SCUDDER MUTUAL FUNDS INC, 497, 1995-11-08

SCUDDER MUTUAL FUNDS INC
497, 1995-11-08

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

If you require more detailed information, a Statement of
Additional Information dated November 1, 1995, as amended from time to time, may
be obtained without charge by writing Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103 or calling 1-800-225-2470. The
Statement, which is incorporated by reference into this prospectus, has been
filed with the Securities and Exchange Commission.

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

Contents--see page 4.

Scudder
Gold
Fund

Prospectus
November 1, 1995

A pure no-load(TM) (no sales charges) mutual fund series which seeks maximum
return consistent with investing primarily in gold-related investments.
<PAGE>

Expense information

How to compare a Scudder pure no-load(TM) fund

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

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

Sales commissions to purchase shares (sales load) NONE

Commissions to reinvest dividends NONE

Redemption fees NONE**

Fees to exchange shares NONE

2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended June 30, 1995.

Investment management fee 1.00%

12b-1 fees NONE

Other expenses 0.65%
----

Total Fund operating expenses 1.65%
====

Example

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$17 $52 $90 $195

See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.

* This information also includes expenses of a wholly-owned subsidiary of
Scudder Mutual Funds, Inc., the capital of which is limited to 25% of the
Fund's assets. (See "Investment objective and policies--Investments.")

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

2
<PAGE>

Financial highlights

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

If you would like more detailed information concerning the Fund's performance, a
complete portfolio listing and audited financial statements are available in the
Fund's Annual Report dated June 30, 1995 and may be obtained without charge by
writing or calling Scudder Investor Services, Inc.

FOR THE PERIOD
SEPTEMBER 2, 1988
(COMMENCEMENT
YEARS ENDED JUNE 30, OF OPERATIONS)
------------------------------------------------------- TO JUNE 30,
1995(b) 1994(b) 1993(b) 1992(b) 1991 1990 1989
------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period......................... $12.64 $12.13 $ 9.19 $ 9.87 $10.21 $10.58 $12.00
------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income
(loss) (a)...................... (.08) (.10) (.08) (.12) (.04) .07 (.06)
Net realized and unrealized
gain (loss) on investment
transactions.................... 1.02 .85 3.02 (.56) (.30) (.34) (1.36)
------ ------ ------ ------ ------ ------ ------
Total from investment
operations........................ .94 .75 2.94 (.68) (.34) (.27) (1.42)
------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment income........ -- -- -- -- -- (.01) --
In excess of net investment
income.......................... (.25) (.24) -- -- -- -- --
From net realized gains on
investment transactions......... (.47) -- -- -- -- (.03) --
From additional paid-in capital... -- -- -- -- -- (.06) --
------ ------ ------ ------ ------ ------ ------
Total distributions............... (.72) (.24) -- -- -- (.10) --
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period.... $12.86 $12.64 $12.13 $ 9.19 $ 9.87 $10.21 $10.58
====== ====== ====== ====== ====== ====== ======

TOTAL RETURN (%).................... 7.50 6.35 31.99 (6.89) (3.33) (2.71) (11.83)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions)...................... 126 130 90 31 33 17 9
Ratio of operating expenses,
net to average daily net
assets (%) (a).................... 1.65 1.69 2.17 2.54 2.54 2.60 3.00*
Ratio of net investment income
(loss) to average daily net
assets (%)........................ (.69) (.81) (.81) (1.34) (.59) .34 (1.06)*
Portfolio turnover rate (%)......... 42.0 50.8 59.2 57.5 71.4 80.6 34.5*

<FN>
(a) Reflects a per share amount
of expenses reimbursed by
the Adviser of................ $ -- $ -- $ -- $ -- $ .02 $ .20 $ .18

Operating expense ratio
including expenses
reimbursed, management
fee and other expenses
not imposed (%)............... -- -- -- 2.57 2.82 3.74 6.59*

(b) Based on monthly average shares outstanding during the period.

* Annualized

** Not annualized
</FN>
</TABLE>

3
<PAGE>

A message from Scudder's chairman

Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $90 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.

The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.

Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.

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

/s/Daniel Pierce

Scudder Gold Fund

Investment objective

* maximum return consistent with investing primarily in a portfolio of
gold-related equity securities and gold

Investment characteristics

* convenient and cost-effective way to broaden an investment portfolio

* opportunity to participate in possible increases in the price of gold

Investors in the Fund must be willing to accept above-average risk and should
not consider the Fund a complete investment program.

Contents

Investment objective and policies 5

Why invest in the Fund? 7

Additional information about policies
and investments 8

Risk factors 9

Distribution and performance information 11

Purchases 12

Exchanges and redemptions 13

Fund organization 14

Transaction information 15

Shareholder benefits 18

Directors and Officers 21

Investment products and services 22

How to contact Scudder 23

4
<PAGE>

Investment objective and policies

Investment objective

Scudder Gold Fund (the "Fund"), a series of Scudder Mutual Funds, Inc. (the
"Corporation"), seeks maximum return (principal change and income) consistent
with investing in a portfolio of gold-related equity securities and gold. When
making portfolio investments, the Fund will emphasize the potential for growth
of the proposed investment, although it may also consider the income generating
capacity of a stock as one factor among others in evaluating investment
opportunities.

Although the Fund is a non-diversified investment company under the Investment
Company Act of 1940 (the "1940 Act"), it is designed as a convenient and
cost-effective means for investors to provide diversity to their investments and
to participate in possible increases in the price of gold. Investors in the Fund
must be willing to accept above-average risk compared to that available from
larger companies such as those in the Standard & Poor's 500 Stock Index.
Investors should not consider the Fund a complete investment program.

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

Investments

The Fund pursues its objective primarily through a portfolio of gold-related
investments. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in:

* equity securities (defined as common stock, investment-grade preferred
stock and debt securities that are convertible into or exchangeable for
common stock) of U.S. and foreign companies primarily engaged in the
exploration, mining, fabrication, processing or distribution of gold,

* gold bullion, and

* gold coins.

A company will be considered "primarily engaged" in a business or an activity if
it devotes or derives at least 50% of its assets, revenues and/or operating
earnings from that business or activity. The remaining 35% of the Fund's assets
may be invested in any precious metals other than gold; in equity securities of
companies engaged in activities primarily relating to precious metals and
minerals other than gold; in investment-grade debt securities, including zero
coupon bonds, of companies engaged in activities relating to gold or other
precious metals and minerals; and in certain debt securities, a portion of the
return on which is indexed to the price of precious metals. In addition, the
Fund may engage in strategic transactions.

Consistent with applicable state securities laws, up to 10% of the Fund's total
assets may be invested directly in gold, silver, platinum and palladium bullion
and in gold and silver coins. In addition, the Fund's assets may be invested in
wholly-owned subsidiaries of the Corporation that invest in gold, silver,
platinum and palladium bullion and in gold and silver coins (see "Risk
factors--Precious metals").

Investment-grade preferred stock and debt securities are securities rated Baa or
higher by Moody's Investors Service, Inc. ("Moody's"), or BBB or higher by
Standard & Poor's ("S&P"), or, if unrated, are deemed by the Fund's investment
adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), to be of equivalent
quality.

When deemed appropriate by the Adviser, the Fund may temporarily invest up to
30% of its assets to maintain liquidity and all or a portion of its assets for

5
<PAGE>

defensive purposes in cash, high quality cash equivalents (including foreign
money market instruments, such as bankers' acceptances, certificates of deposit,
commercial paper, short-term government and corporate obligations, and
repurchase agreements), obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities ("Government Securities"), and domestic
repurchase agreements. The Fund may also, for hedging purposes, invest up to 10%
of its assets in foreign currencies in the form of bank deposits (see "Risk
factors"). To the extent the Fund holds cash or is not invested in securities
used to pursue its investment objective, the Fund will not achieve its
investment objective.

How investments are selected

The Adviser considers a variety of factors when making investments in securities
related to gold and other precious metals. Some of these factors may include the
ore quality of metals mined by a company, the company's mining, processing and
fabricating costs and techniques, and the quantity of unmined reserves. Other
factors that may be evaluated include a company's financial condition, potential
development of property, capital spending plans, quality of management, nature
of any affiliations, current and prospective tax liability, labor relations and
marketability of a company's equity or debt securities.

Bullion and coins in which the Fund invests will be bought from and sold to
institutions such as U.S. and foreign banks, regulated U.S. commodities
exchanges, exchanges affiliated with a regulated U.S. stock exchange, and
dealers who are members of, or affiliated with,

Comparative Investment Data
(1973-1994)

Investment 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983
---------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Bills 6.9% 8.0% 5.8% 5.1% 5.1% 7.2% 10.4% 11.2% 14.7% 10.5% 8.8%
Bonds 2.3 0.2 12.3 15.6 3.0 1.2 2.3 3.0 7.3 31.1 8.0
Stocks -14.7 -26.5 37.2 23.8 -7.2 6.6 18.4 32.4 -4.9 21.4 22.5
Inflation 8.8 12.2 7.0 4.8 6.8 9.0 13.3 12.4 8.9 3.9 3.8
Gold 73.0 66.1 -24.8 4.1 22.6 37.0 126.5 15.2 -32.8 15.3 -16.3

Investment 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
U.S. Treasury
Bills 9.9% 7.7% 6.2% 5.5% 6.4% 8.4% 7.8% 5.6% 3.5% 2.9% 3.9%
Bonds 15.0 21.3 15.6 2.3 7.6 14.2 8.3 16.1 7.6 11.0 -3.5
Stocks 6.3 32.2 18.5 5.2 16.8 31.5 -3.2 30.5 7.7 10.0 1.3
Inflation 4.0 3.8 1.1 4.4 4.4 4.7 6.1 3.1 2.9 2.8 2.7
Gold -19.2 5.8 21.3 22.0 -15.3 -1.6 -3.7 -4.3 -9.0 11.0 -2.2
</TABLE>

The table above contains annual total return figures (capital change plus
income) for four major investment categories and inflation (as represented by
the Consumer Price Index) since 1973. These investment categories are: (1) U.S.
Treasury bills (30-day maturity), (2) Bonds (as represented by the Lehman
Brothers Government/Corporate Bond Index, an unmanaged index of U.S. government
and corporate bonds calculated by Shearson Lehman Brothers Inc.), (3) Common
Stocks (as represented by the Standard & Poor's 500 Composite Stock Index, an
unmanaged index of common stocks), and (4) Gold (as represented by the
month-end London PM or afternoon gold price). The data set forth above should
not be construed as an indication of future performance of any of these
investment categories or the Fund.

6
<PAGE>

a regulated U.S. commodities exchange and who are qualified to provide an
accepted certification of purity. Coins will be purchased for their metallic
value and not for their currency or numismatic value. While bullion and coins do
not generate income and may subject the Fund to certain taxes, insurance,
shipping and storage costs, the Adviser believes that such investments could
serve to moderate fluctuations in the value of the Fund's shares. Historically,
prices of precious metals have tended not to fluctuate as widely as shares of
companies engaged in precious metals related businesses.

The Fund generally invests in equity securities of established companies listed
on U.S. or foreign securities exchanges but may also invest in securities traded
over-the-counter. Investments include companies of varying size as measured by
assets, sales or capitalization. The Fund may invest in investment-grade debt
securities when the Adviser believes such investment will facilitate achievement
of the Fund's investment objective. The Fund may invest in certain closed-end
investment companies holding foreign securities in accordance with the
limitations of the 1940 Act.

Why invest in the Fund?

The Fund is designed as a convenient and cost-effective means for investors to
provide diversity to their investment holdings and to participate in possible
long-term increases in the value of gold. By owning shares of the Fund,
investors can benefit from a professionally managed portfolio of gold and other
precious metals related investments.

An investment in the Fund may appeal to both individuals and institutions for a
variety of reasons. First, as the "Comparative Investment Data" table indicates,
gold can offer the potential for a return higher than other investments for the
long-term investor willing to accept above-average risk. Although gold bullion
normally provides no current income, in many periods, precious metals such as
gold have generated capital returns (capital change) that compare favorably with
the total returns (capital change plus income) of other more traditional types
of investments, such as common stocks.

Gold also has been traditionally viewed as a hedge against inflation, making it
a potentially effective means for protecting the purchasing power of long-term
savings. In 1969, central banks abandoned fixing the private market price of
gold at $35 per ounce.

Many investors have also purchased gold investments to diversify an existing
portfolio of stocks, bonds and money market investments, since historically,
gold, as a tangible asset, has not always moved in close correlation with
financial assets. Investors may consider allocating some portion of their assets
to gold or other precious metals, thereby potentially reducing the volatility of
their overall investment portfolio. Investing in shares of the Fund is not
intended to provide a complete investment program for an investor, but should be
considered part of an overall investment plan.

In addition, investing directly in gold and gold related securities can be
expensive and inconvenient for many individuals. The Adviser is responsible for
all phases of investment research and portfolio management, as well as
acquiring, storing and insuring all direct precious metals holdings.

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

7
<PAGE>

Additional information about policies and investments

Investment restrictions

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

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

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

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

Repurchase agreements

As a means of earning income for periods as short as overnight, the Fund may
invest up to 50% of its assets in repurchase agreements with selected domestic
and foreign banks and broker/dealers. Under a repurchase agreement, the Fund
acquires securities, subject to the seller's agreement to repurchase them at a
specified time and price.

Strategic Transactions and derivatives

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

Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions.

8
<PAGE>

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

Risk factors

Precious metals

The Fund "concentrates" (for purposes of the 1940 Act) its assets in securities
related to gold and gold bullion and coins, which means that at least 25% of its
assets will be invested in these assets at all times. As a result, the Fund may
be subject to greater market fluctuation than a fund which has securities
representing a broader range of investment alternatives.

In addition to investing up to 10% of its total assets directly in precious
metals, the Fund may invest up to 25% of its assets in wholly-owned subsidiaries
of the Corporation which invest in gold, silver, platinum and palladium bullion
and in gold and silver coins. The subsidiaries will incur expenses for the
storage and insurance of precious metals purchased. However, the subsidiaries
may realize capital gains from the sale of metals and may pay distributions to
the Fund from such gains. Currently, Scudder Precious Metals, Inc. is the
Corporation's only subsidiary. There is currently no market for such company's
shares, and no market is expected to develop.

Investments in precious metals and in precious metals-related securities and
companies involve a relatively high degree of risk. Prices of gold and other
precious metals can be influenced by a variety of global economic, financial and
political factors and may fluctuate markedly over short periods of time. Among
other things, precious metals values can be affected by changes in inflation,
investment speculation, metal sales by governments or central banks, changes in
industrial and commercial demand, and any governmental restrictions on private
ownership of gold or other precious metals.

Illiquid investments

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

Foreign securities

The Fund intends to invest its assets principally in Australia, Canada, South
Africa and the United States (as well as in the Cayman Islands, the domicile of
Scudder Precious Metals, Inc.). In addition, the Fund may make money market
investments in the obligations of foreign banks.

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

9
<PAGE>

securities transactions in foreign markets may be longer than in domestic
markets. These considerations generally are more of a concern in developing
countries. For example, the possibility of political upheaval and the dependence
on foreign economic assistance may be greater in these countries than in
developed countries.

Non-diversification

The Fund is classified as a non-diversified investment company under the 1940
Act, which means that the Fund is not limited by the 1940 Act in the proportion
of its assets that it may invest in the obligations of a single issuer. The
investment of a large percentage of the Fund's assets in the securities of a
small number of issuers may cause the Fund's share price to fluctuate more than
that of a diversified investment company.

Correlation of gold and gold securities

The Adviser believes that the value of the securities of firms that deal in gold
will correspond generally, over time, with the prices of the underlying metal.
At any given time, however, changes in the price of gold may not strongly
correlate with changes in the value of securities related to gold, which are
expected to constitute the principal part of the Fund's assets. In fact, there
may be periods in which the price of gold stocks and gold will move in different
directions. The reason for this potential disparity is that political and
economic factors, including behavior of the stock market, may have differing
impacts on gold versus gold stocks.

Repurchase agreements

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

Debt securities

Up to 35% of the Fund's assets may be invested in bonds rated Baa by Moody's or
BBB by S&P. Moody's considers bonds it rates Baa to have speculative elements as
well as investment-grade characteristics. Zero coupon bonds (which do not pay
interest until maturity) and pay-in-kind securities which pay interest in the
form of additional securities, may be more speculative than securities which pay
income periodically and in cash.

Strategic Transactions and derivatives

10
<PAGE>

the value of the Fund's position. In addition, futures and options markets may
not be liquid in all circumstances and certain over-the-counter options may have
no markets. As a result, in certain markets, the Fund might not be able to close
out a transaction without incurring substantial losses, if at all. Although the
use of futures contracts and options transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.

Distribution and performance information

Dividends and capital gains distributions

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

The Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended, which will relieve the Fund of any liability for federal income tax
purposes to the extent its earnings are distributed to shareholders.

Generally, dividends from net investment income are taxable to shareholders as
ordinary income whether received in cash or additional shares.

Long-term capital gains distributions, if any, are taxable as long-term capital
gains regardless of the length of time shareholders have owned their shares.
Short-term capital gains and any other taxable income distributions are taxable
as ordinary income. Shareholders may be able to claim a credit or deduction on
their income tax returns for their pro rata portion of qualified taxes paid by
the Fund to foreign countries.

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

Shareholders should consult their tax advisers regarding specific questions as
to the federal and local tax consequences of investing in the Fund.

Performance information

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, five
years and the life of the Fund as of a stated ending date. "Cumulative total
return" represents the cumulative change in value of an investment in

(Continued on page 14)

11
<PAGE>

Purchases

Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.

o By Mail Send your completed and signed application and check
Make checks
payable to "The
Scudder Funds."
by regular mail to: or by express, registered,
or certified mail to:

The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information-- Purchasing shares-- By wire following these
tables for details, including the ABA wire transfer number. Then call 1-800-225-5163
for instructions.

o In Person Visit one of our Funds Centers to complete your application with the help
of a Scudder representative. Funds Center locations are listed under
Shareholder benefits.

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

Purchasing Minimum additional investment: $100; IRAs $50
additional shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.

Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete Fund name, to
Scudder Funds." the appropriate address listed above.

o By Wire Please see Transaction information--Purchasing shares-- By wire following these
tables for details, including the ABA wire transfer number.

o In Person Visit one of our Funds Centers to make an additional investment in your
Scudder fund account. Funds Center locations are listed under Shareholder benefits.

o By Telephone You may purchase additional shares in an amount of $10,000 or more.
Please call 1-800-225-5163 for more details.

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

12
<PAGE>

Exchanges and redemptions

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

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

o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime telephone
number.

Send your instructions

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

o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:

- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime
telephone number.

A signature guarantee is required for redemptions over $50,000.
See Transaction information--Redeeming shares following these tables.

o By Automatic You may arrange to receive automatic cash payments periodically. Call
Withdrawal Plan 1-800-225-5163 for more information and an enrollment form.
</TABLE>

13
<PAGE>

(Continued from page 11)

the Fund for various periods. All types of total return calculations assume that
all dividends and capital gains distributions during the period were reinvested
in shares of the Fund. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.

Fund organization

Scudder Gold Fund is a non-diversified series of Scudder Mutual Funds, Inc., an
open-end, management investment company registered under the 1940 Act. The
Corporation was organized as a Maryland corporation in March 1988 and currently
offers shares of one investment portfolio.

The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Corporation is not required to hold and has no current
intention of holding annual shareholder meetings, although special meetings may
be called for purposes such as electing or removing Directors, changing
fundamental investment policies or approving an investment management contract.

Shareholders will be assisted in communicating with other shareholders in
connection with removing a Director as if Section 16(c) of the 1940 Act were
applicable.

Investment adviser

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

The Adviser receives monthly an investment advisory fee for its services which
fee equals approximately 1% of the Fund's average daily net assets on an annual
basis. The fee is higher than that charged to most other investment companies
but not necessarily higher than fees charged to funds with investment objectives
similar to those of the Fund.

The Fund's expenses are paid out of gross investment income and, to the extent
necessary, the Fund's net assets. Shareholders pay no direct charges or fees for
investment services.

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

Transfer agent

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

Underwriter

Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser, is
the Fund's principal underwriter. Scudder Investor Services, Inc. confirms, as
agent, all purchases of shares of the Fund. Scudder Investor Relations is a
telephone information service provided by Scudder Investor Services, Inc.

Custodian

State Street Bank and Trust Company is the Fund's custodian.

Fund accounting agent

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

14
<PAGE>

Transaction information

Purchasing shares

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

By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
or exchange requests by telephone prior to the expiration of the seven-day
period will not be accepted.

By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent in Boston. Accounts cannot
be opened without a completed, signed application and a Scudder fund account
number. Contact your bank to arrange a wire transfer to:

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

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

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

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

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

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

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

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

Redeeming shares

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

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

15
<PAGE>

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

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

If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.

In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.

Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.

Telephone transactions

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

Share price

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

Processing time

All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange are
executed at the net asset value per share calculated at the close of regular
trading that day.

Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.

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

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

16
<PAGE>

Short-term trading

Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.

Tax information

A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.

Tax identification number

Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period.

Minimum balances

Shareholders should maintain a share balance worth at least $1,000. Scudder
retirement plans have similar or lower minimum share balance requirements. The
Fund reserves the right, following 60 days' written notice to shareholders, to
redeem all shares in sub-minimum accounts, including accounts of new investors,
where a reduction in value has occurred due to a redemption or exchange out of
the account. Reductions in value that result solely from market activity will
not trigger an involuntary redemption. The Fund will mail the proceeds of the
redeemed account to the shareholder. The shareholder may restore the share
balance to $1,000 or more during the 60-day notice period and must maintain it
at no lower than that minimum to avoid involuntary redemption.

Third party transactions

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

Redemption-in-kind

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

17
<PAGE>

Shareholder benefits

Experienced professional management

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

A team approach to investing

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

Lead Portfolio Manager Douglas D. Donald has been responsible for Scudder Gold
Fund's day-to-day management since its inception in 1988. Mr. Donald, who joined
Scudder in 1964, has more than 40 years of experience with investments in
precious metals and mining. William J. Wallace, Portfolio Manager, who has 15
years of investment experience, has been a member of Scudder Gold Fund's team
since 1991.

SAIL(TM)--Scudder Automated Information Line

For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.

Investment flexibility

Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.

Dividend reinvestment plan

You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.

Shareholder statements

You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.

Shareholder reports

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

To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.

18
<PAGE>

Newsletters

Four times a year, Scudder sends you At the Helm, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.

Scudder Funds Centers

As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
Cincinnati, Los Angeles, New York, Portland (OR), San Diego, San Francisco and
Scottsdale.

T.D.D. service for the hearing impaired

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

19
<PAGE>

Scudder tax-advantaged retirement plans

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

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

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

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

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

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

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

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

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

20
<PAGE>

Directors and Officers

Daniel Pierce*
President and Director

Thomas J. Devine
Director; Consultant

Douglas M. Loudon*
Vice President and Director

Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University Graduate
School of Business

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

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

David S. Lee*
Vice President

Thomas F. McDonough*
Vice President and Secretary

Pamela A. McGrath*
Vice President and Treasurer

Edward J. O'Connell*
Vice President and Assistant Treasurer

Juris Padegs*
Vice President and Assistant Secretary

Kathryn L. Quirk*
Vice President and Assistant Secretary

Coleen Downs Dinneen*
Assistant Secretary

*Scudder, Stevens & Clark, Inc.

21
<PAGE>

Investment products and services

<S> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder GNMA Fund
Scudder U.S. Treasury Money Fund Scudder Income Fund
Tax free money market+ Scudder International Bond Fund
Scudder Tax Free Money Fund Scudder Short Term Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Global Income Fund
Scudder New York Tax Free Money Fund* Scudder Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
------------------------------------------------------------------------------------------------------------------------
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan*+++ (a variable annuity) Profit Sharing and
401(k) Plans Money Purchase Pension Plans
------------------------------------------------------------------------------------------------------------------------

Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia Fund, Inc. Scudder Treasurers Trust(TM)++
------------------------------------------------------------------------------------------------------------------------

For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state and local taxes. *Not available
in all states. +++A no-load variable annuity contract provided by Charter
National Life Insurance Company and its affiliate, offered by Scudder's
insurance agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens &
Clark, Inc., are traded on various stock exchanges. ++For information on
Scudder Treasurers Trust(TM), an institutional cash management service that
utilizes certain portfolios of Scudder Fund, Inc. ($100,000 minimum), call:
1-800-541-7703.

</TABLE>

22
<PAGE>

24
<PAGE>

How to contact Scudder

<TABLE>

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

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

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

Investment Information: Or Stop by a Scudder Funds Center:

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

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

For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*,
institutional cash management service for funds designed to meet the broad investment management
corporations, non-profit organizations and trusts and service needs of banks and other institutions, call:
which utilizes certain portfolios of Scudder Fund, Inc.* 1-800-854-8525.
($100,000 minimum), call: 1-800-541-7703.

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

* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus with more
complete information, including management fees and expenses. Please read it carefully before
you invest or send money.

</TABLE>

23
<PAGE>
SCUDDER GOLD FUND

An Investment Portfolio of Scudder
Mutual Funds, Inc.

A Pure No-Load(TM) (No Sales Charges) mutual fund
series which invests in gold-related equity
securities and gold

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

STATEMENT OF ADDITIONAL INFORMATION

November 1, 1995

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

This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Scudder Gold Fund dated November 1, 1995,
as amended from time to time, a copy of which may be obtained without charge by
writing to Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103.

<PAGE>

TABLE OF CONTENTS
Page

THE FUND'S INVESTMENT OBJECTIVE AND POLICIES...................................1
General Investment Objective and Policies.............................1
Investment Restrictions..............................................11

PURCHASES.....................................................................13
Additional Information About Opening an Account......................13
Additional Information About Making Subsequent Investments By
Telephone Order.................................................14
Checks...............................................................14
Wire Transfer of Federal Funds.......................................14
Share Price..........................................................15
Share Certificates...................................................15
Other Information....................................................15

EXCHANGES AND REDEMPTIONS.....................................................15
Exchanges............................................................15
Redemption by Telephone..............................................16
Redemption by Mail or Fax............................................17
Redemption-In-Kind...................................................17
Other Information....................................................18

FEATURES AND SERVICES OFFERED BY THE FUND.....................................18
The Pure No-Load(TM) Concept.........................................18
Dividend and Capital Gain Distribution Options.......................19
Scudder Funds Centers................................................20
Reports to Shareholders..............................................20
Transaction Summaries................................................20

THE SCUDDER FAMILY OF FUNDS...................................................20

SPECIAL PLAN ACCOUNTS.........................................................23
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension
Plans for Corporations and Self-Employed Individuals............23
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations
and Self-Employed Individuals...................................24
Scudder IRA: Individual Retirement Account..........................24
Scudder 403(b) Plan..................................................25
Automatic Withdrawal Plan............................................25
Group or Salary Deduction Plan.......................................25
Automatic Investment Plan............................................26
Uniform Transfers/Gifts to Minors Act................................26
Scudder Trust Company................................................26

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.....................................26

PERFORMANCE INFORMATION.......................................................27
Average Annual Total Return..........................................27
Cumulative Total Return..............................................27
Total Return.........................................................28
Comparison of Fund Performance.......................................28

FUND ORGANIZATION.............................................................32

INVESTMENT ADVISER............................................................32
Personal Investments by Employees of the Adviser.....................34

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TABLE OF CONTENTS (continued)
Page

DIRECTORS AND OFFICERS........................................................35

REMUNERATION..................................................................36

DISTRIBUTOR...................................................................37

TAXES.........................................................................38

PORTFOLIO TRANSACTIONS........................................................40
Brokerage Commissions................................................40
Portfolio Turnover...................................................41

NET ASSET VALUE...............................................................42

ADDITIONAL INFORMATION........................................................42
Experts..............................................................42
Other Information....................................................43

FINANCIAL STATEMENTS..........................................................43

DESCRIPTION OF S&P AND MOODY'S RATINGS........................................44

Description of S&P preferred stock and corporate bond ratings:................44

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THE FUND'S INVESTMENT OBJECTIVE AND POLICIES

(See "Investment objective and policies," "Additional information about
policies and investments," and "Risk factors" in the Fund's prospectus.)

General Investment Objective and Policies

Scudder Gold Fund (the "Fund"), a series of Scudder Mutual Funds, Inc.
(the "Corporation"), is a pure no-load(TM), non-diversified mutual fund which
seeks maximum return (principal change and income) consistent with investing in
a portfolio of gold-related equity securities and gold. The Fund is designed as
a convenient and cost-effective means for investors to provide diversity to
their investments and to participate in possible increases in the price of gold.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. There can be
no assurance that the Fund will achieve its objective.

Foreign Securities. The Fund intends to invest its assets principally in
Australia, Canada, South Africa and the United States (as well as in the Cayman
Islands, the domicile of Scudder Precious Metals, Inc., which currently is the
Corporation's only wholly-owned subsidiary) and expects that a substantial
portion of its assets at any time will consist of non-U.S. securities. Investors
should recognize that investing in foreign securities involves certain special
considerations, including those set forth below, which are not typically
associated with investing in U.S. securities and which may affect the Fund's
performance favorably or unfavorably. As foreign companies are not generally
subject to uniform accounting and auditing and financial reporting standards,
practices and requirements comparable to those applicable to domestic companies,
there may be less publicly available information about a foreign company than
about a domestic company. Many foreign stock markets, while growing in volume of
trading activity, have substantially less volume than the New York Stock
Exchange (the "Exchange"), and securities of some foreign companies are less
liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets is less than that in the U.S.
market and at times, volatility of price can be greater than in the U.S.
Further, foreign markets have different clearance and settlement procedures and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems either
could result in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Fixed commissions
on some foreign stock exchanges are generally higher than negotiated commissions
on U.S. exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. Further, the Fund may encounter
difficulties or be unable to pursue legal remedies and obtain judgments in
foreign courts. There is generally less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. It may be more difficult for the Fund's agents to keep
currently informed about corporate actions such as stock dividends or other
matters which may affect the prices of portfolio securities. Communications
between the U.S. and foreign countries may be less reliable than within the
U.S., thus increasing the risk of delayed settlements of portfolio transactions
or loss of certificates for portfolio securities. Payment for securities without
delivery may be required in certain foreign markets. In addition, with respect
to certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries. Investments
in foreign securities may also entail certain risks such as possible currency
blockages or transfer restrictions, and the difficulty of enforcing rights in
other countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.

Investments in companies domiciled in developing countries may be
subject to potentially greater risks than investments in developed countries.
For example, the possibility of revolution and the dependence on foreign
economic assistance may be greater in these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management.

Foreign Currencies. Investments in foreign securities usually will involve
currencies of foreign countries. Moreover, the Fund temporarily may hold funds
in bank deposits in foreign currencies during the completion of investment

<PAGE>

programs. Because of these factors, the value of the assets of the Fund as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the Fund
may incur costs in connection with conversions between various currencies.
Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through strategic
transactions involving currencies. (See "Strategic Transactions and
Derivatives.")

Because the Fund normally will be invested in both U.S. and foreign
securities markets, changes in the Fund's share price may not have a high
correlation with movements in the U.S. markets. The Fund's share price will
reflect the movements of both the different stock and bond markets in which it
is invested and of the currencies in which the investments are denominated; the
strength or weakness of the U.S. dollar against foreign currencies may account
for part of the Fund's investment performance. U.S. and foreign securities
markets do not always move in step with each other and the total returns from
different markets may vary significantly.

Because of the Fund's investment policies and the investment
considerations discussed above and in the Prospectus, an investment in shares of
the Fund is not intended to provide a complete investment program for an
investor.

Illiquid Investments. The Fund may invest a portion of its assets in securities
for which there is not an active trading market including securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 or which are otherwise not readily marketable. The
absence of a trading market can make it difficult to ascertain a market value
for illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for the Fund to sell them promptly at an acceptable price. The Fund
may have to bear the extra expense of registering such securities for resale and
the risk of substantial delay in effecting such registration. Also market
quotations are less readily available. The judgment of the Fund's investment
adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), may at times play a
greater role in valuing these securities than in the case of unrestricted
securities.

Debt Securities. The Fund may invest in investment-grade debt securities
convertible into or exchangeable for common stock. Investment grade-debt
securities are those rated Aaa, Aa, A or Baa by Moody's Investors Service, Inc.
("Moody's") or AAA, AA, A or BBB by Standard & Poor's ("S&P") or, if unrated,
judged to be of equivalent quality as determined by the Adviser. Moody's
considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics. (See "DESCRIPTION OF S&P AND MOODY'S
RATINGS").

Asset-Indexed Securities. The Fund may purchase asset-indexed securities which
are debt securities usually issued by companies in precious metals related
businesses such as mining, the principal amount, redemption terms, or interest
rates of which are related to the market price of a specified precious metal.
The Fund will only enter into transactions in publicly traded asset-indexed
securities. Market prices of asset-indexed securities will relate primarily to
changes in the market prices of the precious metals to which the securities are
indexed rather than to changes in market rates of interest. However, there may
not be a perfect correlation between the price movements of the asset-indexed
securities and the underlying precious metals. Asset-indexed securities
typically bear interest or pay dividends at below market rates (and in certain
cases at nominal rates). The Fund will purchase asset-indexed securities to the
extent permitted by law.

Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System, any foreign bank when the repurchase
agreement is fully secured by government securities of the particular
jurisdiction, or with any domestic or foreign broker/dealer which is recognized
as a reporting government securities dealer if the creditworthiness of the bank
or broker/dealer has been determined by the Adviser to be at least as high as
that of other obligations the Fund may purchase.

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<PAGE>

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

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

Short Sales Against the Box. The Fund may make short sales of common stocks if,
at all times when a short position is open, the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without payment
of further consideration, into the shares of common stock sold short. Short
sales of this kind are referred to as short sales "against the box." The
broker/dealer that executes a short sale generally invests cash proceeds of the
sale until they are paid to the Fund. Arrangements may be made with the
broker/dealer to obtain a portion of the interest earned by the broker on the
investment of short sale proceeds. The Fund will segregate the common stock or
convertible or exchangeable preferred stock or debt securities in a special
account with the Custodian. The extent to which the Fund may make short sales of
common stocks may be limited by the requirements contained in the Internal
Revenue Code of 1986 (the "Code") for qualification as a regulated investment
company. (See "TAXES.")

Lending of Portfolio Securities. The Fund has the ability to lend portfolio
securities to brokers, dealers and other financial organizations. Loans of
portfolio securities will be collateralized by cash, letters of credit or
Government Securities which are maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. From time to
time, the Fund may pay a part of the interest earned from the investment of
collateral received for securities loaned to the borrower and/or a third party
that is unaffiliated with the Fund and that is acting as a "finder."

By lending its securities, the Fund can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when Government Securities are used as
collateral. The Fund will adhere to the following conditions whenever its
portfolio securities are loaned: (a) the Fund must receive at least 100% cash
collateral or equivalent securities from the borrower; (b) the borrower must
increase such collateral whenever the market value of the securities rises above
the level of such collateral; (c) the Fund must be able to terminate the loan at
any time; (d) the Fund must receive reasonable interest on the loan, as well as
any dividends, interest or other distributions on the loaned securities, and any
increase in market value; (e) the Fund may pay only reasonable custodian fees in
connection with the loan; and (f) voting rights on the loaned securities may
pass to the borrower; provided, however, that if a material event adversely

3
<PAGE>

affecting the investment occurs, the Corporation's Board of Directors must
terminate the loan and regain the right to vote the securities. Any gain or loss
in the market price of the securities loaned that might occur during the term of
the loan would be for the Fund's account. The Fund has no current intention to
loan portfolio securities.

Zero Coupon Bonds. The Fund may invest in zero coupon bonds which pay no
periodic interest payments and are sold at substantial discounts from their
value at maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero coupon bonds are subject to greater market value
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest (cash).

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

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

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

4
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position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.

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

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

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

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

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

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty

5
<PAGE>

to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.

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

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

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

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

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

The Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a

6
<PAGE>

futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.

The Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of the Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.

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

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

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

The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.

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<PAGE>

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

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

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

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

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

8
<PAGE>

selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.

The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

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

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

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

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

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to

9
<PAGE>

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

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

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

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

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

Investment Considerations. In non-U.S. markets, issuers often issue new shares
on a partially-paid basis. The aggregate purchase price is paid in installments
over a specified period, generally not more than nine months, during which time
the shares trade freely on a partially-paid basis. The Fund anticipates that it
may purchase partially-paid shares from time to time.

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

Because direct investments in precious metals do not generate income,
they may be subject to greater fluctuations in value than interest-paying and
dividend-paying securities. Investors should also be aware that gold coins trade
at approximately the current or spot price of the underlying gold bullion plus a
premium which reflects, among other things, fabrication costs incurred in
producing the coins. This premium has ranged from 2.5% to 15%. Any change in
this premium will affect the value of the Fund's shares.

Changes in portfolio securities are normally made on the basis of
investment considerations.

The Fund cannot guarantee a gain or eliminate the risk of loss. The net
asset value of the Fund's shares will increase or decrease with changes in the
market price of the Fund's investments.

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<PAGE>

Investment Restrictions

The policies set forth below have been adopted by the Corporation with
respect to the Fund as fundamental policies and may not be changed without
approval of a majority of the outstanding voting securities of the Fund which,
under the 1940 Act and the rules thereunder and as used in this Statement of
Additional Information, means the lesser of (1) 67% or more of the shares
present at such meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (2) more than 50% of
the outstanding shares of the Fund.

The Fund may not:

(1) purchase securities on margin or make short sales, unless by
virtue of its ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to the
securities sold and, if the right is conditional, the sale is
made upon the same conditions. For purposes of this
restriction, the deposit or payment of initial or variation
margin in connection with futures contracts or related options
will not be deemed to be a purchase of securities on margin;

(2) make loans other than through the purchase of securities of
persons not in control of or under common control with, the
Corporation or the Fund (including publicly held and privately
placed debt securities such as notes, bonds and debentures),
except that the Fund may lend its portfolio securities
(provided such loans are fully collateralized and
marked-to-market daily), and may enter into repurchase
agreements;

(3) act as an underwriter of the securities of others, except to
the extent the purchase of securities in accordance with its
investment objective and policies directly from the issuer
thereof and the later disposition thereof may be deemed to be
an underwriting;

(4) invest in real estate or mortgages (but may invest in real
estate investment trusts, companies whose business involves
the purchase or sale of real estate or mortgages or securities
that are secured by real estate) or commodities or commodity
contracts, except (a) futures contracts including but not
limited to contracts based on the performance of an index of
securities or fluctuations in interest rates or for the future
delivery of securities and gold and related options, (b)
forward currency exchange contracts and foreign currency
futures contracts and related options and (c) gold, silver,
platinum and palladium bullion and gold, silver, platinum and
palladium coins;

(5) invest more than 25% of the Fund's total assets (taken at
market value) in securities of issuers (other than
wholly-owned subsidiaries of the Corporation) principally in
the same industry, except Government Securities, and except
that the Fund will invest at least 25% of its total assets in
securities of companies that are primarily engaged in the
exploration, mining, fabrication, processing or distribution
of gold and other precious metals and in gold bullion and
coins;

(6) invest for the purpose of exercising control or management of
any other company (other than wholly-owned subsidiaries of the
Corporation);

(7) invest more than 5% of its total assets (taken at market
value) in the securities of issuers (other than wholly-owned
subsidiaries of the Corporation) having records of less than
three years continuous operation (including the operations of
predecessors), except Government Securities and except
securities of closed-end investment companies;

(8) purchase or retain the securities of any issuer (other than
wholly-owned subsidiaries of the Corporation) any of whose
officers, directors or security holders is an officer or
director of the Corporation or of the Fund's investment
adviser if after purchase one or more of such officers or
directors owns beneficially more than 1/2 of 1% of the
securities of such issuer, and such officers and directors
together own beneficially more than 5% of such securities;

(9) borrow, except as a temporary measure to meet redemption
requests or for other extraordinary or emergency purposes, in
an amount exceeding 33 1/3% of the value of the Fund's total

11
<PAGE>

assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time
the borrowing is made. The Fund will not purchase securities
while outstanding borrowings exceed 5% of the Fund's total
assets. For purposes of this restriction, the entry into
futures contracts and related options in the manner described
in the Prospectus shall not be deemed to create a borrowing;

(10) issue any securities other than its shares of common stock
except as appropriate to evidence indebtedness which the Fund
is permitted to incur; or

(11) issue senior securities, except as appropriate to evidence
indebtedness which the Fund is permitted to incur pursuant to
investment restriction (9) and except for shares of any
additional series which may be established by the Board of
Directors of the Corporation. For purposes of this
restriction, (a) the deposit of assets in escrow in connection
with the writing of options and (b) collateral arrangements
with respect to initial or variation margin for futures
contracts will not be deemed to be pledges of the Fund assets.

Other Investment Policies. The Directors of the Corporation have voluntarily
adopted certain policies and restrictions which are observed in the conduct of
the Fund's affairs. These represent intentions of the Directors based upon
current circumstances. They differ from fundamental investment policies in that
they may be changed or amended by action of the Directors without requiring
prior notice to or approval of shareholders.

In accordance with such policies and guidelines the Corporation may
not, for or on behalf of the Fund:

(1) purchase restricted securities (for these purposes restricted
security means a security with a legal or contractual
restriction on resale in the principal market in which the
security is traded), including repurchase agreements maturing
in more than seven days, over-the-counter options and
securities (other than securities of wholly-owned subsidiaries
of the Corporation) which are illiquid if as a result more
than 10% of the value of the Fund's net assets (valued at
market at purchase) would be invested in such securities;

(2) invest in oil, gas, or other mineral leases, or exploration or
development programs (although it may invest in issuers which
own or invest in such interests);

(3) participate on a joint or joint and several basis in any
securities trading account, but may for the purpose of
possibly achieving better net results on portfolio
transactions or lower brokerage commission rates join with
other investment companies and client accounts managed by the
Fund's investment adviser in the purchase or sale of
securities;

(4) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund
at any time do not exceed 20% of its net assets; or sell put
options on securities if, as a result, the aggregate value of
the obligations underlying such put options would exceed 50%
of the Fund's net assets;

(5) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to all futures contracts
entered into on behalf of the Fund and the premiums paid for
options on futures contracts does not exceed 5% of the fair
market value of the Fund's total assets; provided that in the
case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing
the 5% limit;

(6) purchase warrants if as a result such securities taken at the
lower of cost or market value would represent more than 5% of
the value of the Fund's total net assets or more than 2% of
its net assets in warrants that are not listed on the New York
or American Stock Exchanges or on an exchange with comparable
listing requirements (for this purpose, warrants attached to
securities will be deemed to have no value), unless attached
to other securities in which it is permitted to invest;

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<PAGE>

(7) purchase (except for the exercise of stock subscription
rights) securities of any one issuer (other than wholly-owned
subsidiaries of the Corporation) if as a result more than 10%
of the outstanding voting securities of such issuer would be
held in the Fund's portfolio, except those issued or
guaranteed by the government of the U.S.;

(8) purchase time deposits if as a result more than 10% of the
value of the Fund's total assets would be invested in time
deposits maturing in more than seven calendar days;

(9) invest in the securities of other open-end investment
companies, except that the Fund may (i) purchase the
securities of a "money market" fund whose investment adviser
is the same person as the Fund's investment adviser, or an
affiliate thereof but only to the extent authorized by an
order of the SEC; or (ii) purchase the securities of another
investment company by purchase in the open market when no
commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, except
when such purchase, though not made on the open market, is
part of a plan of merger or consolidation; or (iii) that the
Fund may purchase the securities of an investment company
which invests in the securities of issuers located in a
foreign country which, under the laws and/or regulations of
such foreign country, the Fund may not acquire directly;

(10) purchase securities if, as a result thereof, more than 10% of
the value of the Fund's total assets would be invested in
restricted securities (for these purposes a restricted
security means a security with a legal or contractual
restriction on resale in the principal market in which the
security is traded);

(11) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the
time any loan is made; all loans of portfolio securities will
be fully collateralized and marked to market daily. The Fund
has no current intention of making loans of portfolio
securities that would amount to greater than 5% of the Fund's
total assets; or

(12) purchase or sell real estate limited partnerships.

Absent an order of the SEC, the Fund may not purchase more than 3% of
the outstanding voting securities of another investment company, may not invest
more than 5% of its assets in another investment company, and may not invest
more than 10% of its assets in other investment companies. No such order has
been granted and there is no assurance that such an order will be granted in the
future. To the extent that the Fund invests in shares of other investment
companies, additional fees and expenses in addition to those incurred by the
Fund may be deducted from such investments.

If a percentage restriction on investment or utilization of assets as
set forth under "Investment Restrictions" and "Other Investment Policies" above
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value or the total cost of the Funds assets will
not be considered a violation of the restriction. In order to permit sale of the
Fund's shares in certain states, the Corporation may make commitments more
restrictive than the investment restrictions described above with respect to the
Fund. Should the Corporation determine that any such commitment is no longer in
the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of the Fund's shares in the state involved.

PURCHASES

(See "Purchases" and "Transaction information"
in the Fund's prospectus.)

Additional Information About Opening an Account

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

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<PAGE>

Shareholders of other Scudder funds who have submitted an account
application and have a certified tax identification number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($1,000 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the tax identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110, Account Number 9903-5552, ABA Number 011000028. The investor must give
the Scudder fund name, account name and new account number. Finally, the
investor must send the completed and signed application to the Fund promptly.

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

Additional Information About Making Subsequent Investments By Telephone Order

Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone or fax by members of the NASD, by banks and by established
shareholders (except by Scudder Individual Retirement Account (IRA), Scudder
Profit Sharing and Money Purchase Pension Plans, and Scudder 401(k) and Scudder
403(b) Planholders). Orders placed in this manner may be directed to any office
of the Distributor listed in the Fund's prospectus. An invoice of the purchase
will be mailed out promptly following receipt of a request to buy. Payment
should be attached to a copy of the invoice for proper identification. Federal
regulations require that payment be received within three (3) business days. If
payment is not received within that time, the shares may be canceled. In the
event of such cancellation or cancellation at the purchaser's request, the
purchaser will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. If the purchaser is a shareholder,
the Fund shall have the authority, as agent of the shareholder, to redeem shares
in the account in order to reimburse the Fund or the principal underwriter for
the loss incurred. Net losses on such transactions which are not recovered from
the purchaser will be absorbed by the principal underwriter. Any net profit on
the liquidation of unpaid shares will accrue to the Fund.

Checks

A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn on,
or payable through, a U.S. bank.

If shares of the Fund are purchased by a check which proves to be
uncollectible, the Corporation reserves the right to cancel the purchase
immediately and the purchaser will be responsible for any loss incurred by the
Corporation, the Fund or the principal underwriter by reason of such
cancellation. If the purchaser is a shareholder, the Corporation will have the
authority, as agent of the shareholder, to redeem shares in the account to
reimburse the Fund or the principal underwriter for the loss incurred. Investors
whose orders have been canceled may be prohibited from or restricted in placing
future orders in any of the Scudder funds.

Wire Transfer of Federal Funds

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

The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, the Distributor pays a fee for receipt by State
Street Bank and Trust Company (the "Custodian"), of "wired funds," but the right
to charge investors for this service is reserved.

Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include: Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October), and Veterans' Day (November

14
<PAGE>

11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such funds on behalf of
the Fund.

Share Price

Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on each day during
which the Exchange is open for trading. Orders received after the close of
regular trading on the Exchange will be executed at the next business day's net
asset value. If the order has been placed by a member of the NASD, other than
the Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to the Fund's transfer agent in Boston by
the close of regular trading on the Exchange.

Share Certificates

Due to the desire of the Fund's management to afford the ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Share certificates now in a shareholder's possession may be sent to the Transfer
Agent for cancellation and credit to such shareholder's account. Shareholders
who prefer may hold the certificates in their possession until they wish to
exchange or redeem such shares.

Other Information

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

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

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

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

EXCHANGES AND REDEMPTIONS

(See "Exchanges and redemptions" and "Transaction
information" in the Fund's prospectus.)

Exchanges

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

15
<PAGE>

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

Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Corporation and the Transfer Agent each reserves the right to
suspend or terminate the privilege of the Automatic Exchange Program at any
time.

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

Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Corporation employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Corporation does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Corporation will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Corporation and the Transfer Agent each reserves the right to
suspend or terminate the privilege of exchanging by telephone or fax at any
time.

The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from Scudder Investor Services, Inc. a prospectus of
the Scudder fund into which the exchange is being contemplated.

Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.

Redemption by Telephone

In order to request redemptions by telephone, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds are to be sent.
Shareholders currently receive automatically, without having to elect it, the
right to redeem up to $50,000 to their address of record. Shareholders may
request to have the proceeds mailed or wired to their predesignated bank
account.

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

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

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

16
<PAGE>

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

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

The Corporation employs procedures, including recording telephone
calls, testing a caller's identity, and sending written confirmation of
telephone transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Corporation does not follow such procedures, it may be liable for
losses due to unauthorized or fraudulent telephone instructions. The Corporation
will not be liable for acting upon instructions communicated by telephone that
it reasonably believes to be genuine.

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

Redemption by Mail or Fax

Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with a signature guarantee as explained in the
Fund's prospectus.

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

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

The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-225-5163.

Redemption-In-Kind

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

17
<PAGE>

Other Information

If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder will receive, in addition to the net asset
value thereof, all declared but unpaid dividends thereon. The value of shares
redeemed or repurchased may be more or less than the shareholder's cost
depending on the net asset value at the time of redemption or repurchase. The
Corporation does not impose a redemption or repurchase charge, although a wire
charge may be applicable for redemption proceeds wired to an investor's bank
account. Redemptions of shares of the Fund, including an exchange into another
series of the Corporation, if any, or another Scudder fund, may result in tax
consequences (gain or loss) to the shareholder and the proceeds of such
redemptions may be subject to backup withholding. (See "TAXES.")

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

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

If transactions at any time reduce a shareholder's account balance to
below $1,000 in value, the Corporation may notify the shareholder that, unless
the account balance is brought up to at least $1,000, the Corporation will
redeem all shares, close the account and send the redemption proceeds to the
shareholder. The shareholder has sixty days to bring the account balance up to
$1,000 before any action will be taken by the Fund. (This policy applies to
accounts of new shareholders, but does not apply to certain Special Plan
Accounts.)

FEATURES AND SERVICES OFFERED BY THE FUND

(See "Shareholder benefits" in the Fund's prospectus.)

The Pure No-Load(TM) Concept

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

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

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

A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual fund
can call itself a "no-load" fund only if the 12b-1 fee and/or service fee does
not exceed 0.25% of a fund's average annual net assets.

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<PAGE>

Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.

The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same amount
in a load fund that collects an 8.50% front-end load, a load fund that collects
only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25%
12b-1 and/or service fee. The hypothetical figures in the chart show the value
of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.

Scudder Load Fund with 0.75% No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund 0.25% 12b-1 Fee 12b-1 Fee
----- -------------------- --------------- --------------- ---------
<S> <C> <C> <C> <C>

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

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

20 67,275 61,557 58,672 64,282

</TABLE>

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

Dividend and Capital Gain Distribution Options

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

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

Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gains distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163.

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

19
<PAGE>

Scudder Funds Centers

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

Reports to Shareholders

The Corporation issues shareholders semiannual financial statements
(audited annually by independent accountants) including a list of investments
held and statements of assets and liabilities, statements of operations,
statements of changes in net assets and financial highlights.

Transaction Summaries

Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.

THE SCUDDER FAMILY OF FUNDS

(See "Investment products and services" in the Fund's prospectus.)

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

MONEY MARKET

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

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

INCOME

Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.

Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.

Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.

Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement

20
<PAGE>

of principal value by actively managing currency, bond market and
maturity exposure and by security selection.

Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate-and long-term
bonds.

Scudder Short Term Global Income Fund seeks to provide high current
income from a portfolio of high-grade money market instruments and
short-term bonds denominated in foreign currencies and the U.S. dollar.

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

TAX FREE MONEY MARKET

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

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

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

TAX FREE

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

GROWTH AND INCOME

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

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

GROWTH

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

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

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

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

Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.

Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.

Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.

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

22
<PAGE>

Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.

Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.

Scudder Quality Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.

Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.

Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.

The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.

The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.

The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; easy telephone exchanges
into other Scudder funds; shares redeemable at net asset value at any time.

SPECIAL PLAN ACCOUNTS

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

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

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

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

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

Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying

23
<PAGE>

organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.

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

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

Scudder IRA: Individual Retirement Account

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

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

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

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

<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution

Starting Annual Rate of Return
Age of ---------------------
Contributions 5% 10% 15%
------------- -- --- ---

25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>

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

24
<PAGE>

Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket

Starting Annual Rate of Return
Age of ---------------------
Contributions 5% 10% 15%
------------- -- --- ---
<S> <C> <C> <C>
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>

Scudder 403(b) Plan

Shares of the Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.

Automatic Withdrawal Plan

Non-retirement plan shareholders who currently own or purchase $10,000
or more of shares of the Fund may establish an Automatic Withdrawal Plan. The
investor can then receive monthly, quarterly or periodic redemptions from his or
her account for any designated amount of $50 or more. Payments are mailed at the
end of each month. The check amounts may be based on the redemption of a fixed
dollar amount, fixed share amount, percent of account value or declining
balance. The Plan provides for income dividends and capital gains distributions,
if any, to be reinvested in additional shares. Shares are then liquidated as
necessary to provide for withdrawal payments. Since the withdrawals are in
amounts selected by the investor and have no relationship to yield or income,
payments received cannot be considered as yield or income on the investment and
the resulting liquidations may deplete or possibly extinguish the initial
investment. Requests for increases in withdrawal amounts or to change payee must
be submitted in writing, signed exactly as the account is registered and contain
signature guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in the Fund's prospectus. Any such requests must
be received by the Fund's transfer agent by the 15th of the month in which such
change is to take effect. An Automatic Withdrawal Plan may be terminated at any
time by the shareholder, the Corporation or its agent on written notice, and
will be terminated when all shares of the Fund under the Plan have been
liquidated or upon receipt by the Corporation of notice of death of the
shareholder.

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

Group or Salary Deduction Plan

An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Corporation and its agents reserve the right to establish a
maintenance charge in the future depending on the services required by the
investor.

The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.

25
<PAGE>

Automatic Investment Plan

Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.

The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.

Uniform Transfers/Gifts to Minors Act

Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.

The Corporation reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.

Scudder Trust Company

Annual service fees are paid by the Fund to Scudder Trust Company, an
affiliate of the Adviser, for certain retirement plan accounts and are included
in the fees paid to the Transfer Agent.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

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

The Corporation intends to follow the practice of distributing
substantially all of the Fund's net investment income, including any excess of
net realized short-term capital gains over net realized long-term capital
losses. The Corporation intends to follow the practice of distributing the
entire excess of the Fund's net realized long-term capital gains over net
realized short-term capital losses. However, if it appears to be in the best
interest of the Fund and its shareholders, the Fund may retain all or part of
such gain for reinvestment after paying the related federal income taxes on
behalf of the shareholders.

The Corporation intends to distribute the Fund's net investment income
and any net realized short-term and long-term capital gains resulting from Fund
investment activity in December to prevent application of a federal excise tax.
An additional distribution may be made within three months of the Fund's fiscal
year end, if necessary. Both types of distributions will be made in shares of
the Fund and confirmations will be mailed to each shareholder unless a
shareholder has elected to receive cash, in which case a check will be sent.
Distributions are taxable, whether made in shares or cash (see "TAXES"). Any
distributions declared in October, November or December with a record date in
such a month and paid during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared.

26
<PAGE>

PERFORMANCE INFORMATION

(See "Distribution and performance information--Performance
information" in the Fund's prospectus.)

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

Average Annual Total Return

Average annual total return is the average annual compound rate of
return for the periods of one year, five years and the life of the Fund, ended
on the date of the most recent balance sheet. Average annual total return
quotations reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the respective periods were
reinvested in Fund shares. Average annual total return is calculated by
computing the average annual compound rates of return of a hypothetical
investment over such periods, according to the following formula (average annual
total return is then expressed as a percentage):

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

Where:

T = Average Annual Total Return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of the
periods of one year or the life of the Fund (or
fractional portion thereof).

Average Annual Total Return for periods ended June 30, 1995*

One Year Five Years Life of the Fund

7.50% 6.32% 2.26%(1)

(1) For the period September 2, 1988 (commencement of operations)
to June 30, 1995.

* If the Adviser had not absorbed a portion of Fund expenses and
had imposed a full management fee, the average annual total
return for the one year and five year periods ended June 30,
1995, and the life of the Fund would have been lower.

As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for the Fund will vary based on changes in market conditions and
the level of the Fund's expenses.

In connection with communicating its average annual total return to
current or prospective shareholders, the Fund also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.

Cumulative Total Return

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

27
<PAGE>

C = (ERV/P) - 1

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

Cumulative Total Return for periods ended June 30, 1995*

One Year Five Years Life of the Fund

7.50% 35.83% 16.50%(1)

(1) For the period September 2, 1988 (commencement of operations)
to June 30, 1995.

* If the Adviser had not absorbed a portion of Fund expenses and
had imposed a full management fee, the cumulative total return
for the one year and five year periods ended June 30, 1995,
and the life of the Fund would have been lower.

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

The Fund's performance is affected by changes in the prices of gold and
other precious metals, the level of stock prices generally, by the Adviser's
selection of securities for the portfolio, by the Fund's expense ratio and other
factors.

Because some of the Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against these currencies
may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future performance.

Total Return

Total return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total return.

Comparison of Fund Performance

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

From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value

28
<PAGE>

Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.

From time to time, in marketing and other Fund literature, Directors
and officers of the Fund, the Fund's portfolio manager, or members of the
portfolio management team may be depicted and quoted to give prospective and
current shareholders a better sense of the outlook and approach of those who
manage the Fund. In addition, the amount of assets that the Adviser has under
management in various geographical areas may be quoted in advertising and
marketing materials.

The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.

Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.

Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.

Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.

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

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

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

29
<PAGE>

American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.

Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.

CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.

Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.

Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.

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

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

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

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

Handy and Harman, a major New York-based gold fabricator and metal refiner that
issues public quotes on gold prices daily.

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

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

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

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

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

30
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.

USA Today, a leading national daily newspaper.

U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.

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

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

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

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

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

31
<PAGE>

FUND ORGANIZATION

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

The Corporation is a Maryland corporation organized in March 1988. The
Corporation currently offers shares of common stock of one investment fund which
represents interests in the Fund. The authorized capital stock of the
Corporation consists of 100 million shares of a par value of $0.01 each. Shares
are divided into classes, one of which represents interests in the one
investment fund currently offered by the Corporation. Shares of each class have
equal rights as to voting, redemption, dividends and liquidation. Shareholders
have one vote for each share held. All shares issued and outstanding are fully
paid and nonassessable, transferable, and redeemable at net asset value of the
relevant fund at the option of the shareholder. Shares have no preemptive or
conversion rights.

The shares of the Corporation have noncumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and, in such
event, the holders of the remaining less than 50% of the shares voting for the
election of directors will not be able to elect any person or persons to the
Board of Directors. Shareholders of the Corporation generally vote by class,
rather than in the aggregate, except with respect to the election of directors
and the selection of independent accountants.

The Articles of Incorporation provide that the Directors of the
Corporation shall not be liable for any action taken by them in good faith. The
By-Laws provide that the Corporation will indemnify Directors and officers of
the Corporation against liabilities and expenses actually incurred in connection
with litigation in which they may be involved because of their positions with
the Corporation. However, nothing in the Articles of Incorporation or the
By-Laws protects or indemnifies a Director or officer against any liability to
which he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.

INVESTMENT ADVISER

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

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

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

The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets over $11 billion and includes the
AARP Growth Trust, AARP Income Trust, AARP Tax Free Income Trust and AARP Cash
Investment Funds.

32
<PAGE>

The Adviser maintains a large research department, which conducts
continual studies of the factors that affect the position of various industries,
companies and individual securities. In this work, the Adviser utilizes certain
reports and statistics from a variety of sources, including brokers and dealers
who may execute portfolio transactions for the Fund and other clients of the
Adviser, but conclusions are based primarily on investigations and critical
analyses by the Adviser's own research specialists. However, the Adviser regards
this information and material as an adjunct to its own research activities. In
selecting the securities in which the Fund may invest, the conclusions and
investment decisions of the Adviser with respect to the Fund are based primarily
on the analyses of its own research department.

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

The investment advisory agreement with the Adviser (the "Agreement")
was last approved by the Directors on September 6, 1995 and by the shareholders
of the Fund on September 15, 1989. The Agreement is dated August 22, 1988 and
will continue in effect until September 30, 1996 and from year to year
thereafter only if its continuance is approved annually by the vote of a
majority of those Directors who are not parties to such Agreement or interested
persons of the Adviser or the Corporation, cast in person at a meeting called
for the purpose of voting on such approval, and either by vote of the
Corporation's Directors or of the outstanding voting securities of the Fund. The
Agreement may be terminated at any time without payment of penalty by either
party on 60 days' written notice, and automatically terminates in the event of
its assignment.

Under the Agreement, the Adviser regularly provides the Fund with
investment research, advice and supervision and continually furnishes an
investment program for the Fund's portfolio consistent with the Fund's
investment objective and policies and determines what securities shall be
purchased for the portfolio of the Fund, what portfolio securities shall be held
or sold by the Fund, and what portion of the Fund's assets shall be held
uninvested, subject to the provisions of the Corporation's Articles of
Incorporation and By-Laws and of the 1940 Act and to the Fund's investment
objective, policies and restrictions, and subject, further, to such policies and
instructions as the Directors of the Corporation may from time to time
establish. The Adviser also advises and assists the officers of the Corporation
in taking such steps as are necessary or appropriate to carry out the decisions
of its Directors and the appropriate committees of such Directors regarding the
conduct of the business of the Fund.

The Adviser pays the compensation and expenses of all officers and
executive employees of the Corporation and makes available, without expense to
the Corporation or the Fund, the services of such affiliated persons as may duly
be elected officers or Directors of the Corporation, subject to their individual
consent to serve and to any limitations imposed by law, and pays the
Corporation's office rent and provides investment advisory, research and
statistical facilities and all clerical services relating to research,
statistical and investment work. For these services the Fund pays the Adviser in
monthly installments an annual fee equal to approximately 1.0% of the average
daily net assets of the Fund on an annual basis.

The Agreement provides that the Adviser will reimburse the Fund for
annual expenses to the extent required by the lowest expense limitations imposed
by the states in which the Fund will offer its shares, although no payments are
required to be made by the Adviser pursuant to this reimbursement provision in
excess of the annual fee paid by the Fund to the Adviser. Management has been
advised that the lowest of such limitations is presently 2 1/2% of such net
assets up to $30 million, 2% of the next $70 million of such net assets and 1
1/2% of such net assets in excess of that amount. Certain expenses such as
brokerage commissions, taxes, extraordinary expenses and interest are excluded
from such limitation, and other expenses may be excluded from time to time. Any
such fee advance required to be returned to the Fund will be returned as
promptly as practicable after the end of the Fund's fiscal year. However, no fee
payment will be made to the Adviser during any fiscal year which will cause
year-to-date expenses to exceed the cumulative pro-rata expense limitation at
the time of such payment. For the fiscal year ended June 30, 1995, the Adviser
did not reimburse the Fund.

33
<PAGE>

Under the Agreement, the Fund is responsible for all of the other
expenses relating to its operations including clerical salaries; fees and
expenses incurred in connection with membership in investment company
organizations; broker's commissions; legal, auditing and accounting expenses;
taxes and governmental fees; the fees and expenses of the transfer agent; the
cost of preparing share certificates and any other expenses, including clerical
expenses of issuance, redemption or repurchase of shares; the expenses of and
the fees for registering or qualifying securities for sale; the fees and
expenses of the Directors of the Corporation who are not affiliated with the
Adviser; the cost of preparing and distributing reports and notices to
shareholders; and the fees and disbursements of custodians. The Fund may arrange
to have third parties assume all or part of the expenses of sale, underwriting
and distribution of shares of the Fund. The Fund is also responsible for its
expenses incurred in connection with litigation, proceedings and claims and the
legal obligation it may have to indemnify its officers and Directors with
respect thereto. Expenses incurred on a Corporation-wide basis will be allocated
pro rata among all investment funds of the Corporation, including the Fund, on
the basis of their relative net assets.

The Agreement expressly provides that the Adviser shall not be required
to pay a pricing agent for portfolio pricing services relating to the Fund, if
any.

The Agreement also provides that the Fund may use any name derived from
the name "Scudder, Stevens & Clark" only as long as the Agreement remains in
effect.

In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Directors of the Corporation who are not
"interested persons" of the Fund have been represented by independent counsel at
the Fund's expense. Willkie Farr & Gallagher serves as counsel for the Fund and
also for Scudder Investor Services, Inc.

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

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

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

Personal Investments by Employees of the Adviser

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

34
<PAGE>
<TABLE>
<CAPTION>

DIRECTORS AND OFFICERS

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

Daniel Pierce@# President and Director Chairman of the Board Vice President,
and Managing Director Director and Assistant
of Scudder, Stevens & Treasurer
Clark, Inc.

Thomas J. Devine Director Consultant --
641 Lexington Avenue
New York, NY 10022

Douglas M. Loudon+# Vice President and Managing Director of Senior Vice President
Director Scudder, Stevens &
Clark, Inc.

Dr. Gordon Shillinglaw Director Professor Emeritus of --
Columbia University Accounting, Columbia
196 Villard Avenue University Graduate
Hastings-on-Hudson, NY 10706 School of Business

Robert G. Stone, Jr. Director Chairman of the Board --
405 Lexington Avenue and Director, Kirby
39th Floor Corporation (marine
New York, NY 10174 transportation, diesel
repair and property and
casualty insurance in
Puerto Rico)

Jerard K. Hartman+ Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.

Thomas W. Joseph@ Vice President Principal of Scudder, Vice President,
Stevens & Clark, Inc. Director, Treasurer and
Assistant Clerk

David S. Lee@ Vice President Managing Director of President, Assistant
Scudder, Stevens & Treasurer and Director
Clark, Inc.

Thomas F. McDonough@ Vice President and Principal of Scudder, Clerk
Secretary Stevens & Clark, Inc.

Pamela A. McGrath@ Vice President and Principal of Scudder, --
Treasurer Stevens & Clark, Inc.

Edward J. O'Connell+ Vice President and Principal of Scudder, Assistant Treasurer
Assistant Treasurer Stevens & Clark, Inc.

Juris Padegs+ Vice President and Managing Director of Vice President and
Assistant Secretary Scudder, Stevens & Director
Clark, Inc.

35
<PAGE>
Position with
Position with Principal Underwriter, Scudder
Name and Address Corporation Occupation* Investor Services, Inc.
- ---------------- ----------- ----------- -----------------------

Kathryn L. Quirk+ Vice President and Managing Director of Vice President
Assistant Secretary Scudder, Stevens &
Clark, Inc.

Coleen Downs Dinneen@ Assistant Secretary Vice President of Assistant Clerk
Scudder, Stevens &
Clark, Inc.
<FN>

* Unless otherwise stated, all the Directors and officers have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
+ Address: 345 Park Avenue, New York, New York 10154
@ Address: Two International Place, Boston, Massachusetts 02110
# Messrs. Loudon and Pierce are members of the Executive Committee, which
may exercise all of the powers of the Directors when they are not in
session.
</FN>
</TABLE>

As of September 30, 1995 all Directors and officers of the Corporation
as a group owned beneficially (as the term is defined in Section 13(d) under the
Securities Exchange Act of 1934) less than 1% of the Fund.

As of September 30, 1995, 489,129 shares in the aggregate, 5.10% of the
outstanding shares of the Fund, were held in the name of Charles Schwab &
Company, 101 Montgomery Street, San Francisco, CA 94104-4122, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.

To the best of the Fund's knowledge, as of September 30, 1995, no person
owned beneficially more than 5% of the Fund's outstanding shares except as
stated above.

The Directors and officers of the Corporation also serve in similar
capacities with other Scudder funds.

REMUNERATION

Several of the officers and Directors of the Corporation may be
officers or employees of the Adviser or of Scudder Investor Services, Inc., from
whom they receive compensation, as a result of which they may be deemed to
participate in the fees paid to the Adviser. The Corporation pays no direct
remuneration to any officer of the Corporation. However, each of the
Corporation's Directors who is not affiliated with the Adviser will be
compensated for all expenses relating to Corporation business (specifically
including travel expenses relating to Corporation business). Each of these
unaffiliated Directors receives an annual Director's fee of $4,000 plus $400 for
attending each Directors' meeting, audit committee meeting or meeting held for
the purpose of considering arrangements between the Corporation and the Adviser
or any of its affiliates. Each unaffiliated Director also receives $150 per
committee meeting, other than an audit committee meeting or contract meeting,
attended. For the fiscal year ended June 30, 1995, such fees imposed totaled
$26,023.

The following Compensation Table provides, in tabular form, the following data:

Column (1) All Directors who receive compensation from the Corporation.
Column (2) Aggregate compensation received by a Director from the Corporation.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Fund Complex. Scudder Mutual Funds, Inc. does not pay its Directors
such benefits.
Column (5) Total compensation received by a Director from the
Corporation plus compensation received from all funds managed by the Adviser for
which a Director serves. The total number of funds from which a Director
receives such compensation is also provided in column (5). Generally,
compensation received by a Director for serving on the board of a closed-end
fund is greater than the compensation received by a Director for serving on the
board of an open-end fund.

36
<PAGE>
<TABLE>
<CAPTION>

Compensation Table
for the year ended December 31, 1994
=========================== ==================================== =================== ================ ===================
(1) (2) (3) (4) (5)

Total
Pension or Compensation From
Retirement Estimated the Corporation
Benefits Accrued Annual and Fund Complex
Name of Person, Aggregate Compensation from the As Part of Fund Benefits Upon Paid to Director
Position Corporation* Complex Expenses Retirement
=========================== ==================================== =================== ================ ===================
<S> <C> <C> <C> <C>

Thomas J. Devine, $ 8,200 N/A N/A $ 115,656
Director (16 funds)

Gordon Shillinglaw, $9,000 N/A N/A $ 89,570
Director (14 funds)

Robert G. Stone, Jr., $ 8,200 $6,289** $6,000** $134,438
Director (15 funds)

<FN>
* The Corporation consists of one fund: Scudder Gold Fund.
** Retirement benefits accrued and proposed to be paid as additional compensation for serving on the Board of
The Japan Fund, Inc.
</FN>
</TABLE>

DISTRIBUTOR

The Fund has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a wholly-owned
subsidiary of Scudder, Stevens & Clark, Inc., a Delaware corporation. The Fund's
underwriting agreement dated September 2, 1988 will remain in effect from year
to year thereafter only if its continuance is approved annually by a majority of
the members of the Directors who are not parties to such agreement or interested
persons of any such party and either by vote of a majority of the Board of
Directors or a majority of the outstanding voting securities of the Corporation.
The underwriting agreement was most recently approved by the Directors on
September 6, 1995.

Under the underwriting agreement, the Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the SEC of the registration statement and prospectus and any amendments and
supplements thereto relating to the Fund, the registration and qualification of
Fund shares for sale in the various states, including registering the Fund as a
broker/dealer in various states, as required; the fees and expenses of
preparing, printing and mailing prospectuses (see below for expenses relating to
prospectuses paid by the Distributor), notices, proxy statements, reports or
other communications (including newsletters) to shareholders of the Fund; the
cost of printing and mailing confirmations of purchases of Fund shares and the
prospectuses accompanying such confirmations; any issuance taxes or any initial
transfer taxes; a portion of shareholder toll-free telephone charges and
expenses of shareholder service representatives, the cost of wiring funds for
share purchases and redemptions (unless paid by the shareholder who initiates
the transaction); the cost of printing and postage of business reply envelopes;
and a portion of the cost of computer terminals used by both the Fund and the
Distributor.

The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the shares of
the Fund to the public and preparing, printing and mailing any other literature
or advertising in connection with the offering of shares of the Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
shareholder service representatives, a portion of the cost of computer
terminals, and of any activity which is primarily intended to result in the sale
of shares of the Fund issued by the Corporation.

Note: Although the Fund currently has no 12b-1 Plan and shareholder approval
would be required in order to adopt one, the underwriting agreement provides
that the Fund will also pay those fees and expenses permitted to be paid or
assumed by the Fund pursuant to a 12b-1 Plan, if any, adopted by the Fund,
notwithstanding any other provision to the contrary in the underwriting

37
<PAGE>

agreement, and the Fund or a third party will pay those fees and expenses not
specifically allocated to the Distributor in the underwriting agreement.

As agent, the Distributor will offer the Fund's shares on a continuous
basis to investors in all states. The underwriting agreement provides that the
Distributor accepts orders for Fund shares at net asset value as no sales
commission or load is charged the investor. The Distributor has made no firm
commitment to acquire shares of the Fund.

TAXES

(See "Distribution and performance information--Dividends and capital
gains distributions" and "Transaction information--Tax information,
Tax identification number" in the Fund's prospectus.)

The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), or a predecessor statute and has qualified as such since its inception.
It intends to continue to qualify for such treatment. Such qualification does
not involve governmental supervision or management of investment practices or
policy.

As a regulated investment company qualifying under Subchapter M of the
Code, the Fund is required to distribute to its shareholders at least 90 percent
of its investment company taxable income (including net short-term capital gain)
and generally is not subject to federal income tax to the extent that it
distributes annually its investment company taxable income and net realized
capital gains in the manner required under the Code.

Investment company taxable income generally is made of dividends,
interest, and net short-term capital gains in excess of net long-term capital
losses, less expenses. Net capital gains (the excess of net long-term capital
gain over net short-term capital loss) are computed by taking into account any
capital loss carryforward of the Fund.

In order to qualify as a regulated investment company, the Fund may
earn no more than 30% of its annual gross income from the sale of securities
held for less than three months. This requirement may limit the Fund's ability
to sell securities held for less than three months; effect short sales of
securities held for less than three months (or of substantially identical
securities); write options which expire in less than three months; and effect
closing transactions with respect to call or put options that have been written
or purchased within the preceding three months. In addition, no more than 10% of
the Fund's gross income may be from nonqualifying sources, including income from
investments in precious metals and precious metals futures and options
transactions. The Fund may therefore need to limit the extent to which it makes
such investments in order to qualify as a regulated investment company.

The Fund is subject to a 4% nondeductible excise tax calculated as a
percentage of certain undistributed amounts of taxable income and capital gain.
The Fund has established distribution policies which should minimize or
eliminate the application of this tax.

Distributions of taxable net investment income and the excess of net
short-term capital gain over net long-term capital loss are taxable to
shareholders as ordinary income.

Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to a shareholder as long-term capital gain,
regardless of the length of time the shareholder has held shares of the Fund.
Such distributions are not eligible for the dividends-received deduction. Any
loss realized upon the redemption of shares within six months from the date of
their purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.

Distributions of taxable net investment income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.

38
<PAGE>

All distributions of taxable net investment income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
October, November or December with a record date in such a month and paid during
the following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared.
Redemptions of shares, including exchanges for shares of another Scudder Fund,
may result in the recognition of gain or loss by the shareholder.

Distributions by the Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.

The Fund may qualify for and make an election which would allow
shareholders to claim a credit or deduction on their federal income tax returns
for foreign taxes paid by the Fund. Should the Fund elect to do so, shareholders
would be required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid by the Fund to foreign countries. The Fund
will be qualified to make the election if more than 50% of the value of the
total assets of the Fund at the close of its taxable year consists of securities
in foreign corporations. The foreign tax credit available to shareholders is
subject to certain limitations imposed by Section 904 of the Code. No deduction
for foreign taxes may be claimed by shareholders who do not itemize deductions
on their federal income tax returns, although any such shareholder may claim a
credit for foreign taxes and in any event will be treated as having taxable
income in respect to the shareholder's pro rata share of foreign taxes paid by
the Fund. For any year for which such an election is made, the Fund will report
to shareholders (no later than 60 days after the close of its fiscal year) the
amount per share of such foreign taxes that must be included in the
shareholder's gross income and will be available as a deduction or credit.

No gain or loss is recognized by the Fund upon payment of a premium in
connection with the purchase of a put or call option. The character of any gain
or loss recognized (i.e., long-term or short-term) will generally depend, in the
case of a lapse or sale of the option, on the Fund's holding period for the
option and, in the case of an exercise of the put option purchased by the Fund,
on the Fund's holding period for the underlying stock it sells pursuant to the
put option. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock in the Fund's portfolio. If the Fund writes a put or call
option, no gain or loss is recognized upon its receipt of a premium. If the
option lapses or is closed out, any gain or loss is treated as a short-term
capital gain or loss. If a purchaser exercises a call option written by the Fund
and such call option is exercised, the character of the gain or loss recognized
by the Fund will depend on the Fund's holding period for the underlying stock
sold pursuant to such exercise. The exercise of an equity put option written by
the Fund is not a taxable transaction for the Fund.

Many futures contracts (including foreign currency futures contracts)
entered into by the Fund, certain forward currency contracts, and all listed
nonequity options written or purchased by the Fund (including options on debt
securities, options on futures contracts, options on securities indexes and
options on broad-based stock indexes) will be considered "Section 1256"
contracts under the Code. Absent an election to the contrary, gain or loss
attributable to the lapse, exercise or closing out of any such position will be
treated as 60% long-term and 40% short-term. Moreover, on the last trading day
of the Fund's fiscal year, all outstanding Section 1256 positions will be marked
to market (i.e. treated as if such positions were closed out at their closing
price on such day), with any resulting gain or loss recognized. Under certain
circumstances, entry into a futures contract to sell a security held by the Fund
may constitute a short sale of that security for federal income tax purposes,
causing an adjustment in the Fund's holding period for that security.

Under Section 988 of the Code, discussed below, foreign currency gains
or loss from foreign currency related forward contracts, certain futures and
similar financial instruments entered into or acquired by a Fund will be treated
as ordinary income or loss.

39
<PAGE>

The Fund intends to invest up to 25% of its assets in a foreign
subsidiary of the Corporation which invests in gold, silver, platinum and
palladium bullion and in gold and silver coins. The Corporation intends that the
subsidiary be structured so that it will not be subject to tax in the U.S.
However, the Fund (or its shareholders) may be subject to tax on the income of
the subsidiary, regardless of whether the income is distributed to the Fund.

The Fund may invest in shares of certain foreign corporations which may
be classified under the Code as passive foreign investment companies ("PFICs").
If the Fund receives a so-called "excess distribution" with respect to PFIC
stock, the Fund itself may be subject to a tax on a portion of the excess
distribution. Certain distributions from a PFIC as well as gains from the sale
of the PFIC shares are treated as "excess distributions." In general, under the
PFIC rules, an excess distribution is treated as having been realized ratably
over the period during which the Fund held the PFIC shares. The Fund will be
subject to tax on the portion, if any, of an excess distribution that is
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Excess
distributions allocated to the current taxable year are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.

Proposed regulations have been issued which may allow the Fund to make
an election to mark to market its shares of these foreign investment companies
in lieu of being subject to U.S. federal income taxation. At the end of each
taxable year to which the election applies, the Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses may
be recognized. The effect of the election would be to treat excess distributions
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively, the Fund may
elect to include as income and gain its share of the ordinary earnings and net
capital gain of certain foreign investment companies in lieu of being taxed in
the manner described above.

Backup withholding may be required if the Fund is notified by the IRS
or a broker that the taxpayer identification number furnished by the shareholder
is incorrect or that the shareholder has previously failed to report interest or
dividend income.

Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions
made for the previous year.

The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. domestic corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.

Shareholders should consult their tax advisors about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.

PORTFOLIO TRANSACTIONS

Brokerage Commissions

To the maximum extent feasible, the Adviser places orders for portfolio
transactions for the Fund through the Distributor which in turn places orders on
behalf of the Fund with other brokers/dealers. The Distributor receives no
commission, fees or other remuneration from the Fund for this service.
Allocation of brokerage is supervised by the Adviser.

The primary objective of the Adviser in placing orders for the purchase
and sale of assets for the Fund's portfolio is to obtain the most favorable net
results taking into account such factors as price, commission where applicable

40
<PAGE>

(which is negotiable in the case of U.S. national securities exchange
transactions but which is generally fixed in the case of foreign exchange
transactions), size of order, difficulty of execution and skill required of the
executing broker/dealer. The Adviser seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable) through
the familiarity of the Distributor with commissions charged on comparable
transactions, as well as by comparing commissions paid by the Fund to reported
commissions paid by others. The Adviser reviews on a routine basis commission
rates, execution and settlement services performed, making internal and external
comparisons.

When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
brokers/dealers who supply market quotations to the Custodian for appraisal
purposes, or who supply research, market and statistical information to the
Corporation, the Fund or the Adviser. The term "research, market and statistical
information" includes advice as to the value of securities, the advisability of
investing in, purchasing or selling securities; the availability of securities
or purchasers or sellers of securities; and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. The Adviser is not
authorized when placing portfolio transactions for the Fund to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might charge for executing the same transaction solely on account of the receipt
of research, market or statistical information. The Adviser does not place
orders with brokers/dealers on the basis that the broker/dealer has or has not
sold shares of the Corporation. Except for implementing the policy stated above,
there is no intention to place portfolio transactions with particular brokers or
dealers or groups thereof. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.

Subject also to obtaining the most favorable net results, the Adviser
may place brokerage transactions with Bear, Stearns & Co. A credit will be given
against the fee due to the Custodian on behalf of the Fund equal to one-half of
the commission on any such transaction.

Although certain research, market and statistical information from
brokers/dealers may be useful to the Corporation, the Fund and to the Adviser,
it is the opinion of the Adviser that such information is only supplementary to
the Adviser's own research effort, since the information must still be analyzed,
weighed, and reviewed by the Adviser's staff. Such information may be useful to
the Adviser in providing services to clients other than the Corporation and the
Fund, and not all such information is used by the Adviser in connection with the
Fund of the Corporation. Conversely, such information provided to the Adviser by
brokers/dealers through whom other clients of the Adviser effect securities
transactions may be useful to the Adviser in providing services to the
Corporation and the Fund.

In the fiscal years ended June 30, 1995, 1994 and 1993 the Fund paid
brokerage commissions of $341,830, $351,746 and $222,312, respectively. For the
fiscal year ended June 30, 1995, $68,379 (20.0%) of the total brokerage
commissions paid ($341,830) by the Fund resulted from orders placed, consistent
with the policy of obtaining the most favorable net results, with
brokers/dealers who provided supplementary research, market and statistical
information to the Fund or the Adviser. The amount of such transactions
aggregated $25,398,399 (17.6%) of all brokerage transactions. Such brokerage was
not allocated to any particular brokers or dealers or with any regard to the
provision of market quotations for purposes of valuing the Fund's portfolio or
to any other special factors.

The Directors intend to review from time to time whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable.

Portfolio Turnover

The Fund's portfolio turnover rates (defined by the SEC as the ratio of
the lesser of sales or purchases of securities to the monthly average value of
the portfolio, excluding all securities with remaining maturities of less than
one year) for the two fiscal years ended June 30, 1994 and 1995, were 50.8% and
42.0%, respectively.

41
<PAGE>

NET ASSET VALUE

The net asset value of shares of the Fund is computed as of the close
of regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share is determined by dividing
the value of the total assets of the Fund, less all liabilities, by the total
number of shares outstanding.

An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system is
valued at its most recent sale price. Lacking any sales, the security is valued
at the high or "inside" bid quotation. The value of an equity security not
quoted on the NASDAQ System, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.

Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.

An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.

If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.

If, in the opinion of the Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.

Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.

ADDITIONAL INFORMATION
Experts

The Financial Highlights of the Fund included in the Prospectus and the
Financial Statements incorporated by reference in this Statement of Additional
Information have been so included or incorporated by reference in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.

42
<PAGE>

Other Information

Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the Fund's objectives and policies,
and other factors, such as its other portfolio holdings and tax considerations
and should not be construed as recommendations for similar action by other
investors.

The Corporation sends to each shareholder of the Fund audited
semiannual and annual reports, each of which includes a list of the investment
securities held by the Fund. Shareholders may seek information regarding the
Corporation, including the current performance of the Fund from their Scudder
service representative. The CUSIP number of the Fund is 810904-10-2.

The Corporation employs State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02101 as custodian for the Fund. State
Street Bank and Trust Company has entered into agreements with foreign
subcustodians approved by the Directors of the Corporation pursuant to Rule
17f-5 of the 1940 Act.

Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a wholly-owned subsidiary of the Adviser, is
the transfer and dividend paying agent for the Fund. Service Corporation also
serves as shareholder service agent and provides subaccounting and recordkeeping
services for shareholder accounts in certain retirement and employee benefit
plans. The Fund pays Service Corporation an annual fee of $17.55 for each
account maintained for a participant. For the fiscal year end June 30, 1995
Service Corporation charged the Fund aggregate fees of $301,455, of which
$23,220 is unpaid at June 30, 1995.

Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02110-4103, a wholly-owned subsidiary of the Adviser,
computes net asset value for the Fund. The Fund pays SFAC an annual fee equal to
0.025% of the first $150 million of average daily net assets, 0.0075% of such
assets on the next $850 million, 0.0045% of such assets in excess of $1 billion,
plus holding and transaction charges for this service. For the period ended June
30, 1995, the amount charged to the Fund by SFAC aggregated $13,007, of which
$4,016 is unpaid at June 30, 1995.

The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement of the Corporation
relating to the Fund that has been filed with the SEC under the Securities Act
of 1933 and reference is hereby made to the Registration Statement for further
information with respect to the Fund and the securities offered hereby. This
Registration Statement is available for inspection by the public at the SEC in
Washington, D.C.

FINANCIAL STATEMENTS

The financial statements, including the investment portfolio, of
Scudder Gold Fund, which are included on pages 9 through 22, inclusive, in the
Annual Report to the Shareholders of the Fund dated June 30, 1995, together with
the Report of Independent Accountants, and Supplementary Information, are
incorporated by reference and attached hereto, and are hereby deemed to be a
part of this Statement of Additional Information.

43
<PAGE>

DESCRIPTION OF S&P AND MOODY'S RATINGS

Description of S&P preferred stock and corporate bond ratings:

AAA--Preferred stock and bonds rated AAA have the highest rating
assigned by S&P to a preferred stock issue or debt obligation. Capacity to pay
the preferred stock obligations, in the case of preferred stocks, and to pay
interest and repay principal, in the case of bonds, is extremely strong.

AA--Preferred stock and bonds rated AA have a very strong capacity to
pay the preferred stock obligations, in the case of preferred stocks, and to pay
interest and repay principal, in the case of bonds, and differ from the highest
rated issues only in small degree.

A--Preferred stock and bonds rated A have a strong capacity to pay the
preferred stock obligations, in the case of preferred stocks, and to pay
interest and repay principal, in the case of bonds, although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than preferred stocks or bonds in higher rated categories.

BBB--Preferred stock and bonds rated BBB are regarded as having an
adequate capacity to pay the preferred stock obligations, in the case of
preferred stocks, and to pay interest and repay principal, in the case of bonds.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay preferred stock obligations or to pay interest and repay
principal for bonds in this category than for preferred stocks or bonds in
higher rated categories.

Description of Moody's preferred stock ratings:

aaa--An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.

aa--An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.

a--An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.

baa--An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.

Description of Moody's corporate bond ratings:

Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa Group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

44
<PAGE>

Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

45
<PAGE>

Scudder
Gold
Fund

Annual Report
June 30, 1995

o A convenient and cost-effective way to broaden a portfolio of stocks,
bonds,and money market investments. Offers potential for maximum return
from a portfolio of gold and gold-related investments in exchange for
above-average risk.

o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares. This information must be preceded or accompanied by a current
prospectus. Portfolio changes should not be considered recommendations for
action by individual investors.

This information must be preceded or accompanied by a current prospectus.

Portfolio changes should not be considered recommendations for action by
individual investors.

<PAGE>

SCUDDER GOLD FUND

CONTENTS

2 In Brief

3 Letter from the Fund's President

4 Performance Update

5 Portfolio Summary

6 Portfolio Management Discussion

9 Investment Portfolio

14 Consolidated Financial Statements

17 Consolidated Financial Highlights

18 Notes to Consolidated Financial Statements

23 Report of Independent Accountants

24 Tax Information

25 Officers and Directors

26 Investment Products and Services

27 How to Contact Scudder

IN BRIEF

o After a lackluster 1994, the stock prices of gold producers rose during the
first half of 1995, and Scudder Gold Fund provided a total return of 7.50%
for its fiscal year ended June 30, 1995.

(BAR CHART TITLE)
Total Returns for Gold and Gold Funds
(Periods ended June 30, 1995)

(BAR CHART DATA)
-------------------------------------------------------
6 months 12 months
-------------------------------------------------------
Gold Bullion, 1.20% -0.30%
London p.m. fix
------------------------------------------------------
Platinum, free 6.0% 9.54%
market price
-------------------------------------------------------
Toronto Stock 11.32% 11.86%
Exchange Gold Index
-------------------------------------------------------
Johannesburg -28.50% -30.42%
(South Africa)
Stock Exchange
Gold Index
-------------------------------------------------------
Lipper Average 1.75% -0.15%
for Gold-Oriented
Funds
-------------------------------------------------------
Scudder Gold Fund 9.91% 7.50%
-------------------------------------------------------

Past performance does not guarantee future results.

o The price of gold continued to fluctuate in a narrow range, although on a
gradually upward trend.

o During its fiscal year ended June 30, Scudder Gold Fund kept bullion
holdings at a minimum and shifted emphasis to medium- and lower-cost
producers, given the relatively stable path of gold prices.

2
<PAGE>

LETTER FROM THE FUND'S PRESIDENT

Dear Shareholders,

The first six months of 1995 have witnessed impressive performance by both
the U.S. stock and bond markets, while gold has lagged on a relative basis. Some
investors may be asking themselves whether gold is still a worthwhile
investment. Putting aside for a moment the distinctions between gold, gold
stocks, and Scudder Gold Fund, we believe the answer is an emphatic "yes."

Of course, one of gold's historic attractions has always been its rarity.
It is interesting to note that all of the gold ever mined could fit into the
Washington monument. And gold is expensive, requiring the movement of tons of
earth to produce a single ounce. But more important to investors is gold's value
as a portfolio diversifier. Gold often moves independently of other financial
markets, including currencies. Additionally, gold is often viewed as a hedge
against inflation. Over time, gold-based securities have tended to increase in
value during periods of economic and political uncertainty, and as inflationary
concerns have risen.

Paralleling gold's value--and sometimes exceeding its returns--are gold
stocks and the gold mutual funds that own them. Scudder Gold Fund provides a
convenient vehicle to participate in the long-term success of gold mining
companies around the world. The Fund often tracks these firms over a long period
of time. For example, Lead Portfolio Manager Douglas D. Donald has followed
FirstMiss Gold of Nevada, recently one of the Fund's leading performers, for
over 30 years.

At Scudder, we seek to use our expertise to find special "stories,"
companies that are not widely owned and which may promise exciting mineral finds
in the future. As gold's price tracks slowly and steadily upward--as it has
during the past year--we hope you share our excitement in the possibilities of
the long-term explorations and discoveries of gold producers worldwide. If you
have questions about Scudder Gold Fund, please call a Scudder Investor Relations
representative at 1-800-225-2470. Thank you for investing with us.

Sincerely,

/s/Daniel Pierce
Daniel Pierce
President,
Scudder Gold Fund

3
<PAGE>

Scudder Gold Fund
Performance Update as of June 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Gold Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,750 7.50% 7.50%
5 Year $13,583 35.83% 6.32%
Life of
Fund* $11,650 16.50% 2.26%

S&P 500 Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $12,607 26.07% 26.07%
5 Year $17,693 76.93% 12.08%
Life of
Fund* $24,762 147.62% 14.39%

* The Fund commenced operations on September 2, 1988.
Index comparisons begin September 30, 1988.

A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:

Yearly periods ended June 30

Scudder Gold Fund
Year Amount
- ----------------------
9/30/88 10000
89 9256
90 9005
91 8705
92 8106
93 10699
94 11378
95 12231

S&P 500 Index
Year Amount
- ----------------------
9/30/88 10000
89 12014
90 13995
91 15030
92 17046
93 19369
94 19641
95 24762

The Standard & Poor's (S&P) 500 Index is a capitalization-
weighted measure of 500 widely held common stocks listed on
the New York Stock Exchange, American Stock Exchange, and
Over-The-Counter market. Index returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or
expenses.

- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------

A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.

Yearly periods ended June 30
- ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
1989* 1990 1991 1992 1993 1994 1995
---------------------------------------------------------
Net Asset Value..... $10.58 $10.21 $ 9.87 $ 9.19 $12.13 $12.64 $12.86
Income Dividends.... $ -- $ .01 -- $ -- $ -- $ .24 $ .25
Capital Gains &
Other Distributions. $ -- $ .09 $ -- $ -- $ -- $ -- $ .47
Fund Total
Return (%).......... -11.83 -2.71 -3.33 -6.89 31.99 6.35 7.50
Index Total
Return (%).......... 20.11 16.45 7.37 13.39 13.61 1.40 26.07
</TABLE>

All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares when redeemed may be worth more or less than when purchased.
If the Adviser had not temporarily capped expenses, the average annual
total return for the five year and life of fund periods would have been lower.

4
<PAGE>

Portfolio Summary as of June 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
As a percentage of net assets

Equity Securities 93% The Fund is now focusing on moderate-
Precious Metals 5% to lower-cost producers, and keeping
Cash Equivalents, net 2% bullion holdings to a minimum.
----
100%
====

A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.

- --------------------------------------------------------------------------
Quality Distribution
- --------------------------------------------------------------------------
Tier breakdown of the Fund's common stocks

Tier I Premier gold producing
companies 26%
Tier II Major established gold
producers 33% Several Tier V companies, such as
Tier III Junior gold producers Bre-X -- a Canadian company exploring
with medium cost in Indonesia -- have rewarded the Fund
production 15% with substantial growth.
Tier IV Companies with some
gold production on
stream or in startup 8%
Tier V Primarily exploration
companies with or
without mineral
reserves 18%
----
100%
====

A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.

- --------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------
1. Stillwater Mining Co.
Exploration and development of mines in Montana producing
platinum, palladium and associated metals
2. Pioneer Group Inc.
Fund management company owning major gold producer in Ghana
3. Hemlo Gold Mines, Inc.
Large gold producer, with single mine in Ontario; active exploration
company
4. Ashanti Goldfields Co., Ltd. (ADS)
World class gold producer in Ghana
5. Placer Dome Inc.
International gold, silver, and copper mining
6. Santa Fe Pacific Gold Corp.
Major domestic gold mining company
7. Newmont Mining Corp.
International gold exploration and mining company
8. Euro Nevada Mining, Ltd.
Large North American royalty owner
9. Cambior, Inc.
Medium-sized gold producer bringing into production a major mine
in Guyana
10. Rayrock Yellowknife Resources, Inc.
Junior diversified mineral producer with operations in Nevada,
Canada and Latin America

Three of our top ten holdings, Stillwater Mining, Pioneer Group, and
Ashanti Goldfields, were significant contributors to the Fund's positive
performance.

For more complete details about the Fund's Investment Portfolio, see page 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.

5
<PAGE>

PORTFOLIO MANAGEMENT DISCUSSION

SCUDDER GOLD FUND
PORTFOLIO MANAGEMENT DISCUSSION

Dear Shareholders,

The prices of many gold stocks appreciated during Scudder Gold Fund's most
recent fiscal year ended June 30, 1995. After taking a wait-and-see stance
during the last half of 1994, gold bullion and gold stocks began to move up
during the first half of this year. Reflecting this improved environment,
Scudder Gold Fund posted a 7.50% total return for the 12 months ended June 30.
An increase in the Fund's net asset value from $12.64 on June 30, 1994, to
$12.86 on June 30, 1995, plus $0.248 per share in income and $0.465 in capital
gain distributions combined to produce the positive return. Though it failed to
keep pace with broad stock market averages, the Fund performed well relative to
its peers, as shown in the chart below.

Scudder Gold Fund's Average Annual Return
Versus the Averages of Similar Funds*
(Returns for periods ended June 30, 1995)

Period Scudder Gold Fund Lipper Average Number of Funds tracked
------------------------------------------------------------------------------
1 year 7.50% (0.15)% 37
------------------------------------------------------------------------------
2 years 6.92 (0.25) 31
------------------------------------------------------------------------------
3 years 14.70 11.31 30
------------------------------------------------------------------------------
4 years 8.87 6.26 29
------------------------------------------------------------------------------
5 years 6.32 3.92 26
------------------------------------------------------------------------------
Life of Fund 2.26 3.47 25

Performance statistics compiled by Lipper Analytical Services, Inc.

* Past performance is no guarantee of future results.

Demand Steady As Supply Trails

Gold's narrow-ranged price movement during the past 12 months contrasts
with a year ago, when bullion prices were fluctuating widely. As mentioned in
earlier reports, we believe this narrower range reflects investor uncertainty
concerning the direction of gold prices. Gold bullion ranged in price from $375
to $397 per ounce during the year. Though close to $400 an ounce at times, gold
failed to break this psychological barrier. This is because each time the price
of gold approached $400, gold producers began to "sell forward" heavily.
(Selling forward occurs when producers sell on the marketplace gold that will
not be mined for between six months and four years.) Despite this difficulty,
the base price of bullion generally moved higher during the Fund's fiscal year.
Helping nudge prices higher has been a steady if undramatic consumer demand for
gold. In 1994, jewelry demand grew by 1.3%, while total fabrication demand was
about the same as in 1993. We believe that gold will break the $400 barrier in
the near future.

6
<PAGE>

While demand has been steady, world mine production declined marginally in
1994 for the first time in 17 years. Mine production in South Africa (35% of
world production) declined because of productivity problems. We estimate that
South Africa's production will drop an additional 5% to 10% in 1995. Other
factors have trimmed overall gold supply: Bank sales, also known as "net
official sales," dropped precipitously from 488 tons in 1993 to 86 tons in 1994.
Forward sales declined, and old gold scrap, a very important source of supply,
did not come close to compensating for these declines. We expect that 1995's
world production figure will show a further decline.

Steady demand for gold, along with a decrease in supply, should continue to
nudge gold's price upward, as has been the case since 1993. In 1993 and 1994,
the average price for bullion was $360 and $384 an ounce, respectively. For
1995, we expect an average price of $390 an ounce.

Portfolio Review

During the course of the year, we shifted our emphasis from high-cost
gold producers to moderate- and low-cost producers. In an environment of large
price "spikes," high-cost producers often benefit through large percentage gains
in profits. But if the current environment of stable gold prices persists,
moderate- to low-cost producers will benefit from profit margins that are, of
course, wider than those of high-cost producers. We have also continued to
de-emphasize gold bullion, which now makes up approximately 3% of the Fund's
portfolio.

The Fund drew its recent gains primarily from five key positions, three
of which are among the Fund's top ten holdings (see page 5 for more
information): Stillwater Mining, FirstMiss Gold, Ashanti Goldfields, Bre-X, and
Pioneer Group. In particular, Bre-X, a Canadian company exploring in Indonesia,
illustrates the tremendous gains a Tier V (primarily exploration companies with
or without mineral reserves) stock can make in a short time. As of June 30, the
value of our Bre-X position was five times what it was when we purchased this
stock less than a year ago.

7
<PAGE>

Another reason for the Fund's strong performance was our strategy for
dealing with Tier IV and V companies that suffer sharp price declines. When
these declines occur, we review the fundamental health of these companies, and
if they remain fundamentally sound, we increase our position. Over time, we have
found this strategy often reduces the average cost of the position, and
sometimes results in significant gains. Three holdings where we have
successfully pursued this strategy are Southernera, Crown Resources, and
Crystallex.

Additionally, we began to take a positive interest in South African
mines during the first half of this year as prices of the country's gold stocks
declined. The Johannesburg (South Africa) Stock Exchange Gold Index declined 28%
in the first half of 1995. This compares with the Toronto Stock Exchange Gold
Index's gain of almost 12% during the same period. We have added to the Fund's
portfolio two of the largest and richest mining companies in the world--South
Africa's Free State Consolidated Gold Mining and Driefontein Consolidated. South
African gold mining firms are currently pursuing major improvements in
efficiency and cost structure as the country moves further away from apartheid.
We anticipate, for example, that South African mines will eventually move to a
7-day work week to increase productivity while they make improvements in social
conditions for miners. As we monitor the progress of South Africa's mining
companies we stand ready to add to the Fund's position as conditions warrant.

In light of our outlook for steady demand for gold and somewhat
diminished supply, we believe Scudder Gold Fund is well-positioned to benefit
from what we believe will be a slow but steady increase in the price of gold
during the remainder of this year. The Fund remains an appropriate investment
for those seeking diversification, a hedge against inflation, and participation
in the world's gold and precious metals markets.

Sincerely,

Your Portfolio Management Team

/s/Douglas D.Donald /s/William J. Wallace

Douglas D. Donald William J. Wallace

Scudder Gold Fund:
A Team Approach to Investing

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

Lead Portfolio Manager Douglas D. Donald has been responsible for Scudder
Gold Fund's day-to-day management since its inception in 1988. Doug, who joined
Scudder in 1964, has more than 40 years of experience with investments in
precious metals and mining. William J. Wallace, Portfolio Manager, has been a
member of Scudder Gold Fund's team since 1991 and also serves as a Portfolio
Manager for Scudder Value Fund. Bill, who has 15 years of investment experience,
contributes expertise in quantitative analysis.

8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of June 30, 1995
- -----------------------------------------------------------------------------------------------------
<CAPTION>

% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
1.1% REPURCHASE AGREEMENTS
----------------------------------------------------------------------------
1,364,000 Repurchase Agreement with State Street Bank
and Trust Company dated 6/30/95 at 6%,
to be repurchased on 7/3/95 at $1,364,682,
collateralized by a $1,360,000 U.S. Treasury
Note, 6.875%, 10/31/96 (Cost $1,364,000)........... 1,364,000
-----------
----------------------------------------------------------------------------
3.4% CONVERTIBLE BONDS
----------------------------------------------------------------------------
AUSTRALIA 0.7% 800,000 Golden Shamrock Mines Ltd., 7.5%, 5/9/00 (e)........ 864,000
-----------
CANADA 0.6% 500,000 Dayton Mining Corp., 7%, 1/31/99.................... 760,000
-----------
UNITED STATES 2.1% 500,000 Bema Gold Corp., 7.5%, 2/28/00...................... 540,000
2,500,000 Horsham Corp., 3.25%, 12/10/18...................... 2,200,000
-----------
2,740,000
-----------

TOTAL CONVERTIBLE BONDS (Cost $4,210,000) 4,364,000
-----------
----------------------------------------------------------------------------
89.5% COMMON STOCKS
----------------------------------------------------------------------------
Shares
----------------------------------------------------------------------------
AUSTRALIA 10.5% 600,000 Acacia Resources Ltd.* (Gold and mineral
exploration company with operations
throughout Australia).............................. 1,058,171
1,000,000 Climax Mining Ltd.* (Gold exploration
company in Australia and the Philippines
Islands)........................................... 796,473
500,000 Delta Gold NL* (Emerging junior exploration
company with important platinum property
in Zimbabwe)....................................... 931,589
2,500,000 Gold Mines of Kalgoorlie (Major gold producer)...... 2,240,080
400,000 Newcrest Mining, Ltd. (Senior gold
producer and exploration company).................. 1,692,505
550,000 Orion Resources* (Junior exploration company)....... 508,463
1,133,976 Poseidon Gold Ltd. (Growing Tier III
gold producer)..................................... 2,290,209
700,000 Ranger Minerals NL* (Gold producer and
exploration company in Ghana)...................... 1,642,725
1,600,000 Ross Mining NL (Junior exploration company)......... 1,240,222
625,000 Zapopan NL "A"* (Small emerging gold producer)...... 888,920
-----------
13,289,357
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

SCUDDER GOLD FUND
- -----------------------------------------------------------------------------------------------------
<CAPTION>

% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

CANADA 49.0% 200,000 Agnico-Eagle Mines, Ltd. (Silver and
gold mining)....................................... 2,675,354
400,000 Arequipa Resources (Exploration company
in Peru)........................................... 416,409
107,399 Barrick Gold Corp. (Gold exploration and
production in North and South America)............. 2,711,825
241,500 Bema Gold Corp.* (Partner in development
of large Chilean gold deposit)..................... 492,265
536,600 Bolivar Goldfields Ltd.* (Gold exploration
company in Venezuela).............................. 703,149
100,000 Bre-X Minerals Ltd.* (Gold exploration
company in Indonesia).............................. 545,991
250,000 Bre-X Minerals Ltd. Warrants*
(expire 5/21/96) (c)............................... 953,664
275,000 Cambior, Inc. (Medium-sized gold producer
with a major mine in Guyana)....................... 3,403,341
670,600 Canarc Resources Corp.* (Exploration and
development company)............................... 1,025,196
415,700 Carson Gold Corp.* (Gold exploration
and development company operating
in Venezuela)...................................... 544,724
312,500 Carson Gold Corp. Warrants*
(expire 12/23/95) (c).............................. 11,375
400,000 Chase Resource Corp. (Acquisition,
exploration and development of resource
mineral properties)................................ 585,302
250,000 Crown Butte Resources Ltd.* (Small exploration
company holding an important gold deposit
in Montana)........................................ 641,539
200,000 Crystallex International Corp.* (Junior
company developing gold property
in Venezuela)...................................... 433,881
267,000 Crystallex International Corp. Units*
(expire 9/29/96) (c) (d)........................... 629,845
300,000 Da Capo Resources Ltd.* (Mineral
exploration and development
company in Bolivia)................................ 622,429
125,000 Da Capo Resources Ltd. Warrants*
(expire 10/31/95) (c).............................. 16,198
250,000 Dayton Mining Corp.* (Junior company
developing Chilean gold deposits).................. 855,385
223,000 Dundee Bancorp Inc.* (Junior mine finance
and holding company)............................... 1,968,387
1,023,800 Ecuadorian Minerals Corp.* (Exploration
company in Ecuador)................................ 931,642
100,000 Ecuadorian Minerals Corp. Warrants*
(expire 3/24/96 ) (c).............................. 21,840
</TABLE>

The accompanying notes are an integral part of the financial statements.

INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------
<CAPTION>

% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

874,000 El Callao Mining Corp.* (Gold exploration
and development company with interests
in Venezuela)...................................... 604,448
112,700 Euro Nevada Mining Ltd. (Large North
American royalty owner)............................ 3,445,856
267,100 Golden Knight Resources, Inc. (Junior gold
producer, in Quebec)............................... 1,701,398
300,000 Golden Star Resources Ltd.* (Junior company,
with permits in North and South America
and West Africa)................................... 2,156,663
700,000 Granges, Inc.* (Emerging junior gold
producer and exploration company).................. 1,177,156
360,000 Guyanor Resources S.A. "B" (Company
holding interests in mineral properties in
French Guiana)..................................... 812,434
450,000 Hemlo Gold Mines, Inc. (Large gold
producer, with single mine in Ontario;
active exploration company)........................ 4,832,017
300,000 International Gold Resources Corp.*
(Exploration company in Ghana)..................... 1,048,302
375,000 Kinross Gold Corp.* (Gold mining company,
with interests in Zimbabwe)........................ 2,798,202
550,000 Minera Rayrock Inc. "A"* (Company developing
a low cost property in Chile)...................... 660,649
100,000 Minera Rayrock Inc. "B"*............................ 123,758
750,000 Mutual Resources Ltd.* (Holder of gold
prospects in West Africa).......................... 649,729
400,000 Namibian Minerals Corp.* (Diamond
exploration and development company,
offshore Namibia).................................. 647,909
125,000 Namibian Minerals Corp. Warrants*
(expire 12/6/95) (c)............................... 8,645
300,000 Orvana Minerals Corp.* (International
exploration and development company)............... 1,091,981
40,000 Pan African Resources Corp.*
(Gold exploration in West Africa) (c).............. 20,384
400,000 Pangea Goldfields Inc.* (Gold exploration
company operating in Tanzania)..................... 669,748
200,000 Pangea Goldfields Inc. Warrants*
(expire 9/22/95) (c)............................... 2,912
170,000 Placer Dome Inc. (International gold, silver
and copper mining)................................. 4,441,250
150,000 Prime Resources Group, Inc.* (Junior gold
producer in British Columbia)...................... 1,037,382
300,000 Rayrock Yellowknife Resources, Inc.* (Junior
diversified mineral producer with operations
in Nevada, Canada and Latin America)............... 3,275,944
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
SCUDDER GOLD FUND
- -----------------------------------------------------------------------------------------------------
<CAPTION>

% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
300,000 Redfern Resources Ltd.* (Exploration company
in British Columbia)............................... 384,377
672,700 Repadre Capital Corp.* (Junior gold
royalty company)................................... 1,885,411
518,300 Solitario Resources Corp.* (Precious and
base metals exploration company primarily
in Argentina and Peru)............................. 611,252
7,053 Solitario Resources Corp. Warrants*
(expire 3/3/96) (c)................................ 1,848
240,000 Southernera Resources Ltd.* (Diamond
exploration company)............................... 803,698
125,000 Southwestern Gold Corp. (Multiple gold and
gold/copper exploration properties in Peru)........ 978,233
400,000 TVX Gold, Inc.* (International gold
and silver mining)................................. 2,875,551
350,000 Texas Star Resources Corp.* (Diamond
exploration in Arkansas and northern Canada)....... 132,494
225,000 Texas Star Resources Corp. *(c)..................... 163,797
400,000 Triton Mining Corp.* (Exploration and
development of mineral properties in Central
and South America)................................. 1,339,497
270,000 Viceroy Resources Corp.* (Gold producer
in California)..................................... 1,375,896
-----------
61,948,562
-----------
SOUTH AFRICA 3.1% 100,000 Driefontein Consolidated Ltd. (ADR)
(Gold mining and exploration)...................... 1,384,375
100,000 Free State Consolidated Gold Mining Ltd.
(ADR)(Gold mining company)......................... 1,237,500
192,355 Potgietersrust Platinum Holdings, Ltd. (Leading
platinum producer)................................. 1,296,032
-----------
3,917,907
-----------
UNITED STATES 26.9% 200,000 Ashanti Goldfields Co., Ltd. (ADS) (World
class gold producer in Ghana)...................... 4,525,000
324,000 Crown Resources Corp.* (Gold, silver and
mineral exploration company)....................... 1,498,500
200,000 FMC Gold Co. (Medium-sized producer of
gold and silver in Nevada)......................... 800,000
161,200 FirstMiss Gold Inc.* (Gold mining in Nevada)........ 3,224,000
150,000 Homestake Mining Co. (Major international
gold producer)..................................... 2,475,000
100,000 Newmont Mining Corp. (International gold
exploration and mining company).................... 4,187,500
759,000 Piedmont Mining Co.* (Gold and mining
development company in the Carolinas).............. 332,063
</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------
<CAPTION>

% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

214,000 Pioneer Group Inc. (Fund management
company owning major gold producer
in Ghana).......................................... 5,751,250
350,001 Santa Fe Pacific Gold Corp. (Major domestic
gold mining company)............................... 4,243,762
250,000 Stillwater Mining Co. (Exploration and
development of mines in Montana producing
platinum, palladium and associated metals) (e)..... 6,953,120
-----------
33,990,195
-----------

TOTAL COMMON STOCKS (Cost $99,924,407).............. 113,146,021
-----------
</TABLE>

<TABLE>
- -----------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Net Assets Value ($)
---------------------------------
<S> <C> <C>
Investment Portfolio (Cost $105,498,407) (a)... 94.0 118,874,021

SCUDDER PRECIOUS METALS, INC. (NOTE A):
GOLD* (Cost $4,326,959) (b)................... 3.4 4,293,189
PLATINUM* (Cost $1,289,757) (b)............... 1.2 1,517,339
OTHER ASSETS AND LIABILITIES, NET.............. 1.4 1,726,141
----- -----------
NET ASSETS..................................... 100.0 126,410,690
===== ===========

<FN>
* Non-income producing security or commodity.

(a) The cost for federal income tax purposes was $111,641,463. At June 30, 1995, net unrealized
appreciation for all investment securities based on tax cost was $7,232,558. This consisted of
aggregate gross unrealized appreciation for all investments in which there was an excess of
market value over tax cost of $20,508,379 and aggregate gross unrealized depreciation for all
investment securities in which there was an excess of tax cost over market value of $13,275,821.

(b) The cost of Gold for federal income tax purposes was $4,326,959. At June 30, 1995, gross and net
unrealized depreciation was $33,770 based on tax cost. The cost of Platinum for federal income
tax purposes was $1,289,757. At June 30, 1995, gross and net unrealized appreciation was $227,582
based on tax cost.

(c) Securities valued in good faith by the Valuation Committee of the Board of Directors. The cost
for these securities at June 30, 1995, aggregated $943,303. See Note A of the Notes to
Consolidated Financial Statements.

(d) 1 Unit = 1 common share and 1 warrant.

(e) Restricted Securities -- securities which have not been registered with the Securities and
Exchange Commission under the Securities Act of 1933. Information concerning such restricted
securities at June 30, 1995 is as follows:
</FN>
</TABLE>

<TABLE>
<CAPTION>
Principal Amount($)
Security /Shares Acquisition Date Cost ($)
-------- ------------------- ---------------- ---------
<S> <C> <C> <C>
Golden Shamrock Mines Ltd.
7.5%, 5/9/00 $800,000 4/13/95 800,000
Stillwater Mining Co. 170,454 9/12/94 1,000,000
</TABLE>

See page 5 for the breakdown of the Fund's common stocks.

The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
SCUDDER GOLD FUND
CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------------

JUNE 30, 1995
- -----------------------------------------------------------------------------------------------------------

ASSETS
<S> <C> <C>
Investments, at market (identified cost $105,498,407) (Note A).............. $118,874,021
Gold, at market, 11,092.078 oz. (identified cost $4,326,959) (Note A)....... 4,293,189
Platinum, at market, 3,433.672 oz. (identified cost $1,289,757) (Note A).... 1,517,339
Cash........................................................................ 182
Foreign currency, at market (identified cost $50,481) (Note A).............. 50,331
Receivables:
Investments sold......................................................... 5,912,042
Dividends and interest................................................... 106,042
Fund shares sold......................................................... 49,971
Other assets................................................................ 2,649
------------
Total assets........................................................... 130,805,766

LIABILITIES
Payables:
Investments purchased.................................................... $3,859,771
Fund shares redeemed..................................................... 313,286
Accrued management fee (Note C).......................................... 106,446
Other accrued expenses (Note C).......................................... 115,573
----------
Total liabilities...................................................... 4,395,076
------------
Net assets, at market value................................................. $126,410,690
============

NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net investment income............. $ (3,028,694)
Net unrealized appreciation (depreciation) on:
Investment securities.................................................. 13,375,614
Gold................................................................... (33,770)
Platinum............................................................... 227,582
Foreign currency related transactions.................................. 315
Accumulated net realized gains.......................................... 399,296
Capital stock............................................................ 98,266
Additional paid-in capital............................................... 115,372,081
------------
Net assets, at market value $126,410,690
============
NET ASSET VALUE, offering and redemption price per share
($126,410,690 divided by 9,826,603 shares of capital stock outstanding,
$.01 par value, 100,000,000 shares of capital stock authorized).......... $12.86
======
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------------

YEAR ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of withholding taxes of $71,228)...................... $ 750,279
Interest............................................................. 477,498
----------
1,227,777

Expenses:
Management fee (Note C).............................................. $1,281,161
Services to shareholders (Note C).................................... 386,675
Custodian and accounting fees (Note C)............................... 171,188
Directors' fees (Note C)............................................. 26,023
Auditing............................................................. 61,965
Reports to shareholders.............................................. 80,891
Legal................................................................ 10,867
State registration................................................... 58,727
Other................................................................ 40,686 2,118,183
--------------------------
Net investment loss.................................................. (890,406)
---------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investment securities............................................ 3,713,872
Gold............................................................. (426,487)
Foreign currency related transactions............................ (12,260) 3,275,125
Net unrealized appreciation (depreciation) during the period on: ----------
Investment securities 5,203,515
Gold (159,351)
Platinum 143,012
Foreign currency related transactions 251 5,187,427
--------------------------

Net gain on investment transactions 8,462,552
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,572,146
==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
SCUDDER GOLD FUND
- ------------------------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------

<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss ........................................ $ (890,406) $ (928,172)
Net realized gain from investment transactions ............. 3,275,125 7,521,103
Net unrealized appreciation (depreciation) on investment
transactions during the period ........................... 5,187,427 (5,250,988)
------------ ------------
Net increase in net assets resulting from operations ....... 7,572,146 1,341,943
------------ ------------
Distributions to shareholders:
In excess of net investment income ($.25 and $.24 per
share, respectively) ..................................... (2,869,449) (1,866,119)
------------ ------------
From net realized gains from investment
transactions ($.47 per share) ............................ (5,245,021) --
------------ ------------
Fund share transactions:
Proceeds from shares sold .................................. 143,035,136 247,469,583
Net asset value of shares issued to shareholders
in reinvestment of distributions ......................... 7,611,778 1,714,331
Cost of shares redeemed .................................... (153,550,282) (208,913,342)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions ....................................... (2,903,368) 40,270,572
------------ ------------
INCREASE (DECREASE) IN NET ASSETS (3,445,692) 39,746,396
Net assets at beginning of period .......................... 129,856,382 90,109,986
------------ ------------
NET ASSETS AT END OF PERIOD (including accumulated
distributions in excess of net investment income of
$3,028,694 and $1,343,532, respectively) ................. $126,410,690 $129,856,382
============ ============

OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .................. 10,277,443 7,427,151
------------ ------------
Shares sold ................................................ 11,733,937 19,073,576
Shares issued to shareholders in reinvestment of
distributions ............................................ 589,031 145,609
Shares redeemed ............................................ (12,773,808) (16,368,893)
------------ ------------
Net increase (decrease) in Fund shares ..................... (450,840) 2,850,292
------------ ------------
Shares outstanding at end of period ........................ 9,826,603 10,277,443
============ ============

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------

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

<FN>
(a) Reflects a per share amount
of expenses reimbursed by
the Adviser of................ $ -- $ -- $ -- $ -- $ .02 $ .20 $ .18

Operating expense ratio
including expenses
reimbursed, management
fee and other expenses
not imposed (%)............... -- -- -- 2.57 2.82 3.74 6.59*

(b) Based on monthly average shares outstanding during the period.

* Annualized

** Not annualized
</FN>
</TABLE>

<PAGE>
SCUDDER GOLD FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Gold Fund (the "Fund") is a non-diversified series of Scudder Mutual
Funds, Inc. (the "Corporation"). The Corporation is a Maryland corporation,
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The policies described below are followed
consistently by the Fund in the preparation of its financial statements in
conformity with generally accepted accounting principles.

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of the Fund
include the accounts of the Fund and Scudder Precious Metals, Inc., a
wholly-owned subsidiary of the Corporation, whose principal assets are precious
metals. All intercompany accounts and transactions have been eliminated.

SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.

Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the Officers of the Fund, which prices
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Securities valued in good faith by the Valuation Committee of the Board of
Directors at

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

fair value amounted to $1,830,508 (1.4% of net assets) and have been noted in
the investment portfolio as of June 30, 1995.

RESTRICTED SECURITIES. The Fund may not purchase restricted securities (for
these purposes, restricted security means a security which cannot be sold to the
public without registration under the Securities Act of 1933 or the availability
of an exemption from registration, or which is subject to other legal or
contractual delays in or restrictions on resale), if, as a result thereof, more
than 5% of the value of the Fund's total assets would be invested in restricted
securities. The aggregate fair value of restricted securities at June 30, 1995
amounted to $5,604,752 which represents 4.4% of net assets.

PRECIOUS METALS VALUATION. Gold bullion will be valued on quotations obtained
from U.S. dealers and on the London afternoon gold price. Precious metals other
than gold will be valued on current prices provided by market makers.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.

FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:

(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and

(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.

The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.

<PAGE>
SCUDDER GOLD FUND
- --------------------------------------------------------------------------------

Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.

Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.

Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.

FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders. The
Fund paid no federal income taxes and no federal income tax provision was
required.

DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax. The Fund uses the

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

identified cost method for determining realized gain or loss on investments for
both financial and federal income tax reporting purposes.

The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to investments in passive foreign investment
companies. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.

OTHER. Investment security and precious metals transactions are accounted for on
a trade date basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. All original issue discounts are accreted for both tax and financial
reporting purposes.

B. PURCHASES AND SALES
- --------------------------------------------------------------------------------
For the year ended June 30, 1995, purchases and sales of investment securities
(excluding short-term investments) aggregated $55,800,864 and $50,758,923,
respectively. During the year ended June 30, 1995, purchases and sales of gold
aggregated $16,597,689 and $31,670,376, respectively.

C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay to the Adviser a
fee equal to an annual rate of 1% of the Fund's average net assets, computed and
accrued daily and payable monthly. For the year ended June 30, 1995, the fee
pursuant to the Agreement amounted to $1,281,161. However, the Adviser has
agreed to absorb a portion of expenses in order to maintain the annualized
expenses of the Fund at not more than 3% of the average net assets until October
31, 1995. The Adviser did not absorb any expenses for the year ended June 30,
1995. The Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest and extraordinary expenses, exceed the lowest applicable state
expense limitation, such excess up to the amount of the management fee will be
paid by the Adviser.

<PAGE>
SCUDDER GOLD FUND
- --------------------------------------------------------------------------------

Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent. For the year
ended June 30, 1995, the amount charged to the Fund by SSC aggregated $301,455,
of which $23,220 is unpaid at June 30, 1995.

Effective March 28, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the period ended June 30, 1995, the amount
charged to the Fund by SFAC aggregated $13,007, of which $4,016 is unpaid at
June 30, 1995.

The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended June 30, 1995, Directors' fees aggregated $26,023.

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS OF SCUDDER MUTUAL FUNDS, INC. AND THE SHAREHOLDERS
OF SCUDDER GOLD FUND:

We have audited the accompanying consolidated statement of assets and
liabilities of Scudder Gold Fund, including the investment portfolio, as of June
30, 1995, and the related consolidated statement of operations for the year then
ended, the consolidated statements of changes in net assets for each of the two
years in the period then ended, and the consolidated financial highlights for
each of the six years in the period then ended, and for the period September 2,
1988 (commencement of operations) to June 30, 1989. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities and precious
metals owned as of June 30, 1995, by correspondence with the custodians and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the consolidated financial
position of Scudder Gold Fund as of June 30, 1995, the consolidated results of
its operations for the year then ended, the consolidated changes in its net
assets for each of the two years in the period then ended, and the consolidated
financial highlights for each of the six years in the period then ended, and for
the period September 2, 1988 (commencement of operations) to June 30, 1989 in
conformity with generally accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 15, 1995

<PAGE>
SCUDDER GOLD FUND
TAX INFORMATION
- --------------------------------------------------------------------------------

The Fund paid distributions of $.30 per share from long-term capital gains
during its year ended June 30, 1995. Pursuant to section 852 of the Internal
Revenue Code, the Fund designates $2,253,306 as capital gain dividends for its
fiscal year ended June 30, 1995.

Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investors Relations
Representative at 1-800-225-5163.

<PAGE>

OFFICERS AND DIRECTORS

Daniel Pierce*
President and Director

Thomas J. Devine
Director; Consultant

Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University Graduate
School of Business

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

Douglas M. Loudon*
Vice President and Director

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

David S. Lee*
Vice President

Thomas F. McDonough*
Vice President and Secretary

Pamela A. McGrath*
Vice President and Treasurer

Edward J. O'Connell*
Vice President and Assistant Treasurer

Juris Padegs*
Vice President and Assistant Secretary

Kathryn L. Quirk*
Vice President and Assistant Secretary

Coleen Downs Dinneen*
Assistant Secretary

* Scudder, Stevens & Clark, Inc.

25
<PAGE>

<TABLE>
<CAPTION>
INVESTMENT PRODUCTS AND SERVICES

The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund

Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans

Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,(TM) an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call 1-800-541-7703.

26
<PAGE>

HOW TO CONTACT SCUDDER

Account Service and Information
-------------------------------------------------------------------------------------------------------------

For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163

For account updates, prices, yields,
exchanges, and redemptions SCUDDER
AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------

To receive information about the
Scudder funds, for additional
applications and prospectuses, or for
investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470

For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------

THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------

Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------

For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.

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

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

* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
</FN>
</TABLE>

27
<PAGE>

Celebrating Over 75 Years of Serving Investors

Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer 36 pure no load(TM) funds, including the first international mutual
fund offered to U.S. investors.

Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.