and postage fees. In return, the Acquiring Fund will pay
Scudder Kemper the Administrative Fee.
The proposed Administration Agreement will have an initial term of three
years, subject to earlier termination by the Directors. The fee payable by the
Acquiring Fund to Scudder Kemper pursuant to the Administration Agreement would
be reduced by the amount of any credit received from the Acquiring Fund's
custodian for cash balances.
Certain expenses of the Acquiring Fund would not be borne by Scudder Kemper
under the Administration Agreement, such as taxes, brokerage, interest and
extraordinary expenses, and the fees and expenses of the Independent Directors
(including the fees and expenses of their independent counsel). In addition, the
Acquiring Fund would continue to pay the fees required by its investment
management agreement with Scudder Kemper.
COMPARISON OF EXPENSES
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in the S Class Shares of the Acquiring Fund, and comparing these with
the expenses of the Acquired Fund. AS INDICATED BELOW, IT IS EXPECTED THAT THE
22
<PAGE>
TOTAL EXPENSE RATIO OF THE ACQUIRING FUND FOLLOWING THE REORGANIZATION WILL BE
SUBSTANTIALLY LOWER THAN THE CURRENT TOTAL EXPENSE RATIO OF THE ACQUIRED FUND.
Unless otherwise noted, the information is based on each Fund's expenses and
average daily net assets during the twelve months ended October 31, 1999 and on
a pro forma basis as of that date and for the period then ended, giving effect
to the Reorganization.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
ACQUIRING ACQUIRED PRO FORMA
FUND FUND (COMBINED)
--------- -------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)............. None None None
Maximum deferred sales charge (load) (as a
percentage of purchase price or redemption
proceeds)....................................... None None None
Maximum deferred sales charge (load) imposed on
reinvested dividends............................ None None None
Redemption fee (as a percentage of amount
redeemed, if applicable)(+)..................... None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (UNAUDITED)
<TABLE>
<CAPTION>
ACQUIRING ACQUIRED PRO FORMA**
FUND FUND (COMBINED)
--------- -------- -----------
<S> <C> <C> <C>
Management fees................................... 0.75% 0.82% 0.75%
Distribution and/or service (12b-1) fees.......... None None None
Other expenses.................................... 0.66% 0.81% 0.40%
Total annual Fund operating expenses.............. 1.41% 1.63% 1.15%
Expense reimbursement............................. 0.16% 0.13% N/A
Net annual Fund operating expenses................ 1.25%* 1.50%(#) N/A
</TABLE>
- ------------------------
(+) There is a $5 wire service fee for receiving redemption proceeds via wire.
* By contract, the Acquiring Fund's total annual Fund operating expenses were
maintained at 1.00% until February 28, 1999 and are maintained at 1.25%
until February 28, 2001. Annual Fund operating expenses in the table above
have been restated to reflect the Acquiring Fund's net annual Fund operating
expenses at 1.25% of average daily net assets. There is no guarantee that
these expense waivers will continue beyond February 28, 2001.
23
<PAGE>
(#) By contract, the Acquired Fund's total annual Fund operating expenses will
be maintained at 1.50% until February 28, 2001. There is no guarantee that
this expense waiver will continue beyond February 28, 2001.
** Pro Forma expenses reflect the implementation of the Administrative Fee for
the Acquiring Fund to be effective upon the Reorganization.
In evaluating the Reorganization, the Independent Directors also considered
the Acquiring Fund's and the Acquired Fund's estimated expense ratios calculated
utilizing Fund net assets at December 31, 1999 (rather than average daily net
assets for a full year, as used in the table above), the number of shareholder
accounts at that date, and other relevant factors. This calculation resulted in
an estimated total annual expense ratio (without reflecting any expense
reimbursements) of 1.41% for the Acquiring Fund and 1.61% for the Acquired Fund.
EXAMPLES (UNAUDITED)
Based on the costs above (including one year of capped expenses in each
period included in the Acquiring Fund and Acquired Fund columns), the following
examples are intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in each Fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The examples also assume that your
investment has a 5% return each year, you reinvested all dividends and
distributions, and each Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be as follows:
<TABLE>
<CAPTION>
ACQUIRING ACQUIRED PRO FORMA
YEAR FUND FUND (COMBINED)*
- ---- --------- -------- -----------
<S> <C> <C> <C>
1ST.................................... $ 127 $ 153 $ 117
3RD.................................... $ 431 $ 502 $ 365
5TH.................................... $ 756 $ 874 $ 633
10TH................................... $1,677 $1,922 $1,398
</TABLE>
- ------------------------
* Pro Forma expenses reflect the implementation of the Administrative Fee for
the Acquiring Fund to be effective upon the Reorganization.
FINANCIAL HIGHLIGHTS
The financial highlights table for the Acquiring Fund, which is intended to
help you understand the Acquiring Fund's financial performance for the past
24
<PAGE>
five years, is included in the Acquiring Fund's prospectus dated March 1, 2000,
which is included herewith and incorporated herein by reference.
DISTRIBUTION OF SHARES
Scudder Investor Services, Inc. ("SIS"), Two International Place, Boston,
Massachusetts 02110, a subsidiary of the Investment Manager, is the principal
underwriter of each Fund. SIS charges no direct fees in connection with the
distribution of shares of the Funds. Following the Reorganization, S Class
Shares shareholders will continue to be able to purchase shares of the funds in
the Scudder Family of Funds on a no-load basis.
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION
The purchase, redemption and exchange procedures and privileges of the
Acquired Fund are identical to those of the S Class Shares. The shareholder
service features of the S Class Shares are identical to those of the Acquired
Fund.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each of the Funds intends to distribute dividends from its net investment
income monthly. Each of the Funds intends to distribute net realized capital
gains after utilization of capital loss carryforwards, if any, annually. An
additional distribution may be made by each of the Funds, if necessary.
Dividends and distributions of each Fund will be invested in additional shares
of the Fund at net asset value and credited to the shareholder's account on the
payment date or, at the shareholder's election, paid in cash.
If the Plan is approved by the Acquired Fund's shareholders, the Acquired
Fund will pay its shareholders a distribution of all undistributed net
investment income and undistributed realized net capital gains immediately prior
to the Closing.
TAX CONSEQUENCES
As a condition to the Reorganization, the Acquiring Fund and the Acquired
Fund will have received an opinion of Willkie Farr & Gallagher in connection
with the Reorganization, to the effect that, based upon certain facts,
assumptions and representations, the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"). If the Reorganization constitutes a
tax-free reorganization, no gain or loss will be recognized by the Acquired Fund
25
<PAGE>
or its shareholders as a direct result of the Reorganization. See "The Proposed
Transaction -- Federal Income Tax Consequences."
II. PRINCIPAL RISK FACTORS
Because of their similar investment objectives, policies and strategies, the
principal risks presented by the Acquiring Fund are similar to those presented
by the Acquired Fund. The main risks applicable to each Fund include, among
others, management risk (i.e., securities selection by the Investment Manager),
risk associated with interest rates, market risk, foreign currency risk and risk
associated with foreign investments. Foreign investments tend to be more
volatile than their U.S. counterparts, for various reasons including political
and economic uncertainties and difficulty in obtaining accurate information.
Foreign currency risk refers to the effect currency exchange rates have on the
dollar value of a security.
In addition, each Fund presents the risk associated with being
non-diversified. Since each Fund is non-diversified, its investment returns are
more likely to be impacted by changes in the market value and returns of any one
portfolio holding as compared to diversified funds. Because the Acquiring Fund
may invest a larger portion of its assets in U.S. securities and U.S.
dollar-denominated securities, it will present less foreign investment and
foreign currency risk than the Acquired Fund; however, if the U.S. dollar and/or
U.S. securities underperform foreign currencies and/or foreign securities, the
Acquiring Fund's performance will likely suffer relative to the Acquired Fund.
Investments in high yield securities, or "junk bonds," entail relatively greater
risk of loss of income and principal than investments in higher rated
securities, and may fluctuate more in value. The Acquiring Fund's
mortgage-backed holdings may involve risks such as increased volatility.
For a further discussion of the investment techniques and risk factors
applicable to the Funds, see the "Investment Objectives, Policies and
Restrictions of the Funds" herein, and the prospectuses and statements of
additional information for the Funds, which are incorporated by reference
herein.
III. THE PROPOSED TRANSACTION
DESCRIPTION OF THE PLAN
As stated above, the Plan provides for the reclassification of the issued
and outstanding shares of the Acquired Fund into S Class Shares and the
abolition of the Acquired Fund as a series of the Corporation. As a result of
the Reorganization, all of the assets and liabilities of the Acquired Fund would
become the assets and liabilities of the Acquiring Fund.
26
<PAGE>
Upon completion of the Reorganization, each shareholder of the Acquired Fund
will own that number of full and fractional S Class Shares having an aggregate
net asset value equal to the aggregate net asset value of such shareholder's
shares held in the Acquired Fund immediately as of the close of business on the
Valuation Date. Such shares will be held in an account with the Corporation
identical in all material respects to the account currently maintained by the
Corporation for such shareholder. In the interest of economy and convenience, S
Class Shares issued to the Acquired Fund's shareholders will be in
uncertificated form.
Until the Closing, shareholders of the Acquired Fund will continue to be
able to redeem their shares at the net asset value next determined after receipt
by the Acquired Fund's transfer agent of a redemption request in proper form.
Redemption and purchase requests received by the transfer agent after the
Closing will be treated as requests received for the redemption or purchase of
S Class Shares received by the shareholder in connection with the
Reorganization.
The obligations of the Corporation on behalf of each of the Acquired Fund
and the Acquiring Fund under the Plan are subject to various conditions, as
stated therein. Among other things, the Plan requires that all filings be made
with, and all authority be received from, the SEC and state securities
commissions as may be necessary in the opinion of counsel to permit the parties
to carry out the transactions contemplated by the Plan. The Acquired Fund and
the Acquiring Fund are in the process of making the necessary filings. To
provide against unforeseen events, the Plan may be terminated or amended at any
time prior to the Closing by action of the Directors of the Corporation,
notwithstanding the approval of the Plan by the shareholders of the Acquired
Fund. However, no amendment may be made that materially adversely affects the
interests of the shareholders of the Acquired Fund without obtaining the
approval of the Acquired Fund's shareholders. The Acquired Fund and the
Acquiring Fund may at any time waive compliance with certain of the covenants
and conditions contained in the Plan. For a complete description of the terms
and conditions of the Reorganization, see the Plan at Exhibit A.
Each Fund will pay its own allocable share of expenses associated with the
Reorganization, except that Scudder Kemper will bear any such expenses in excess
of $28,384 for the Acquiring Fund and $98,616 for the Acquired Fund
(approximately $0.0033 and $0.0090 per share, respectively, based on
December 31, 1999 net assets for each Fund). As investors in a Fund, Fund
shareholders indirectly bear a portion of these expenses.
27
<PAGE>
BOARD APPROVAL OF THE PROPOSED TRANSACTION
Scudder Kemper first proposed the Reorganization to the Independent
Directors of the Acquired Fund at a meeting held on October 5, 1999. The
Reorganization was presented to the Directors and considered by them as part of
a broader initiative by Scudder Kemper to restructure many of the mutual funds
advised by it that are currently offered to retail investors (see "Synopsis --
Background of the Reorganization" above). This initiative includes four major
components:
(i) The combination of funds with similar investment objectives and
policies, including in particular the combination of the AARP Funds with
similar Scudder Funds currently offered to the general public;
(ii) The liquidation of certain small funds which have not achieved
market acceptance and which are unlikely to reach an efficient operating
size;
(iii) The implementation of an administration agreement for each fund,
covering, for a single fee rate, substantially all services required for the
operation of the fund (other than those provided under the fund's investment
management agreement) and most expenses; and
(iv) The consolidation of the separate boards currently responsible for
overseeing several groups of no-load funds managed by Scudder Kemper into a
single board.
The Independent Directors of the Acquired Fund reviewed the potential
implications of these proposals for the Acquired Fund as well as the various
other funds for which they serve as directors or trustees. They were assisted in
this review by their independent legal counsel and by independent consultants
with special expertise in financial and mutual fund industry matters. Following
the October 5 meeting, the Independent Directors met in person or by telephone
on seven occasions (including committee meetings) to review and discuss these
proposals, both among themselves and with representatives of Scudder Kemper. On
a number of occasions, these meetings included representatives of the
independent directors or trustees of other funds affected by these proposals. In
the course of their review, the Independent Directors requested and received
substantial additional information and suggested numerous changes to Scudder
Kemper's proposals, many of which were accepted.
Following the conclusion of this process, the Independent Directors of the
Acquired Fund, the independent trustees/directors of other funds involved and
Scudder Kemper reached general agreement on the elements of a restructuring
28
<PAGE>
plan as it affects shareholders of various funds and, where required, agreed to
submit elements of the plan for approval to shareholders of those funds.
On February 7, 2000, the Board of the Acquired Fund, including the
Independent Directors of the Acquired Fund, approved the terms of the
Reorganization and certain related proposals. The Independent Directors have
also unanimously agreed to recommend that the Reorganization be approved by the
Acquired Fund's shareholders.
In determining to recommend that the shareholders of the Acquired Fund
approve the Reorganization, the Board considered, among other factors: (a) the
fees and expense ratios of the Funds, including comparisons between the expenses
of the Acquired Fund and the estimated operating expenses of the Acquiring Fund,
and between the estimated operating expenses of the Acquiring Fund and other
mutual funds with similar investment objectives; (b) the terms and conditions of
the Reorganization and whether the Reorganization would result in the dilution
of shareholder interests; (c) the compatibility of the Acquired Fund's and the
Acquiring Fund's investment objectives, policies, restrictions and portfolios;
(d) the agreement by Scudder Kemper to provide services to the Acquiring Fund
for a fixed fee rate under the Administration Agreement with an initial three
year term; (e) the service features available to shareholders of the Acquired
Fund and the Acquiring Fund; (f) the costs to be borne by the Acquired Fund, the
Acquiring Fund and Scudder Kemper as a result of the Reorganization; (g)
prospects for the Acquiring Fund to attract additional assets; (h) the tax
consequences of the Reorganization on the Acquired Fund, the Acquiring Fund and
their respective shareholders; and (i) the investment performance of the
Acquired Fund and the Acquiring Fund.
The Directors also gave extensive consideration to possible economies of
scale that might be realized by Scudder Kemper in connection with the
Reorganization, as well as the other fund combinations included in Scudder
Kemper's restructuring proposal. The Directors concluded that these economies
were appropriately reflected in the fee and expense arrangements of the
Acquiring Fund, as proposed to be revised upon completion of the Reorganization.
In particular, the Directors considered the benefits to shareholders resulting
from locking in the rate of the Acquiring Fund's Administrative Fee for an
initial three-year period. Because the Acquiring Fund will pay only its stated
Administrative Fee rate for such services and expenses regardless of changes in
actual costs, the Acquiring Fund's shareholders will be protected from increases
in the Acquiring Fund's expense ratio attributable to increases in such actual
costs. The Board also considered the protection this would afford shareholders
if the Acquiring Fund's net assets declined as a result of market fluctuations
or net redemptions.
29
<PAGE>
The Directors also considered the impact of the Reorganization on the total
expenses to be borne by shareholders of the Acquired Fund. As noted above under
"Comparison of Expenses," the pro forma expense ratio (reflecting the
Administrative Fee) for the combined Fund following the Reorganization is
substantially lower than the current expense ratio for the Acquired Fund. The
Board also considered that the Reorganization would permit the shareholders of
the Acquired Fund to pursue similar investment goals in a larger fund. In this
regard, Scudder Kemper advised the Directors of the Acquired Fund that the
Acquired Fund's shareholders will benefit from being in a larger fund which will
likely have the ability to effect portfolio transactions on more favorable terms
and provide Scudder Kemper with greater investment flexibility and the ability
to select a larger number of portfolio securities for the combined Fund, with
the ability to spread investment risks among a larger number of portfolio
securities.
Finally, the Directors concluded that the shareholders of the Acquired Fund
would be better served by having their interests represented by a single board
of directors with responsibility for overseeing substantially all of the funds
to be marketed as a "family of funds" through Scudder's no-load distribution
channels. Accordingly, the Directors unanimously agreed to recommend the
election of a new consolidated board comprised of representatives of each of the
various boards currently serving as directors or trustees of these funds.
Based on all of the foregoing, the Board concluded that the Acquired Fund's
participation in the Reorganization would be in the best interests of the
Acquired Fund and would not dilute the interests of the Acquired Fund's
shareholders. THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE ACQUIRED FUND APPROVE THE
REORGANIZATION.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
The Acquiring Fund is a series of the Corporation, a corporation organized
under the laws of the state of Maryland on May 15, 1986. The Corporation's
authorized capital consists of 800 million shares of capital stock, par value
$0.01 per share, 300 million shares of which are allocated to the Acquiring
Fund. The Directors of the Corporation are authorized to divide the
Corporation's shares into separate series. The Acquiring Fund is one of five
series of the Corporation that the Board has created to date. The Directors of
the Corporation are also authorized to further divide the shares of the series
of the Corporation into classes. The Directors of the Corporation have
authorized the division of the Acquiring Fund into two classes, S Class and AARP
Class. It is anticipated that this division will occur prior to the Closing and
that shares of the Acquiring Fund existing at that time will be redesignated as
S Class Shares of the
30
<PAGE>
Acquiring Fund. If the division does not occur prior to the Closing, then the
Reorganization will not be consummated. Although shareholders of different
classes of a series have an interest in the same portfolio of assets,
shareholders of different classes may bear different expenses in connection with
different methods of distribution and certain other matters.
Each share of each class of the Acquiring Fund represents an interest in the
Acquiring Fund that is equal to and proportionate with each other share of that
class of the Acquiring Fund. Acquiring Fund shareholders are entitled to one
vote per share held on matters on which they are entitled to vote. In the areas
of shareholder voting and the powers and conduct of the Directors, there are no
material differences between the rights of shareholders of the Acquired Fund and
the rights of shareholders of the Acquiring Fund.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is conditioned upon the receipt by the Corporation, on
behalf of each Fund, of an opinion from Willkie Farr & Gallagher, substantially
to the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the reclassification of all
the issued shares of the Acquired Fund into S Class Shares and the combination
of the assets and liabilities of the Acquired Fund with the assets and
liabilities of the Acquiring Fund, as described in the Plan, and the abolition
of the Acquired Fund as a series of the Corporation, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquiring Fund and the Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Acquired Fund as a result of such transactions or upon the
distribution of the S Class Shares to the Acquired Fund shareholders in exchange
for their shares of the Acquired Fund; (iii) the basis of the assets of the
Acquired Fund in the hands of the Acquiring Fund will be the same as the basis
of such assets of the Acquired Fund immediately prior to the transfer; (iv) the
holding period of the assets of the Acquired Fund in the hands of the Acquiring
Fund will include the period during which such assets were held by the Acquired
Fund; (v) no gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund and the assumption by the Acquiring
Fund of all of the liabilities of the Acquired Fund; (vi) no gain or loss will
be recognized by the shareholders of the Acquired Fund upon the receipt of the S
Class Shares solely upon the reclassification of their shares of the Acquired
Fund as part of the transaction; (vii) the basis of the S Class Shares received
by the shareholders of the Acquired Fund will be the same as the basis of the
shares of the Acquired Fund exchanged therefor; and (viii) the holding period of
S Class Shares received by the shareholders of the Acquired Fund will include
the holding
31
<PAGE>
period during which the shares of the Acquired Fund exchanged therefor were
held, provided that at the time of the exchange the shares of the Acquired Fund
were held as capital assets in the hands of the shareholders of the Acquired
Fund.
As of its fiscal year ended October 31, 1999, the Acquiring Fund had a net
tax-basis capital loss carryforward of $7,988,000. This carryforward expires as
follows: $686,000 in 2002, $5,010,000 in 2003, $735,000 in 2004 and $1,557,000
in 2007. Also, as of October 31, 1999, the Acquired Fund had a net tax-basis
capital loss carryforward of $73,227,000. This carryforward expires as follows:
$64,329,000 in 2002, $6,093,000 in 2003, $494,000 in 2006 and $2,311,000 in
2007.
After the Reorganization, these losses will be available to the Acquiring
Fund to offset its capital gains, although the amount of these losses which may
offset the Acquiring Fund's capital gains in any given year may be limited. As a
result of this limitation, it is possible that the Acquiring Fund may not be
able to use these losses as rapidly as it might have absent the Reorganization,
and part or all of these losses may not be useable at all. The ability of the
Acquiring Fund to absorb losses in the future depends on a variety of factors
that cannot be known in advance, including the existence of capital gains
against which these losses may be offset. Net capital losses of regulated
investment companies generally expire at the end of the eighth taxable year
after they arise, if not previously absorbed by that time; therefore, it is
possible that some or all of the Acquiring Fund's losses will expire unused. In
addition, the benefits of any capital loss carryforwards currently are available
only to the existing shareholders of the Acquiring Fund. After the
Reorganization, however, these benefits will inure to all of the shareholders
(including the former Acquired Fund shareholders) of the Acquiring Fund. The
Directors of the Acquiring Fund believe that the Reorganization is in the best
interests of the shareholders of the Acquiring Fund, having considered the
foregoing information in connection with their recommendation that the
reorganization proceed.
After the Closing, the Acquiring Fund may dispose of certain securities
received by it from the Acquired Fund in connection with the Reorganization,
which may result in transaction costs and capital gains.
While the Corporation is not aware of any adverse state or local tax
consequences of the proposed Reorganization, it has not requested any ruling or
opinion with respect to such consequences and shareholders may wish to consult
their own tax adviser with respect to such matters.
32
<PAGE>
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each
Fund as of October 31, 1999, and on a pro forma basis as of that date, giving
effect to the Reorganization:
<TABLE>
<CAPTION>
ACQUIRING ACQUIRED PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED(1)
-------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Net Assets................ $ 84,963,743 $ 115,469,497 ($ 127,000)(2) $ 200,306,240(3)
Net Asset Value Per
Share................... $ 9.34 $ 9.96 -- $ 9.34
Shares Outstanding........ 9,093,351 11,597,052 755,291 21,445,694
</TABLE>
- ------------------------------
(1) Assumes the Reorganization had been consummated on October 31, 1999, and is
for information purposes only. No assurance can be given as to how many
shares of the Acquiring Fund will be received by the shareholders of the
Acquired Fund on the date the Reorganization takes place, and the foregoing
should not be relied upon to reflect the number of shares of the Acquiring
Fund that actually will be received on or after such date.
(2) Represents one-time proxy, legal, accounting and other costs of the
Reorganization of $28,384 and $98,616 to be borne by the Acquiring Fund and
the Acquired Fund, respectively.
(3) Pro forma combined net assets do not reflect expense reductions that would
result from the implementation of the Administrative Fee.
THE BOARD OF DIRECTORS OF GLOBAL/INTERNATIONAL FUND, INC. UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF SCUDDER INTERNATIONAL BOND FUND VOTE IN FAVOR OF THIS
PROPOSAL 2.
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
ACCOUNTANTS
The Board of the Corporation, including a majority of the Independent
Directors, has selected PricewaterhouseCoopers LLP to act as independent
accountants of the Acquired Fund for the Acquired Fund's current fiscal year.
One or more representatives of PricewaterhouseCoopers LLP are expected to be
present at the Meeting and will have an opportunity to make a statement if they
so desire. Such representatives are expected to be available to respond to
appropriate questions posed by shareholders or management.
THE BOARD OF DIRECTORS OF GLOBAL/INTERNATIONAL FUND, INC. UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF SCUDDER INTERNATIONAL BOND FUND VOTE IN FAVOR OF THIS
PROPOSAL 3.
33
<PAGE>
ADDITIONAL INFORMATION
INFORMATION ABOUT THE FUNDS
Additional information about the Corporation, the Funds and the
Reorganization has been filed with the SEC and may be obtained without charge by
writing to Scudder Investor Services, Inc., Two International Place, Boston, MA
02110-4103, or by calling 1-800-225-2470.
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the 1940 Act, and in accordance
therewith, files reports, proxy material and other information about each of the
Funds with the SEC. Such reports, proxy material and other information filed by
the Corporation can be inspected and copied at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the following SEC Regional Offices: Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, NY 10048; Southeast Regional Office,
1401 Brickell Avenue, Suite 200, Miami, FL 33131; Midwest Regional Office,
Citicorp Center, 500 W. Madison Street, Chicago, IL 60661-2511; Central Regional
Office, 1801 California Street, Suite 4800, Denver, CO 80202-2648; and Pacific
Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, CA
90036-3648. Copies of such material can also be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The SEC maintains an Internet World Wide Web site (at
http://www.sec.gov) which contains the statements of additional information for
the Corporation, materials that are incorporated by reference into the
prospectuses and statements of additional information, and other information
about the Corporation and the Funds.
INTERESTS OF CERTAIN PERSONS
The Investment Manager has a financial interest in the Reorganization,
arising from the fact that its fee under its investment management agreement
with the Acquiring Fund will increase as the amount of the Acquiring Fund's
assets increases. The amount of those assets will increase by virtue of the
Reorganization. See "Synopsis -- Investment Manager; Fees and Expenses" above.
GENERAL
PROXY SOLICITATION. Proxy solicitation costs will be considered
Reorganization expenses and will be allocated accordingly. In addition to
solicitation by mail, certain officers and representatives of the Corporation,
officers and employees of Scudder Kemper and certain financial services firms
and their
34
<PAGE>
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally.
Any Acquired Fund shareholder giving a proxy has the power to revoke it by
mail (addressed to the Secretary at the principal executive office of the
Acquired Fund, c/o Scudder Kemper Investments, Inc., at the address for the
Acquired Fund shown at the beginning of this Proxy Statement/Prospectus) or in
person at the Meeting, by executing a superseding proxy or by submitting a
notice of revocation to the Acquired Fund. All properly executed proxies
received in time for the Meeting will be voted as specified in the proxy or, if
no specification is made, in favor of each Proposal.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of one-third of the shares of the Corporation (for a corporation-wide
vote) or the Acquired Fund (for a fund-wide vote) entitled to be cast shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve any Proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law to permit further solicitation of proxies with respect to that
Proposal. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Corporation's (for a corporation-wide vote)
or the Acquired Fund's (for a fund-wide vote) shares present in person or by
proxy at the Meeting. The persons named as proxies will vote in favor of any
such adjournment those proxies which they are entitled to vote in favor of that
Proposal and will vote against any such adjournment those proxies to be voted
against that Proposal. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but which have not been voted. Broker
non-votes are proxies received by the Acquired Fund from brokers or nominees
when the broker or nominee has neither received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter. Accordingly, shareholders are urged to forward their voting
instructions promptly.
Approval of Proposal 1 requires the affirmative vote of a plurality of the
shares of the Corporation voting at the Meeting. Approval of Proposal 2 requires
the affirmative vote of the holders of a majority of the Acquired Fund's shares
outstanding and entitled to vote thereon. Approval of Proposal 3 requires the
affirmative vote of a majority of the shares of the Acquired Fund voting at the
Meeting. Abstentions and broker non-votes will not be counted in favor of, but
will have no other effect on, Proposal 1 and will have the effect of a "no" vote
on Proposals 2 and 3.
Holders of record of the shares of the Acquired Fund at the close of
business on April 17, 2000 will be entitled to one vote per share on all
business
35
<PAGE>
of the Meeting. As of March 20, 2000, there were 9,809,403 shares of the
Acquired Fund outstanding.
As of January 31, 2000, the officers and Directors of the Corporation as a
group owned beneficially less than 1% of the outstanding shares of the Acquiring
Fund. Appendix 2 hereto sets forth the beneficial owners of at least 5% of each
Fund's shares, as well as the beneficial owners of at least 5% of the shares of
each other series of the Corporation. To the best of the Corporation's
knowledge, as of January 31, 2000, no person owned beneficially at least 5% of
either Fund's outstanding shares or the shares of any other series of the
Corporation, except as stated in Appendix 2.
Shareholder Communications Corporation ("SCC") has been engaged to assist in
the solicitation of proxies, at an estimated cost of $7,661. As the Meeting date
approaches, certain shareholders of the Acquired Fund may receive a telephone
call from a representative of SCC if their votes have not yet been received.
Authorization to permit SCC to execute proxies may be obtained by telephonic or
electronically transmitted instructions from shareholders of the Acquired Fund.
Proxies that are obtained telephonically will be recorded in accordance with the
procedures set forth below. The Directors believe that these procedures are
reasonably designed to ensure that both the identity of the shareholder casting
the vote and the voting instructions of the shareholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card(s), and ask for the shareholder's instructions
on the Proposals. Although the SCC representative is permitted to answer
questions about the process, he or she is not permitted to recommend to the
shareholder how to vote, other than to read any recommendation set forth in the
proxy statement. SCC will record the shareholder's instructions on the card.
Within 72 hours, the shareholder will be sent a letter or mailgram to confirm
his or her vote and asking the shareholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting, but does not wish to
give a proxy by telephone or electronically, the shareholder may still submit
the proxy card(s) originally sent with the proxy statement or attend in person.
Should shareholders require additional information regarding the proxy or
replacement proxy card(s), they may contact SCC toll-free at 1-800-603-1915. Any
proxy given by a shareholder is revocable until voted at the Meeting.
36
<PAGE>
Shareholders may also provide their voting instructions through telephone
touch-tone voting or Internet voting. These options require shareholders to
input a control number which is located on each voting instruction card. After
inputting this number, shareholders will be prompted to provide their voting
instructions on the Proposals. Shareholders will have an opportunity to review
their voting instructions and make any necessary changes before submitting their
voting instructions and terminating their telephone call or Internet link.
Shareholders who vote on the Internet, in addition to confirming their voting
instructions prior to submission, will also receive an e-mail confirming their
instructions.
SHAREHOLDER PROPOSALS FOR SUBSEQUENT MEETINGS. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a shareholder meeting
subsequent to the Meeting, if any, should send their written proposals to the
Secretary of the Corporation, c/o Scudder Kemper Investments, Inc., Two
International Place, Boston, Massachusetts 02110, within a reasonable time
before the solicitation of proxies for such meeting. The timely submission of a
proposal does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE MEETING. No Director is aware of any
matters that will be presented for action at the Meeting other than the matters
set forth herein. Should any other matters requiring a vote of shareholders
properly come before the Meeting, the proxy in the accompanying form will confer
upon the person or persons entitled to vote the shares represented by such proxy
the discretionary authority to vote the shares as to any such other matters in
accordance with their best judgment in the interest of the Corporation and/or
the Acquired Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) (OR TAKE
ADVANTAGE OF AVAILABLE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES) PROMPTLY. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board,
/s/ John Millette
John Millette
Secretary
37
<PAGE>
INDEX OF EXHIBITS AND APPENDICES
<TABLE>
<S> <C> <C>
EXHIBIT A: Agreement and Plan of Reorganization
EXHIBIT B: Management's Discussion of Acquiring Fund's
Performance
APPENDIX 1: Director and Nominee Shareholdings
APPENDIX 2: Beneficial Owners of Fund Shares
</TABLE>
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this day of , 2000, by and between Global/ International Fund, Inc. (the
"Corporation"), a Maryland corporation with its principal place of business at
345 Park Avenue, New York, NY 10154, on behalf of each of Scudder Global Bond
Fund (the "Acquiring Fund") and Scudder International Bond Fund (the "Acquired
Fund" and, together with the Acquiring Fund, each a "Fund" and collectively the
"Funds"). Each of the Acquiring Fund and the Acquired Fund is a separate series
of the Corporation.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization")
will consist of the transfer of all or substantially all of the assets of the
Acquired Fund to the Acquiring Fund, the reclassification of all of the issued
and outstanding shares of the Acquired Fund into voting shares of the S Class
shares of capital stock ($.01 par value per share) of the Acquiring Fund (the
"Acquiring Fund Shares"), the assumption by the Acquiring Fund of all of the
liabilities of the Acquired Fund and the distribution of the Acquiring Fund
Shares to the shareholders of the Acquired Fund in complete liquidation of the
Acquired Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES
AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer to the Acquiring Fund all or substantially all of the Acquired
Fund's assets as set forth in section 1.2, and the Acquiring Fund agrees in
exchange therefor (i) to deliver to the Acquired Fund that number of full and
fractional Acquiring Fund Shares determined by dividing the value of the
Acquired Fund's net assets, computed in the manner and as of the time and date
set forth in section 2.1, by the net asset value of one Acquiring Fund Share,
computed in the manner and as of the time and date set forth in section 2.2; and
(ii) to assume
A-1
<PAGE>
all of the liabilities of the Acquired Fund. Such transactions shall take place
at the closing provided for in section 3.1 (the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
(the "Assets") shall consist of all assets, including, without limitation, all
cash, cash equivalents, securities, commodities and futures interests and
dividends or interest or other receivables that are owned by the Acquired Fund
and any deferred or prepaid expenses shown on the unaudited statement of assets
and liabilities of the Acquired Fund prepared as of the effective time of the
Closing in accordance with generally accepted accounting principles ("GAAP")
applied consistently with those of the Acquired Fund's most recent audited
balance sheet. The Assets shall constitute at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by the Acquired Fund immediately before the Closing (excluding for
these purposes assets used to pay the dividends and other distributions paid
pursuant to section 1.4).
1.3. The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in section 3.1.
1.4. On or as soon as practicable prior to the Closing Date as defined in
section 3.1, the Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it will have
distributed substantially all of its investment company taxable income (computed
without regard to any deduction for dividends paid) and realized net capital
gain, if any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of Assets provided for in section 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
(the "Acquired Fund Shareholders"), determined as of the Valuation Time (as
defined in section 2.1), on a pro rata basis, the Acquiring Fund Shares received
by the Acquired Fund pursuant to section 1.1 and will completely liquidate. Such
distribution and liquidation will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net
asset value of Acquiring Fund Shares to be so credited to Acquired Fund
Shareholders shall be equal to the aggregate net asset value of the Acquired
Fund shares owned by such shareholders as of the Valuation Time. All issued and
outstanding shares of the Acquired Fund will simultaneously be cancelled on the
books of the Acquired Fund, although share certificates representing interests
in shares of the Acquired Fund will represent a number of Acquiring Fund Shares
after the Closing Date as determined in accordance with
A-2
<PAGE>
section 2.3. The Acquiring Fund will not issue certificates representing
Acquiring Fund Shares in connection with such exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
1.7. Any reporting responsibility of the Acquired Fund including, without
limitation, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
1.8. All books and records of the Acquired Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following the Closing
Date.
2. VALUATION
2.1. The value of the Assets shall be computed as of the close of regular
trading on The New York Stock Exchange, Inc. (the "NYSE") on the business day
immediately preceding the Closing Date, as defined in Section 3.1 (the
"Valuation Time") after the declaration and payment of any dividends and/or
other distributions on that date, using the valuation procedures set forth in
the Corporation's Charter, as amended, and then-current prospectus or statement
of additional information.
2.2. The net asset value of an Acquiring Fund share shall be the net asset
value per share computed as of the Valuation Time using the valuation procedures
referred to in section 2.1.
2.3. The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Assets shall be determined by
dividing the value of the Assets with respect to shares of the Acquired Fund
determined in accordance with section 2.1 by the net asset value of an Acquiring
Fund Share determined in accordance with section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall
A-3
<PAGE>
be subject to confirmation by each Fund's respective independent accountants
upon the reasonable request of the other Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement shall be
September 25, 2000, or such later date as the parties may agree in writing (the
"Closing Date"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of 9:00 a.m., Eastern time, on the Closing Date, unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
Dechert Price & Rhoads, Ten Post Office Square -- South, Boston, MA 02109, or at
such other place and time as the parties may agree.
3.2. The Acquired Fund shall deliver to Acquiring Fund on the Closing Date a
schedule of Assets.
3.3. Brown Brothers Harriman & Co. ("Brown Brothers"), custodian for the
Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets shall have been delivered in proper form to
Brown Brothers, custodian for the Acquiring Fund, prior to or on the Closing
Date and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. The Acquired Fund's portfolio
securities represented by a certificate or other written instrument shall be
presented by the custodian for the Acquired Fund to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date and transferred and delivered by the Acquired Fund as of the
Closing Date by the Acquired Fund for the account of Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Acquired Fund's portfolio securities and instruments
deposited with a securities depository, as defined in Rule 17f-4 under the 1940
Act, shall be delivered as of the Closing Date by book entry in accordance with
the customary practices of such depositories and the custodian for the Acquiring
Fund. The cash to be transferred by the Acquired Fund shall be delivered by wire
transfer of federal funds on the Closing Date.
3.4. Scudder Service Corp. (the "Transfer Agent"), on behalf of the Acquired
Fund, shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Acquired Fund
Shareholders and the number and percentage ownership (to three decimal places)
of outstanding Acquired Fund Shares owned by each such shareholder immediately
prior to the Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to the
Acquired Fund or provide evidence satisfactory to the
A-4
<PAGE>
Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request to effect the transactions contemplated by this
Agreement.
3.5. In the event that immediately prior to the Valuation Time (a) the NYSE
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board members of
either party to this Agreement, accurate appraisal of the value of the net
assets with respect to the Acquiring Fund Shares or the Acquired Fund Shares is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Corporation, on behalf of the Acquired Fund, represents and
warrants to the Acquiring Fund as follows:
(a) The Corporation is a corporation duly organized and validly existing
under the laws of the State of Maryland with power under the Corporation's
Charter, as amended, to own all of its properties and assets and to carry on
its business as it is now being conducted;
(b) The Corporation is registered with the Commission as an open-end
management investment company under the 1940 Act, and such registration is
in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund
of the transactions contemplated herein, except such as have been obtained
under the Securities Act of 1933, as amended (the '1933 Act'), the
Securities Exchange Act of 1934, as amended (the '1934 Act') and the 1940
Act and such as may be required by state securities laws;
(d) Other than with respect to contracts entered into in connection with
the portfolio management of the Acquired Fund which shall terminate on or
prior to the Closing Date, the Corporation is not, and the execution,
delivery and performance of this Agreement by the Corporation will not
result, in violation of Maryland law or of the Corporation's Charter, as
A-5
<PAGE>
amended, or By-Laws, or of any material agreement, indenture, instrument,
contract, lease or other undertaking known to counsel to which the Acquired
Fund is a party or by which it is bound, and the execution, delivery and
performance of this Agreement by the Acquired Fund will not result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to
which the Acquired Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any properties or assets
held by it. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings which would materially and adversely
affect its business and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate
the transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes in
Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquired Fund at and for the fiscal year ended October 31, 1999, have been
audited by PricewaterhouseCoopers LLP, independent accountants, and are in
accordance with GAAP consistently applied, and such statements (a copy of
each of which has been furnished to the Acquiring Fund) present fairly, in
all material respects, the financial position of the Acquired Fund as of
such date in accordance with GAAP, and there are no known contingent
liabilities of the Acquired Fund required to be reflected on a balance sheet
(including the notes thereto) in accordance with GAAP as of such date not
disclosed therein;
(g) Since October 31, 1999, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Acquiring Fund. For purposes of
this subsection (g), a decline in net asset value per share of the Acquired
Fund due to declines in market values of securities in the Acquired Fund's
portfolio, the discharge of Acquired Fund liabilities, or the redemption of
Acquired Fund shares by Acquired Fund Shareholders shall not constitute a
material adverse change;
A-6
<PAGE>
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquired Fund required by law to have been
filed by such dates (including any extensions) shall have been filed and are
or will be correct in all material respects, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment
thereof, and, to the best of the Acquired Fund's knowledge, no such return
is currently under audit and no assessment has been asserted with respect to
such returns;
(i) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment company
and has elected to be treated as such, has been eligible to and has computed
its federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net capital
gain (as defined in the Code) that has accrued through the Closing Date;
(j) All issued and outstanding shares of the Acquired Fund (i) have been
offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable registration requirements of the
1933 Act and state securities laws, (ii) are, and on the Closing Date will
be, duly and validly issued and outstanding, fully paid and non-assessable,
and (iii) will be held at the time of the Closing by the persons and in the
amounts set forth in the records of the Transfer Agent, as provided in
section 3.4. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired
Fund shares, nor is there outstanding any security convertible into any of
the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the Acquiring Fund
pursuant to section 1.2 and full right, power, and authority to sell,
assign, transfer and deliver such assets hereunder free of any liens or
other encumbrances, except those liens or encumbrances as to which the
Acquiring Fund has received notice at or prior to the Closing, and upon
delivery and payment for such assets, the Acquiring Fund will acquire good
and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the 1933
Act and the 1940 Act, except those restrictions as to which the Acquiring
Fund has received notice and necessary documentation at or prior to the
Closing;
A-7
<PAGE>
(l) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Corporation, and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes a
valid and binding obligation of the Corporation, on behalf of the Acquired
Fund, enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to general
equity principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for
use in any other document filed or to be filed with any federal, state or
local regulatory authority (including the National Association of Securities
Dealers, Inc. (the 'NASD')), which may be necessary in connection with the
transactions contemplated hereby, shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(n) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading; and
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in section 5.7 (the 'Proxy Statement'),
insofar as it relates to the Acquired Fund, will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements are made, not materially
misleading; provided, however, that the representations and warranties in
this section shall not apply to statements in or omissions from the Proxy
Statement and the Registration Statement made in reliance upon and in
conformity with information that was furnished or should have been furnished
by the Acquiring Fund for use therein.
A-8
<PAGE>
4.2. The Corporation, on behalf of the Acquiring Fund, represents and
warrants to the Acquired Fund as follows:
(a) The Corporation is a corporation duly organized and validly existing
under the laws of the State of Maryland with power under the Corporation's
Charter, as amended, to own all of its properties and assets and to carry on
its business as it is now being conducted;
(b) The Corporation is registered with the Commission as an open-end
management investment company under the 1940 Act, and such registration is
in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring
Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may
be required by state securities laws;
(d) The Corporation is not, and the execution, delivery and performance
of this Agreement by the Corporation will not result, in violation of
Maryland law or of the Corporation's Charter, as amended, or By-Laws, or of
any material agreement, indenture, instrument, contract, lease or other
undertaking known to counsel to which the Acquiring Fund is a party or by
which it is bound, and the execution, delivery and performance of this
Agreement by the Acquiring Fund will not result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the
Acquiring Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any properties or assets
held by it. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings which would materially and adversely
affect its business and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate
the transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes in
Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquiring Fund at and for the fiscal year ended October 31, 1999 have been
audited by PricewaterhouseCoopers LLP, independent accountants, and are in
accordance with GAAP consistently applied, and such statements (a copy of
each of which has been furnished to the
A-9
<PAGE>
Acquired Fund) present fairly, in all material respects, the financial
position of the Acquiring Fund as of such date in accordance with GAAP, and
there are no known contingent liabilities of the Acquiring Fund required to
be reflected on a balance sheet (including the notes thereto) in accordance
with GAAP as of such date not disclosed therein;
(g) Since October 31, 1999, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Acquired Fund. For purposes of
this subsection (g), a decline in net asset value per share of the Acquiring
Fund due to declines in market values of securities in the Acquiring Fund's
portfolio, the discharge of Acquiring Fund liabilities, or the redemption of
Acquiring Fund shares by Acquiring Fund shareholders shall not constitute a
material adverse change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquiring Fund required by law to have been
filed by such dates (including any extensions) shall have been filed and are
or will be correct in all material respects, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment
thereof, and, to the best of the Acquiring Fund's knowledge, no such return
is currently under audit and no assessment has been asserted with respect to
such returns;
(i) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such, has been
eligible to and has computed its federal income tax under Section 852 of the
Code, and will do so for the taxable year including the Closing Date;
(j) All issued and outstanding shares of the Acquiring Fund (i) have
been offered and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws and (ii) are, and on
the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. The Acquiring Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquiring Fund shares, nor is there outstanding any security convertible
into any of the Acquiring Fund shares;
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<PAGE>
(k) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund Shareholders, pursuant to the
terms of this Agreement, will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued and
outstanding Acquiring Fund Shares, and will be fully paid and
non-assessable;
(l) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of any liens or other
encumbrances, except those liens or encumbrances as to which the Acquired
Fund has received notice at or prior to the Closing;
(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Corporation and this Agreement will
constitute a valid and binding obligation of the Corporation, on behalf of
the Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements or proxy materials or for
use in any other document filed or to be filed with any federal, state or
local regulatory authority (including the NASD), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations applicable thereto;
(o) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(p) The Proxy Statement to be included in the Registration Statement,
only insofar as it relates to the Acquiring Fund, will, on the effective
date of the Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
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<PAGE>
materially misleading; provided, however, that the representations and
warranties in this section shall not apply to statements in or omissions
from the Proxy Statement and the Registration Statement made in reliance
upon and in conformity with information that was furnished or should have
been furnished by the Acquired Fund for use therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state securities laws as may be necessary in order to continue
its operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and the Acquired Fund each covenants to operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that (a) such ordinary course of business will include (i) the
declaration and payment of customary dividends and other distributions and (ii)
such changes as are contemplated by the Funds' normal operations; and (b) each
Fund shall retain exclusive control of the composition of its portfolio until
the Closing Date.
5.2. Upon reasonable notice, the Acquiring Fund's officers and agents shall
have reasonable access to the Acquired Fund's books and records necessary to
maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
5.3. The Acquired Fund covenants to call a meeting of the Acquired Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
than July 13, 2000.
5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.5. The Acquired Fund covenants that it will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund shares and will provide the
Acquiring Fund with a list of affiliates of the Acquired Fund.
5.6. Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all actions, and do or cause
to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
A-12
<PAGE>
5.7. Each Fund covenants to prepare in compliance with the 1933 Act, the
1934 Act and the 1940 Act the Registration Statement on Form N-14 (the
"Registration Statement") in connection with the meeting of the Acquired Fund
Shareholders to consider approval of this Agreement and the transactions
contemplated herein. The Acquiring Fund will file the Registration Statement,
including the Proxy Statement, with the Commission. The Acquired Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the Proxy Statement referred to
in section 4.1(o), all to be included in the Registration Statement, in
compliance in all material respects with the 1933 Act, the 1934 Act and the 1940
Act.
5.8. The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and 1940 Act, and such
of the state securities laws as it deems appropriate in order to continue its
operations after the Closing Date and to consummate the transactions
contemplated herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as circumstances
change.
5.10. The Acquiring Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquired Fund, execute and deliver or cause to
be executed and delivered all such assignments, assumption agreements, releases,
and other instruments, and will take or cause to be taken such further action,
as the Acquired Fund may reasonably deem necessary or desirable in order to (i)
vest and confirm to the Acquired Fund title to and possession of all Acquiring
Fund Shares to be transferred to the Acquired Fund pursuant to this Agreement
and (ii) assume the liabilities from the Acquired Fund.
5.11. As soon as reasonably practicable after the Closing, the Acquired Fund
shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing.
5.12. The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
A-13
<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of the Corporation, on behalf of the
Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than the Acquired Fund, its adviser or any of their affiliates) against the
Acquiring Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to the Acquiring Fund which the
Acquiring Fund reasonably believes might result in such litigation.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquired Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Corporation, with respect to the Acquiring Fund, made in this Agreement are
true and correct on and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Acquired Fund shall reasonably request.
6.3. The Acquired Fund shall have received on the Closing Date an opinion of
Ober, Kaler, Grimes & Shriver, in a form reasonably satisfactory to the Acquired
Fund, and dated as of the Closing Date, to the effect that:
(a) The Corporation has been duly formed and is an existing corporation;
(b) the Corporation has the power to carry on its business as presently
conducted in accordance with the description thereof in the Corporation's
registration statement under the 1940 Act; (c) the Agreement has been duly
authorized, executed and delivered by the Corporation, on behalf of the
Acquiring Fund, and constitutes a valid and legally binding obligation of
the Corporation, on behalf of the Acquiring Fund, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles; (d) the
execution and delivery of the Agreement did not, and the exchange of the
A-14
<PAGE>
Acquired Fund's assets for Acquiring Fund Shares pursuant to the Agreement
will not, violate the Corporation's Charter, as amended, or By-laws; and (e)
to the knowledge of such counsel, all regulatory consents, authorizations,
approvals or filings required to be obtained or made by the Acquiring Fund
under the Federal laws of the United States or the laws of the State of
Maryland for the exchange of the Acquired Fund's assets for Acquiring Fund
Shares, pursuant to the Agreement have been obtained or made.
6.4. The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
6.5 The Acquiring Fund shall have entered into an administrative services
agreement with Scudder Kemper Investments, Inc. ("Scudder Kemper") in a form
reasonably satisfactory to the Acquired Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of the Corporation, on behalf of the
Acquired Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than the Acquiring Fund, its adviser or any of their affiliates) against the
Acquired Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to the Acquired Fund which the
Acquired Fund reasonably believes might result in such litigation.
7.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer of the Acquired Fund.
7.3. The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the
A-15
<PAGE>
Corporation with respect to the Acquired Fund made in this Agreement are true
and correct on and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as the
Acquiring Fund shall reasonably request.
7.4. The Acquiring Fund shall have received on the Closing Date an opinion
of Ober, Kaler, Grimes & Shriver, in a form reasonably satisfactory to the
Acquiring Fund, and dated as of the Closing Date, to the effect that:
(a) The Corporation has been duly formed and is an existing corporation;
(b) the Corporation has the power to carry on its business as presently
conducted in accordance with the description thereof in the Corporation's
registration statement under the 1940 Act; (c) the Agreement has been duly
authorized, executed and delivered by the Corporation, on behalf of the
Acquired Fund, and constitutes a valid and legally binding obligation of the
Corporation, on behalf of the Acquired Fund, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles; (d) the
execution and delivery of the Agreement did not, and the exchange of the
Acquired Fund's assets for Acquiring Fund Shares pursuant to the Agreement
will not, violate the Corporation's Charter, as amended, or By-laws; and (e)
to the knowledge of such counsel, all regulatory consents, authorizations,
approvals or filings required to be obtained or made by the Acquired Fund
under the Federal laws of the United States or the laws of the State of
Maryland for the exchange of the Acquired Fund's assets for Acquiring Fund
Shares, pursuant to the Agreement have been obtained or made.
7.5. The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date.
7.6 The Acquiring Fund shall have entered into an administrative services
agreement with Scudder Kemper.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been met on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
A-16
<PAGE>
the Acquired Fund in accordance with the provisions of the Corporation's
Charter, as amended, and By-Laws, applicable Maryland law and the 1940 Act, and
certified copies of the resolutions evidencing such approval shall have been
delivered to the Acquiring Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this section 8.1.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or to its knowledge threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain material damages or
other relief in connection with, this Agreement or the transactions contemplated
herein.
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions.
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. The parties shall have received an opinion of Willkie Farr & Gallagher
addressed to the Corporation, on behalf of each Fund, in a form reasonably
satisfactory to each party to this Agreement, substantially to the effect that,
based upon certain facts, assumptions and representations of the parties, for
federal income tax purposes: (i) the transfer to the Acquiring Fund of all or
substantially all of the assets of the Acquired Fund in exchange solely for
Acquiring Fund Shares and the assumption by the Acquiring Fund of all of the
liabilities of the Acquired Fund, followed by the distribution of such shares to
the Acquired Fund Shareholders in exchange for their shares of the Acquired Fund
in complete liquidation of the Acquired Fund, will constitute a "reorganization"
within the meaning of Section 368(a)(1) of the Code, and the Acquiring Fund and
the Acquired Fund will each be "a party to a reorganization" within the meaning
of Section 368(b) of the Code; (ii) no gain or loss will be recognized by the
Acquired Fund upon the transfer of all or substantially all of its assets to the
Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption
by the Acquiring Fund of all of the liabilities of the
A-17
<PAGE>
Acquired Fund; (iii) the basis of the assets of the Acquired Fund in the hands
of the Acquiring Fund will be the same as the basis of such assets of the
Acquired Fund immediately prior to the transfer; (iv) the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which such assets were held by the Acquired Fund; (v) no gain or
loss will be recognized by the Acquiring Fund upon the receipt of the assets of
the Acquired Fund in exchange for Acquiring Fund Shares and the assumption by
the Acquiring Fund of all of the liabilities of the Acquired Fund; (vi) no gain
or loss will be recognized by Acquired Fund Shareholders upon the receipt of the
Acquiring Fund Shares solely in exchange for their shares of the Acquired Fund
as part of the transaction; (vii) the basis of the Acquiring Fund Shares
received by Acquired Fund Shareholders will be the same as the basis of the
shares of the Acquired Fund exchanged therefor; and (viii) the holding period of
Acquiring Fund Shares received by Acquired Fund Shareholders will include the
holding period during which the shares of the Acquired Fund exchanged therefor
were held, provided that at the time of the exchange the shares of the Acquired
Fund were held as capital assets in the hands of Acquired Fund Shareholders. The
delivery of such opinion is conditioned upon receipt by Willkie Farr & Gallagher
of representations it shall request of the Corporation. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the condition set forth in this section 8.5.
9. INDEMNIFICATION
9.1. The Acquiring Fund agrees to indemnify and hold harmless the Acquired
Fund and each of the Acquired Fund's Board members and officers from and against
any and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquired Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquiring Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
9.2. The Acquired Fund agrees to indemnify and hold harmless the Acquiring
Fund and each of the Acquiring Fund's Board members and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquiring Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
A-18
<PAGE>
10. FEES AND EXPENSES
10.1. Each Fund represents and warrants to the other that it has no
obligations to pay any brokers or finders fees in connection with the
transactions provided for herein.
10.2. Each Fund will pay its own allocable share of expenses associated with
the Reorganization, except that Scudder Kemper will bear any such expenses in
excess of $28,384 for the Acquiring Fund and $98,616 for the Acquired Fund
(approximately $0.0033 and $0.0090 per share, respectively, based on
December 31, 1999 net assets for each Fund). Any such expenses which are so
borne by Scudder Kemper will be solely and directly related to the
Reorganization within the meaning of Revenue Ruling 73-54, 1973-1 C.B. 187.
Acquired Fund Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and the Acquired Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this section
11.2, the representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquiring Fund and Acquired Fund in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
12.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
or (ii) by either party if the Closing shall not have occurred on or before
October 31, 2000, unless such date is extended by mutual agreement of the
parties, or (iii) by either party if the other party shall have materially
breached its obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective Board members or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
A-19
<PAGE>
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by any authorized officer of the Acquired
Fund and any authorized officer of the Acquiring Fund; provided, however, that
following the meeting of the Acquired Fund Shareholders called by the Acquired
Fund pursuant to section 5.3 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement
to the detriment of such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
Acquired Fund, 345 Park Avenue, New York, NY 10154, with a copy to Dechert Price
& Rhoads, Ten Post Office Square South, Boston, MA 02109-4603, Attention:
Sheldon A. Jones, Esq., or to the Acquiring Fund, 345 Park Avenue, New York, NY
10154, with a copy to Dechert Price & Rhoads, Ten Post Office Square South,
Boston, MA 02109-4603, Attention: Sheldon A. Jones, Esq., or to any other
address that the Acquired Fund or the Acquiring Fund shall have last designated
by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and the Acquired Fund and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
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<PAGE>
15.4. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Massachusetts, without regard to its
principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by an authorized officer and its seal to be affixed thereto and
attested by its Secretary or Assistant Secretary.
Attest: GLOBAL/INTERNATIONAL FUND, INC.
on behalf of Scudder International Bond
Fund
-------------------------------
Secretary
By: -----------------------------
Its: -----------------------------
Attest: GLOBAL/INTERNATIONAL FUND, INC.
on behalf of Scudder Global Bond Fund
-------------------------------
Secretary
By: -----------------------------
Its: -----------------------------
A-21
<PAGE>
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
By: --------------------------
Its: --------------------------
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<PAGE>
EXHIBIT B
MANAGEMENT'S DISCUSSION OF ACQUIRING FUND'S PERFORMANCE
- --------------------------------------------------------------------------------
Performance Update October 31, 1999
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
<TABLE>
<CAPTION>
Salomon Brothers
Currency-Hedged
Salomon Brothers World Government
Scudder Global World Government Bond Index
Bond Fund Bond Index* (1-3 years)**
<S> <C> <C> <C>
3/91*** 10000 10000 10000
'91 10653 10970 10075
'92 11487 12493 10896
'93 12307 13992 11702
'94 12277 14499 12058
'95 12944 16704 12748
'96 13458 17601 13625
'97 13546 18061 0
'98 14753 20326 0
'99 14607 19827 0
</TABLE>
Yearly periods ended October 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/1999 $10,000 Cumulative Annual
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Scudder Global Bond Fund
- --------------------------------------------------------------------------------
1 year $ 9,901 -0.99% -0.99%
- --------------------------------------------------------------------------------
5 year $ 11,898 18.98% 3.54%
- --------------------------------------------------------------------------------
Life of Fund*** $ 14,623 46.23% 4.48%
- --------------------------------------------------------------------------------
Salomon Brothers World Government Bond Index*
- --------------------------------------------------------------------------------
1 year $ 9,754 -2.46% -2.46%
- --------------------------------------------------------------------------------
5 year $ 13,675 36.75% 6.46%
- --------------------------------------------------------------------------------
Life of Fund*** $ 19,827 98.27% 8.29%
- --------------------------------------------------------------------------------
</TABLE>
* The unmanaged Salomon Brothers World Govenment Bond Index consists of
worldwide fixed-rate government bonds with remaining maturities greater
than one year. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees or expenses.
** On December 27, 1995, the Fund adopted its current name and objectives.
Prior to that date, the Fund was known as the Scudder Short Term Global
Income Fund and its investment objective was to provide high current
income through short-term instruments. Since adopting its current
objectives, the cumulative return is 11.21%. Prior to December 27,
1995, the Salomon Brothers Currency-Hedged World Government Bond Index
(1-3 years) was used as a comparative index.
*** The Fund commenced operation on March 1, 1991. Index comparisons begin
March 31, 1991.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. If the
Adviser had not maintained expenses, the total returns for the Fund for
the one year, five year, and life of Fund periods would have been
lower.
B-1
<PAGE>
Portfolio Management Discussion October 31, 1999
In the following interview, lead portfolio manager Jan Faller and portfolio
manager Jeremy Ragus discuss Scudder Global Bond Fund's strategy and the market
environment for the 12-month period ended October 31, 1999.
Q: How did the fund perform over the past year?
A: The Scudder Global Bond Fund had a return of -0.99%, outperforming the -2.46%
return for the Salomon Brothers World Government Bond Index. The index is an
unmanaged and unhedged benchmark containing the government bonds of 18 high
credit quality countries. The fund's return also compared favorably with its
competitors as it ranked in the second quartile of its Lipper peer group.
The positive relative performance for the fund can broadly be attributed to
three factors: the use of currency hedging, selective exposure to emerging
markets, and country allocation.
Q: How would you characterize market conditions during this period?
A: Market conditions changed dramatically over the past 12 months. In October,
1998, investors still had a very low appetite for risk and there was substantial
nervousness in response to Russia's default and the significant sell-off in
emerging markets. In the United States, the corporate bond market sold off in
sympathy which widened credit spreads. The Federal Reserve Board (the Fed)
lowered short-term interest rates by 75 basis points (0.75%), essentially
injecting liquidity into unstable global financial markets.
The market's appetite for risk gradually returned as we began 1999, thanks to
Fed policy. The first evidence of this was reflected in the lack of a negative
reaction to Brazil's devaluation of its currency, the real, early in the year.
As the year progressed, U.S. equity markets rallied, which proved to be bullish
both for emerging markets and U.S. corporate debt. Economic growth remained
strong in the
B-2
<PAGE>
United States and improved in every other major region around the globe.
The positive economic growth picture, combined with increasing risk tolerance
among market participants, led nearly all central banks to change their stances
since mid-1999. The Fed raised short-term rates by 50 basis points (0.50%),
taking back 50 of the 75 basis points it gave last year, while news of renewed
growth led the market to expect a rate hike by the European Central Bank,
reversing its easing of 50 basis points in the first quarter of this year. The
only major central bank which has maintained an accommodative monetary policy is
the Bank of Japan (BOJ). Although the Japanese economy appears to have
stabilized, the economic recovery has not firmed enough for the BOJ to change
its zero interest-rate policy.
Q: What were some of the key factors affecting performance?
A: As mentioned earlier, the key factors affecting performance were the currency
hedges, exposure to emerging markets, and country weightings. The Salomon
Brothers World Government Bond Index was down 2.46% in unhedged terms, but in
hedged terms it actually was up by 1.33%. Clearly, hedging helped performance
over the past 12 months. The fund maintained partial hedges both on the Euro and
on the Yen, which benefited overall return. Much of the dollar's strength is
attributable to the strong performance of the U.S. equity market; demand from
foreign buyers helped the U.S. dollar to rally. Meanwhile the Euro fell
significantly after its introduction at the beginning of 1999, due to the
combination of anemic growth in major Euro-bloc countries and low interest rates
in the region. However, the strength of the U.S. dollar against the Yen and the
Euro has waned somewhat in the past several months as a result of the
deterioration of the U.S.-Japan trade balance, a rally in Japanese equities, and
renewed economic growth in the Euro-bloc.
B-3
<PAGE>
Emerging markets significantly outperformed developed markets over the past
year. The return on the J.P. Morgan emerging markets Bond Index Plus was almost
20% for the past 12 months. This performance is an indication of the degree to
which an appetite for risk has returned to the market, as well as how the
general improvement in economic growth has bolstered emerging markets. The fund
has had a tactical exposure to emerging markets for most of 1999 and clearly
benefited from this allocation. It is important to note that all emerging market
debt we hold is sovereign debt.
Country allocation also contributed to performance. Our relative positions in
the United States versus peripheral dollar bloc countries -- New Zealand,
Australia, and Canada -- had a positive impact on the fund. Early in the year,
the fund was neutral to the dollar-bloc, overweight New Zealand, Australia, and
Canada, but underweight the United States. We had forecast that the peripheral
countries would outperform relative to the United States because they were not
as far along in their business cycle. As the year progressed, we shifted out of
the peripheral countries into the United States as growth began to accelerate
significantly in the peripheral countries. Our underweighting in Japanese
government bonds (JGBs) did not help the fund's performance. We did not favor
JGBs as yields are the lowest in the index by a significant margin, making the
country unattractive. While bond yields are rising in other developed countries,
JGB yields remain unchanged due to the fragility of the economy in Japan. Thus,
Japan has been the best performing country relative to others in the Salomon
Brothers index.
Q: How has renewed global growth, along with rising prices for such commodities
as oil and gold, affected your strategy?
A: Renewed global economic growth has made us more cautious about the impact of
major central bank policy on developed bond markets, and has prompted us to be
more favorable toward emerging markets. We are investing in
B-4
<PAGE>
countries where the markets have already priced in rate hikes to avoid an
aggressive sell-off resulting from a central bank tightening. For this reason,
we like countries whose central banks are being very preemptive in raising
rates, such as the United States and the United Kingdom. We have also begun to
favor U.S. Treasuries as we expect growth rates in other developed countries to
begin to approach those of the United States, which could lead to rising yields
relative to the United States.
Meanwhile, climbing commodity prices induce us to increase our exposure to
emerging market countries which benefit from rising raw material prices.
Furthermore, global growth in general benefits equity markets, and emerging
market returns are positively correlated with equity returns. The renewal of
global growth, therefore, could also continue to benefit emerging markets.
Q: The European Monetary Union (EMU) has been in existence for almost a year.
What effect has the EMU had on European bonds?
A: The EMU remains young, thus we are closely watching developments in that
market to monitor how various factors might affect relative performance. As
anticipated, government bond returns among EMU countries are highly correlated,
apart from a few isolated incidents that prompted brief nervousness about the
EMU's stability. An unknown issue is how differing rates of inflation among the
member countries will influence their bond returns.
Also as anticipated, corporate issuance has increased significantly in
Euro-denominated bonds. Growing deal size improves the liquidity of bonds in the
Euro-corporate market. Nevertheless, broad diversification of corporate holdings
is somewhat difficult as the predominant issuers remain in the finance and
utility industries. We anticipate the ability to diversify will improve as the
market matures.
B-5
<PAGE>
Q: What percentage of the portfolio consists of emerging-market bonds, and what
impact have they had on the fund?
A: Emerging-market exposure has varied from zero to 9% over the past year. We
view the position as tactical rather than strategic, so we reduce the weight
whenever we believe emerging markets represent too much risk for the portfolio.
Another way we control the risk associated with emerging markets debt is to
concentrate our holdings on the highest quality, lower volatility countries such
as Mexico, Panama, and Argentina. As already noted, emerging markets have
performed exceptionally well over the past 12 months, so the impact of these
holdings on the fund has been quite positive.
Q: How significant was the fund's U.S. exposure?
A: The fund's U.S. exposure evolved from being underweight early in the
period to being overweight late in the period. This reflected a change in our
forecast for higher relative returns for the United States versus other
dollar-bloc countries. As far as the dollar-bloc as a whole, we tended to be
neutral or slightly overweight. Two competing tensions brought us to this
position. The yield of the dollar-bloc countries is the highest of all the
countries in the index. This made the dollar bloc attractive. Conversely,
every piece of growth news out of the United States seemed to make yields
rise even further, which was evidence of a weak technical environment. Thus,
we have remained fairly close to the benchmark weight in an effort to benefit
from the higher yield while protecting ourselves from any additional sell-off.
Q: Can you discuss some investments that did not fare well?
A: The two investments that have not worked well for the fund were the
underweight position in JGBs, and the decreased currency hedge of Euro against
U.S. dollars. As mentioned earlier, JGBs have the lowest yield in the index, and
we had forecast that the yields would rise in nearly
B-6
<PAGE>
any economic scenario that played out in Japan. If evidence of growth had
materialized, yields were expected to rise as a result of inflation fears.
Conversely, continued weakness would lead to a fiscal stimulus package that
would increase the supply of JGBs, making yields rise and hurting returns.
However, the Japanese economy has simply muddled through, not weak enough for
significant stimulus packages -- though a moderate spending package is currently
in discussion -- but not strong enough to generate inflation fears. Thus, JGBs
have performed better than the government bonds of other countries in the index,
which have sold off as global growth has begun to pick up.
Recent reductions in our currency hedge on the Euro have also not helped the
fund's performance. In the first six months of its existence, the Euro fell by
over 10%, nearly reaching parity with the dollar. At that point we forecast that
it would turn around and appreciate for two reasons. First, we believed that it
was being overly punished for seemingly inconsistent and unclear communication
by the European Central Bank, a situation that has improved markedly over the
past few months. Second, economic growth in the Euro-bloc clearly began to turn
up during the summer, and currency returns are positively correlated with
economic strength.
As the Euro stabilized and technicals suggested that it could rally, we began to
reduce our hedge on the currency. Over the past several weeks, the Euro has
again weakened and languishes within a few percent of its lows. The sell- off
has been attributable to the strength in the U.S. asset markets that have helped
to sustain a buoyant U.S. dollar.
Q: What is your strategy going forward?
A: We continue to expect the Euro to strengthen relative to the dollar. We are
maintaining our current hedge ratios while waiting for technical factors to
indicate that the Euro is going to strengthen further.
In Japan, although we expect higher yields in the long-term, we are considering
increasing our exposure to JGBs. The market dynamics described above should
B-7
<PAGE>
continue to hold for the medium term, leading us to believe that yields should
remain stable in Japan. We therefore would like to be closer to the benchmark
weight until further evidence of the solid economic recovery is apparent.
We are also considering an increase in our tactical weight to emerging markets
debt. As noted earlier, the increase in global growth and stabilizing commodity
prices are both positive for the emerging markets outlook. Furthermore,
volatility levels have decreased dramatically over the past year, making the
risk profile of emerging markets more attractive.
Finally, we continue to monitor the relative growth of the United States
compared to other regions. As other economies begin to approach the U.S. growth
rate, and if the Fed rate hikes begin to slow the U.S. economy, Treasuries
should become more attractive.
B-8
<PAGE>
APPENDIX 1
FUND SHARES OWNED BY NOMINEES AND DIRECTORS
Many of the nominees and Directors own shares of the series of the
Corporation and of other funds in the Scudder Family of Funds and AARP Funds,
allocating their investments among such funds based on their individual
investment needs. The following table sets forth, for the Corporation's
Presidents and each nominee and Director, the number of shares owned in each
series of the Corporation as of January 31, 2000. The information as to
beneficial ownership is based on statements furnished to the Corporation by its
Presidents and each nominee and Director. Unless otherwise noted, beneficial
ownership is based on sole voting and investment power. Each nominee's and
Director's individual shareholdings of any series of the Corporation constitute
less than 1% of the outstanding shares of such fund. As a group, the Directors
and officers own less than 1% of the shares of any series of the Corporation.
<TABLE>
<CAPTION>
SCUDDER
EMERGING
MARKETS GLOBAL SCUDDER SCUDDER SCUDDER
INCOME DISCOVERY GLOBAL GLOBAL INTERNATIONAL
FUND FUND* FUND BOND FUND BOND FUND
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Henry P. Becton, Jr.
(1)................ 256(4) 55(7) 641(9) 0 1,152(12)
Sheryle J. Bolton
(1)................ 602 2,868 2,175 162 152
Nicholas Bratt+...... 6,144(5) 2,524 -- 0 0
William T. Burgin
(1)................ 0 0 0 0 0
Linda C. Coughlin
(1)................ 0 0 0 0 0
Dawn-Marie Driscoll
(1)................ 127 1,052 1,061 115 0
Edgar R. Fiedler
(1)................ 70,156 0 0 0 0
Keith R. Fox (1)..... 545 276 332 593 544
William Holzer++..... -- -- 18,286 -- --
William H. Luers
(1)................ 0 0 0 667 1,184
Kathryn L. Quirk
(2)................ 0 0 0 0 0
Joan Edelman Spero
(2)................ 128 28 33 110 0
Jean Gleason
Stromberg (2)...... 0 0 0 0 0
Jean C. Tempel (1)... 0 0 0 0 0
Steven Zaleznick
(3)................ 0 0 0 0 0
All Directors and
Officers as a
Group.............. 83,768(6) 41,103(8) 40,848(10) 35,382(11) 4,473(13)
</TABLE>
- ------------------------------
* Ownership of shares of Global Discovery Fund is in the Scudder Shares class
of the Fund.
+ Mr. Bratt's shares are shown only for those Funds for which he serves as
President.
++ Mr. Holzer's shares are shown only for the Fund for which he serves as
President.
(1) Total aggregate holdings in each series of the Corporation listed and all
other funds in the Scudder Family of Funds and AARP Funds were over
$100,000.
(2) Total aggregate holdings in each series of the Corporation listed and all
other funds in the Scudder Family of Funds and AARP Funds ranged between
$50,000 and $100,000.
(3) Total aggregate holdings in each series of the Corporation listed and all
other funds in the Scudder Family of Funds and AARP Funds were $0.
(4) Mr. Becton's shares in Scudder Emerging Markets Income Fund are held with
sole investment but no voting power. Shares held with sole investment but no
voting power are shares held in profit sharing and 401(k) plans for which
Scudder Kemper serves as trustee.
<PAGE>
(5) Mr. Bratt's shares in Scudder Emerging Markets Income Fund include 641
shares held with sole investment and voting power and 5,503 shares held with
shared investment and voting power.
(6) As a group, as of January 31, 2000, the Directors and officers of Scudder
Emerging Markets Income Fund held 72,199 shares with sole voting and
investment power, 5,503 shares with shared investment and voting power, and
6,066 shares with sole investment but no voting power. Shares held with sole
investment but no voting power are shares held in profit sharing and 401(k)
plans for which Scudder Kemper serves as trustee.
(7) Mr. Becton's shares in Global Discovery Fund are held with sole investment
but no voting power. Shares held with sole investment but no voting power
are shares held in profit sharing and 401(k) plans for which Scudder Kemper
serves as trustee.
(8) As a group, as of January 31, 2000, the Directors and officers of Global
Discovery Fund held 6,748 shares with sole voting and investment power and
34,355 shares with sole investment but no voting power. Shares held with
sole investment but no voting power are shares held in profit sharing and
401(k) plans for which Scudder Kemper serves as trustee.
(9) Mr. Becton's shares in Scudder Global Fund are held with sole investment but
no voting power. Shares held with sole investment but no voting power are
shares held in profit sharing and 401(k) plans for which Scudder Kemper
serves as trustee.
(10) As a group, as of January 31, 2000, the Directors and officers of Scudder
Global Fund held 20,827 shares with sole voting and investment power and
20,561 shares with sole investment but no voting power. Shares held with
sole investment but no voting power are shares held in profit sharing and
401(k) plans for which Scudder Kemper serves as trustee.
(11) As a group, as of January 31, 2000, the Directors and officers of Scudder
Global Bond Fund held 1,647 shares with sole voting and investment power and
33,735 shares with sole investment but no voting power. Shares held with
sole investment but no voting power are shares held in profit sharing and
401(k) plans for which Scudder Kemper serves as trustee.
(12) Mr. Becton's shares in Scudder International Bond Fund are held with sole
investment but no voting power. Shares held with sole investment but no
voting power are shares held in profit sharing and 401(k) plans for which
Scudder Kemper serves as trustee.
(13) As a group, as of January 31, 2000, the Directors and officers of Scudder
International Bond Fund held 1,880 shares with sole voting and investment
power and 2,593 shares with sole investment but no voting power. Shares held
with sole investment but no voting power are shares held in profit sharing
and 401(k) plans for which Scudder Kemper serves as trustee.
<PAGE>
APPENDIX 2
BENEFICIAL OWNERSHIP OF FUND SHARES
As of January 31, 2000, 5,066,716 shares in the aggregate, or 22.59% of the
outstanding shares, of SCUDDER EMERGING MARKETS INCOME FUND were held in the
name of Charles Schwab, 101 Montgomery Street, San Francisco, CA 94104, who may
be deemed to be the beneficial owner of certain of these shares.
As of January 31, 2000, 1,000,163 shares in the aggregate, or 6.13% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- SCUDDER SHARES were held in the
name of Charles Schwab, 101 Montgomery Street, San Francisco, CA 94104, who may
be deemed to be the beneficial owner of certain of these shares.
As of January 31, 2000, 223,297 shares in the aggregate, or 7.63% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS A SHARES were held in the
name of Donaldson, Lufkin & Jenrette Securities Corp., P.O. Box 2052, Jersey
City, NJ 07303, who may be deemed to be the beneficial owner of certain of these
shares.
As of January 31, 2000, 241,925 shares in the aggregate, or 8.27% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS A SHARES were held in the
name of Oppenheimer & Co. Inc., 280 Park Avenue, New York, NY 10017, who may be
deemed to be the beneficial owner of certain of these shares.
As of January 31, 2000, 156,638 shares in the aggregate, or 5.35% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS A SHARES were held in the
name of National City Bank of PA, Trustee for McKeesport Health Care Systems,
P.O. Box 94984, Cleveland, OH 44101, who may be deemed to be the beneficial
owner of certain of these shares.
As of January 31, 2000, 123,641 shares in the aggregate, or 7.24% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS B SHARES were held in the
name of National Financial Services Corp., 200 Liberty Street, New York, NY
10281, who may be deemed to be the beneficial owner of certain of these shares.
As of January 31, 2000, 298,703 shares in the aggregate, or 17.51% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS B SHARES were held in the
name of Donaldson, Lufkin & Jenrette Securities Corp., P.O. Box 2052, Jersey
City, NJ 07303, who may be deemed to be the beneficial owner of certain of these
shares.
As of January 31, 2000, 39,803 shares in the aggregate, or 8.46% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS C SHARES were held in the
name of National Financial Services Corp., 200 Liberty Street, New York, NY
10281, who may be deemed to be the beneficial owner of certain of these shares.
<PAGE>
As of January 31, 2000, 48,488 shares in the aggregate, or 10.31% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS C SHARES were held in the
name of Donaldson, Lufkin & Jenrette Securities Corp., P.O. Box 2052, Jersey
City, NJ 07303, who may be deemed to be the beneficial owner of certain of these
shares.
As of January 31, 2000, 52,626 shares in the aggregate, or 11.19% of the
outstanding shares, of GLOBAL DISCOVERY FUND -- CLASS C SHARES were held in the
name of Wedbush Morgan Securities, Accounting Department, P.O. Box 30014, Los
Angeles, CA 90030, who may be deemed to be the beneficial owner of certain of
these shares.
As of January 31, 2000, 5,556,037 shares in the aggregate, or 10.50% of the
outstanding shares, of SCUDDER GLOBAL FUND were held in the name of Charles
Schwab, 101 Montgomery Street, San Francisco, CA 94104, who may be deemed to be
the beneficial owner of certain of these shares.
As of January 31, 2000, 580,012 shares in the aggregate, or 6.88% of the
outstanding shares, of SCUDDER GLOBAL BOND FUND were held in the name of Charles
Schwab, 101 Montgomery Street, San Francisco, CA 94104, who may be deemed to be
the beneficial owner of certain of these shares.
As of January 31, 2000, 1,518,034 shares in the aggregate, or 14.61% of the
outstanding shares, of SCUDDER INTERNATIONAL BOND FUND were held in the name of
Charles Schwab, 101 Montgomery Street, San Francisco, CA 94104, who may be
deemed to be the beneficial owner of certain of these shares.
SCUDDER KEMPER'S OWNERSHIP OF FUND SHARES
Certain accounts for which Scudder Kemper acts as investment adviser owned
2,219,985 shares in the aggregate, or 13.62% of the outstanding shares, of
GLOBAL DISCOVERY FUND -- SCUDDER SHARES on January 31, 2000. Scudder Kemper may
be deemed to be the beneficial owner of such shares, but disclaims any
beneficial ownership in such shares.
<PAGE>
For more information, please call Shareholder Communications
Corporation, your Fund's information agent at 1-800-603-1915.
SD Int Bond
<PAGE>
This proxy statement/prospectus is accompanied by the Acquiring Fund's
prospectus dated March 1, 2000, which was previously filed with the Commission
via EDGAR on February 28, 2000 (File No. 33-05724) and is incorporated by
reference herein.
<PAGE>
PART B
GLOBAL/INTERNATIONAL FUND, INC.
- ------------------------------------------------------------------------------
Statement of Additional Information
April 18, 2000
- ------------------------------------------------------------------------------
Acquisition of the Assets of By and in Exchange for Shares of
Scudder International Bond Fund Scudder Global Bond Fund (the
(the "Acquired Fund"), a series of "Acquiring Fund"), a series of the
Global/International Fund, Inc. Corporation
(the "Corporation") 345 Park Avenue
345 Park Avenue New York, NY 10154
New York, NY 10154
This Statement of Additional Information is available to the shareholders of the
Acquired Fund in connection with a proposed transaction whereby the Acquiring
Fund will acquire all or substantially all of the assets and all of the
liabilities of the Acquired Fund in exchange for shares of the Acquiring Fund
(the "Reorganization").
This Statement of Additional Information of the Corporation contains material
which may be of interest to investors but which is not included in the
Prospectus/Proxy Statement of the Corporation relating to the Reorganization.
This Statement of Additional Information consists of this cover page and the
following documents:
1. The Acquiring Fund's statement of additional information dated March 1, 2000,
which was previously filed with the Securities and Exchange Commission (the
"Commission") via EDGAR on February 28, 2000 (File No. 33-05724) and is
incorporated by reference herein.
2. The Acquiring Fund's annual report to shareholders for the fiscal year ended
October 31, 1999, which was previously filed with the Commission via EDGAR on
December 23, 1999 (File No. 811-04670) and is incorporated by reference herein.
3. The Acquired Fund's prospectus dated March 1, 2000, which was previously
filed with the Commission via EDGAR on February 28, 2000 (File No. 33-05724) and
is incorporated by reference herein.
4. The Acquired Fund's statement of additional information dated March 1, 2000,
which was previously filed with the Commission via EDGAR on February 28, 2000
(File No. 33-05724) and is incorporated by reference herein.
5. The Acquired Fund's annual report to shareholders for the fiscal year ended
October 31, 1999, which was previously filed with the Commission via EDGAR on
December 29, 1999 (File No. 811-04670) and is incorporated by reference herein.
6. The financial statements and schedules of the Acquiring Fund and the Acquired
Fund required by Regulation S-X for the periods specified in Article 3 thereof,
which are filed herein.
-52-
<PAGE>
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated April 18, 2000 relating to the Reorganization may be
obtained by writing the Acquired Fund at Two International Place, Boston, MA
02110-4103 or by calling Scudder Investor Services, Inc. at 1-800-225-2470. This
Statement of Additional Information should be read in conjunction with the
Prospectus/Proxy Statement.
-53-
<PAGE>
Pro Forma
Portfolio of Investments
as of October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Global International Pro Forma Global International Pro Forma
Bond Bond Combined Bond Bond Combined
Principal Principal Principal Market Market Market
Amount($) Amount($) Amount ($) Value($) Value ($) Value($)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS 2.7%
- ---------------------------
- ---------------------------
Repurchase Agreement with
Donaldson, Lufkin & Jenrette, 1,431,000 3,952,000 5,383,000 1,431,000 3,952,000 5,383,000
5.200%, 11/01/1999
----------------------------------------------
Repurchase Agreements Total 1,431,000 3,952,000 5,383,000
----------------------------------------------
----------------------------------------------
Repurchase Agreements (Cost
of $1,431,000 $3,952,000 and
$5,383,000 respectively)
SHORT TERM NOTES 2.6%
- ---------------------------
- ---------------------------
Federal Home Loan Mortgage 5,000,000 5,000,000 5,000,000 5,000,000
Corp., 5.16%, 11/1/1999
U.S. Treasury Bill, 4.6%, 205,000 205,000 204,719 204,719
11/12/1999
----------------------------------------------
Short Term Notes Total 0 5,204,719 5,204,719
----------------------------------------------
----------------------------------------------
Short Term Notes (Cost of $0
$5,204,712 and $5,204,712
respectively)
FOREIGN DENOMINATED DEBT
OBLIGATIONS 74.1%
- ---------------------------
- ---------------------------
BRITISH POUNDS 10.4%
General Motors Acceptance 2,250,000 3,530,000 5,780,000 3,655,648 5,735,306 9,390,954
Corp., 6.875%, 09/09/2004
United Kingdom Treasury 2,265,000 4,400,000 6,665,000 3,936,331 7,646,735 11,583,066
Bond, 8.000%, 6/10/03
----------------------------------------------
7,591,979 13,382,041 20,974,020
----------------------------------------------
COSTA RICA COLON 0.1%
Citibank Time Deposit, 26,501,104 35,540,954 62,042,058 89,994 120,693 210,687
16.25%, 11/1/1999
Citibank Time Deposit, 11,210,000 15,340,000 26,550,000 38,068 52,093 90,161
16.25%, 12/1/1999
----------------------------------------------
128,062 172,786 300,848
----------------------------------------------
EURO 39.4%
Caisse D'Amort Dette Cades, 6,150,000 6,150,000 6,107,225 6,107,225
3.375%, 7/12/04
Depfa Pfandbrief Bank, 1,900,000 2,350,000 4,250,000 1,903,812 2,354,715 4,258,527
4.750%, 7/15/08
Federal Republic of Germany, 1,700,000 8,300,000 10,000,000 1,825,109 8,910,824 10,735,933
5.000%, 5/21/01
Federal Republic of Germany, 4,000,000 4,880,000 8,880,000 4,439,571 5,416,277 9,855,848
6.250%, 1/4/24
Ford Motor Credit Corp., 930,000 930,000 921,629 921,629
3.750%, 7/12/04
French Treasury Note, 5,170,000 2,300,000 7,470,000 5,449,094 2,424,162 7,873,256
4.500%, 7/12/03
Government of France, 4,750,000 8,300,000 13,050,000 5,166,674 9,028,083 14,194,757
5.500%, 4/25/07
Kingdom of Spain, 13,820,000 13,820,000 14,354,778 14,354,778
4.500%, 7/30/04
Republic of Deutschland, 3,000,000 3,000,000 3,408,974 3,408,974
7.250%, 10/21/02
Rheinische Hypo Bank, 4,300,000 4,300,000 4,485,887 4,485,887
4.500%, 8/26/03
Tokyo Electric Power Co., 3,600,000 3,600,000 3,444,017 3,444,017
4.375%, 5/14/09
----------------------------------------------
27,600,750 52,040,081 79,640,831
----------------------------------------------
JAPANESE YEN 14.4%
Federal National Mortgage 680,000,000 680,000,000 6,761,486 6,761,486
Association Global Issue
2.125%, 10/9/2007
Japan Development Bank, 740,000,000 1,400,000,000 2,140,000,000 7,763,713 14,688,106 22,451,819
2.875%, 12/20/06
----------------------------------------------
7,763,713 21,449,592 29,213,305
----------------------------------------------
NORWEGIAN KRONER 9.5%
Kingdom of Norway, 58,500,000 90,200,000 148,700,000 7,591,446 11,705,102 19,296,548
7.000%, 5/31/01 ---------------------------------------------
EL SALVADORAN COLON 0.1%
Citibank Time Deposit, 452,311 603,082 1,055,393 51,610 68,814 120,424
8.25%, 11/22/99 ---------------------------------------------
TURKISH LIRE 0.2%
J.P. Morgan Time Deposit, 36,296,403,525 47,518,325,225 83,814,728,750 75,496 98,838 174,334
65%, 11/26/99
J.P. Morgan Time Deposit, 35,402,814,630 46,348,461,448 81,751,276,078 73,638 96,405 170,043
68%, 11/12/99
----------------------------------------------
149,134 195,243 344,377
----------------------------------------------
Foreign Denominated Debt 50,876,694 99,013,659 149,890,353
Obligations Total ----------------------------------------------
----------------------------------------------
Obligations (Cost of
$52,042,025 $97,784,582
and $149,826,607
respectively)
U.S. DOLLAR DENOMINATED
DEBT OBLIGATIONS 20.6%
- ---------------------------
- ---------------------------
Argentine Republic, 190,000 230,000 420,000 181,450 219,650 401,100
11.000%, 12/4/05
Argentine Republic, Floating 242,000 374,000 616,000 214,218 331,065 545,283
Rate Bond, Series L, LIBOR
plus .8125%, (6.8125%),
03/31/2005
DaimlerChrysler AG, 1,825,000 1,825,000 1,829,179 1,829,179
7.450%, 03/01/2027
Federal National Mortgage 2,593,000 2,593,000 2,464,958 2,464,958
Association,
5.125%, 02/13/2004
Federative Republic of 300,000 370,000 670,000 220,500 271,950 492,450
Brazil, "New" Money Bond,
Floating Rate Bond, LIBOR
plus .875%, (7%),
04/15/2009
Federative Republic of 280,000 350,000 630,000 219,800 274,750 494,550
Brazil Global Bond,
10.125%, 05/15/2027
Government National Mortgage 4,651,758 4,651,758 4,563,811 4,563,811
Association Pass-thru 7.00%
with various maturities to
03/15/2029
Government of Jamaica, 350,000 425,000 775,000 327,250 397,375 724,625
10.875%, 6/10/05
Government of Malaysia, 100,000 150,000 250,000 102,750 154,125 256,875
8.750%, 6/1/09
IBM Corp., 2,300,000 2,300,000 2,073,128 2,073,128
5.375%, 02/01/2009
Midland Bank PLC, 1,500,000 1,500,000 1,524,600 1,524,600
7.625%, 06/15/2006
Petroliam Nasional BHD, 100,000 125,000 225,000 102,780 128,475 231,255
8.875%, 8/1/04
Republic of Bulgaria, 490,000 575,000 1,065,000 373,625 438,438 812,063
Interest Arrears Bond,
LIBOR plus .8125%,
(6.5%), 7/28/11
Republic of Colombia, 200,000 275,000 475,000 164,626 226,361 390,987
7.625%, 2/15/07
Republic of Columbia, 120,000 130,000 250,000 109,200 118,300 227,500
9.750%, 4/23/09
Republic of Panama, 300,000 450,000 750,000 223,500 335,250 558,750
Interest Reduction Bond,
Step-up Coupon,
4.25%, 7/17/14
Republic of Panama, Past 271,906 380,647 652,553 203,930 285,485 489,415
Due Interest Bond, LIBOR
plus .8125%, 4% with 2.5%
Interest Capitalization
(6.5%), 7/17/2016
Republic of Peru, Floating 275,000 375,000 650,000 151,250 206,250 357,500
Rate Interest Reduction
Bond, 3.750%, 3/7/17
Republic of South Africa, 300,000 400,000 700,000 263,250 351,000 614,250
8.500%, 6/23/17
Republic of Turkey, 425,000 560,000 985,000 393,125 518,000 911,125
9.875%, 02/23/2005
Republic of Venezuela, Debt 202,380 202,380 404,760 162,572 162,572 325,144
Conversion Bond, Floating
Rate Bond, Series DL,
LIBOR plus .875%,
(6.3125%), 12/18/2007
Republic of Venezuela 160,000 254,000 414,000 107,680 170,942 278,622
Global Bond, 9.250%,
9/15/27
Republic of the Philippines, 220,000 330,000 550,000 213,400 320,100 533,500
9.875%, 1/15/2019
Slovak Republic, 100,000 150,000 250,000 101,250 151,875 253,125
9.500%, 05/28/2003
U.S. Treasury Bond, 795,000 1,015,000 1,810,000 971,267 1,240,046 2,211,313
8.500%, 02/15/2020
U.S. Treasury Note, 1,970,000 2,520,000 4,490,000 1,953,984 2,499,512 4,453,496
5.625%, 12/31/2002
U.S. Treasury Note, 3,560,000 3,560,000 3,533,300 3,533,300
5.750%, 08/15/2003
U.S. Treasury Note, 1,485,000 1,485,000 1,488,475 1,488,475
6.000%, 08/15/2004
U.S. Treasury Note, 1,725,000 1,725,000 1,755,464 1,755,464
6.500%, 10/15/2006
U.S. Treasury Note, 4,100,000 4,100,000 4,240,302 4,240,302
6.500%, 10/15/2006
United Mexican States, 500,000 800,000 1,300,000 437,500 700,000 1,137,500
Floating Rate Discount
Bond (Detachable Oil
Priced Indexed Value
Recovery Rights), Series D,
LIBOR plus .8125%,
(6.0675%), 12/31/19
United Mexican States, 325,000 250,000 575,000 284,375 218,750 503,125
Floating Rate Discount
Bond (Detachable Oil
Priced Indexed Value
Recovery Rights), Series
A, LIBOR plus .8125%,
(6.9325%), 12/31/19
United Mexican States, 400,000 500,000 900,000 446,720 558,400 1,005,120
11.500%, 5/15/26
----------------------------------------------
U.S. Dollar Denominated 31,403,219 10,278,671 41,681,890
Debt Obligations Total ----------------------------------------------
----------------------------------------------
U.S. Dollar Denominated Debt
Obligations (Total Cost of
$31,872,494 $10,222,514 and
$42,095,008 respectively)
PURCHASED OPTIONS 0.0%
- ---------------------------
- ---------------------------
Put on Japanese Yen, strike 601,000,000 601,000,000 10,025 10,025
at 97.63, expire 11/19/1999
Put on Japanese Yen, strike 272,500,000 272,500,000 4,545 4,545
price at 107.71, expire
11/19/1999 ----------------------------------------------
4,545 10,025 14,570
Purchased Options Total ----------------------------------------------
----------------------------------------------
Purchased Options (Cost of
$35,425, $78,130 and $113,555
respectively)
TOTAL INVESTMENT PORTFOLIO ----------------------------------------------
- - 100% 83,715,458 118,459,074 202,174,532
- --------------------------- ----------------------------------------------
- --------------------------- ----------------------------------------------
Investment Portfolio (cost
of $85,380,944, $117,241,938
and $202,622,882
respectively)
</TABLE>
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL BOND INTERNATIONAL PRO FORMA PRO FORMA
FUND BOND FUND ADJUSTMENTS COMBINED
--------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Investments, at value $ 83,715,458 $ 118,459,074 $ 202,174,532
Cash 151,276 -- 151,276
Other assets less liabilities 1,097,009 (2,989,577) $ (127,000)(2) (2,019,568)
--------------------- -------------------- ------------------- -------------------
Net assets $ 84,963,743 $ 115,469,497 $ (127,000) $ 200,306,240
--------------------- -------------------- ------------------- -------------------
--------------------- -------------------- ------------------- -------------------
Shares outstanding 9,093,351 11,597,052 755,291 21,445,694
Net asset value per share $ 9.34 $ 9.96 $ 9.34
</TABLE>
<PAGE>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL BOND INTERNATIONAL PRO FORMA PRO FORMA
FUND BOND FUND ADJUSTMENTS COMBINED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income $ 6,050,194 $ 7,747,622 $ -- $ 13,797,816
-------------------------------------------------------------------------
Total Investment Income 6,050,194 7,747,622 13,797,816
Expenses
Management fees 731,743 1,070,886 (93,329)(3) 1,709,300
Trustee fees 41,982 49,498 (49,498)(4) 41,982
All other expenses 605,747 1,001,918 (753,015)(5) 854,650
-------------------------------------------------------------------------
Total expenses before reductions 1,379,472 2,122,302 (895,842) 2,605,932
Expense reductions (247,004) (166,835) 413,839 (6) --
-------------------------------------------------------------------------
Expenses, net 1,132,468 1,955,467 (482,003) 2,605,932
-------------------------------------------------------------------------
Net investment income (loss) 4,917,726 5,792,155 482,003 11,191,884
-------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) from investments, (1,150,008) (3,612,013) -- (4,762,021)
futures, options and foreign currency related
transactions
Net unrealized appreciation (depreciation)
of investments, futures, options
and foreign currency related transactions (4,713,075) (5,966,930) -- (10,680,005)
-------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (945,357) $ (3,786,788) $ 482,003 $ (4,250,142)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 1999
1. These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of October 31, 1999, and the
unaudited pro forma condensed Statement of Operations for the twelve month
period ended October 31, 1999 for Scudder Global Bond Fund and Scudder
International Bond Fund as adjusted giving effect to the Reorganization as
if it had occurred as of the beginning of the period. These statements have
been derived from the books and records utilized in calculating daily net
asset value for each fund.
2. Represents one-time proxy, legal, accounting and other costs of the
Reorganization of $28,384 and $98,616 to be borne by the Acquiring Fund and
the Acquired Fund, respectively.
3. Represents reduction in management fees resulting from the application of
Scudder Global Bond Fund's lower management fee.
4. Reduction in trustee fees resulting from the Reorganization.
5. Represents reduction in other expenses resulting from the implementation of
an administrative fee contract.
6. Represents the elimination of expense reimbursements.
