Scudder
Gold
Fund
Annual Report
October 31, 1998
Pure No-Load(TM) Funds
A mutual fund which seeks maximum return consistent with investing primarily in
a portfolio of gold-related equity securities and gold.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder Gold Fund
- --------------------------------------------------------------------------------
Date of Inception: 9/2/88 Total Net Assets as of Ticker Symbol: SCDGX
10/31/98: $130.40 million
- --------------------------------------------------------------------------------
o Despite some improvement toward the close of the period, gold and gold stocks
posted negative results primarily due to central bank sales and short sales of
gold during the 12 months ended October 31, 1998.
o Scudder Gold Fund's total return during its most recent fiscal year ended
October 31, 1998 was -26.88%. This return compares with the -21.67% return of
similar funds as compiled by Lipper Analytical Services, Inc.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
Total Returns for Gold and Gold Funds
BAR CHART PERIOD:
(Periods ended October 31, 1998)
- --------------------------------------------------------------------------
Six months Twelve months
---------- -------------
Gold bullion,
London p.m. fix -5.92% -6.16%
Platinum,
London Fixing
Price Index -17.06% -17.62%
Toronto Stock
Exchange Gold
Index -10.79% -11.73%
Johannesburg
(South Africa)
Stock Exchange
Gold Index -1.75% 18.34%
Lipper Average for
Gold-Oriented
Funds -21.88% -21.67%
Scudder
Gold Fund -24.44% -26.88%
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Table of Contents
3 Letter from the Fund's President 19 Financial Highlights
4 Performance Update 20 Notes to Financial Statements
5 Portfolio Summary 25 Report of Independent Accountants
6 Portfolio Management Discussion 28 Officers and Directors
9 Glossary of Investment Terms 29 Investment Products and Services
10 Investment Portfolio 30 Scudder Solutions
16 Financial Statements
2 - Scudder Gold Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
Gold and gold stocks found themselves in negative territory over the 12
months ended October 31, 1998, but we believe a rebound seems in sight. Although
central banks sales continued to depress gold's price, fears of deflation as
well as inflation have recently caused more investment professionals to take a
position in gold. Scudder Gold Fund posted a -26.88% return over the period,
compared with the -21.67% performance of similar gold funds as tracked by
Lipper.
For your information, we have changed the Scudder Gold Fund's fiscal year
end to October 31 as part of a larger effort to create efficiencies and reduce
the costs of producing Scudder Fund regulatory materials such as shareholder
reports and prospectuses. You will now receive April 30 semiannual reports and
October 31 annual reports for the Fund.
For those of you who are interested in new Scudder products, we recently
introduced the Scudder Tax Managed Growth Fund, investing in medium- to
large-sized U.S. companies, and Scudder Tax Managed Small Company Fund, which
invests in stocks of small U.S. companies. Using a combination of quantitative
and fundamental research, the funds will focus on companies with strong earnings
growth, reasonable valuations, and favorable risk profiles. Both funds strive to
maximize after tax returns by systematically taking into account the tax
implications of portfolio transactions and seeking to offset capital gains by
realizing losses when appropriate. Please see page 29 for more information on
Scudder products and services.
If you have any questions regarding Scudder Gold Fund or any other Scudder
fund, please do not hesitate to call Investor Relations at 1-800-225-2470 or
visit Scudder's Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Gold Fund
3 - Scudder Gold Fund
<PAGE>
Performance Update as of October 31, 1998
- ----------------------
Fund Index Comparisons
- ----------------------
Total Return
- ---------------------------------------------------
Period Ended Growth of Average
10/31/98 $10,000 Cumulative Annual
- ---------------------------------------------------
Scudder Gold Fund
- ---------------------------------------------------
1 Year $ 7,312 -26.88% -26.88%
5 Year $ 7,770 -22.30% -4.92%
10 Year $ 8,218 -17.82% -1.94%
- ---------------------------------------------------
S&P 500 Index
- ---------------------------------------------------
1 Year $ 12,199 21.99% 21.99%
5 Year $ 26,266 162.66% 21.29%
10 Year $ 51,827 418.27% 17.87%
- ------------------------------
Growth of a $10,000 Investment
- ------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
S&P 500 Index Scudder Gold Fund
'88 10000 10000
'89 12637 9586
'90 11693 8277
'91 15608 8210
'92 17167 7580
'93 19731 10577
'94 20494 11519
'95 25911 11156
'96 32154 16478
'97 42484 11240
'98 51827 8218
Yearly periods ended October 31
The Standard & Poor's (S&P) 500 Index is an unmanaged 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
- ---------------------------------
Yearly periods ended June 30
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1998(a)(b)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 10.21 $ 9.87 $ 9.19 $ 12.13 $ 12.64 $ 12.86 $ 15.34 $ 10.49 $ 6.65 $ 6.37
- ------------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .01 $ -- $ -- $ -- $ .24 $ .25 $ 1.08 $ 2.39 $ .14 $ --
- ------------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ .09 $ -- $ -- $ -- $ -- $ .47 $ .63 $ .26 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) -2.71 -3.33 -6.89 31.99 6.35 7.50 36.91 -17.72 -35.45 -4.21
- ------------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) 16.45 7.37 13.39 13.61 1.40 26.07 26.00 34.72 30.17 -2.63
- ------------------------------------------------------------------------------------------------------------------------------
</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 an investor's shares, when redeemed, may be worth more
or less than when purchased.
(a) For the four months ended October 31, 1998.
(b) On September 15, 1998, the Board of Directors of the Fund changed the fiscal
year end from June 30 to October 31.
4 - Scudder Gold Fund
<PAGE>
Portfolio Summary as of October 31, 1998
- ---------------
Diversification
- ---------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
As a percentage of net assets
Equity Holdings 89%
Cash Equivalents, net 10%
Precious Metals 1%
---------------------------------------------
100%
---------------------------------------------
As difficulties for gold and gold stocks continued, the Fund
retained a significant cash position.
- --------------------
Quality Distribution
- --------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Tier breakdown of the Fund's common stocks
Tier I
Premier gold producing companies 40%
Tier II
Major established gold producers 24%
Tier III
Junior gold producers with
medium cost production 18%
Tier IV
Companies with some gold
production on stream or in startup 5%
Tier V
Primarily exploration companies
with or without mineral reserves 13%
---------------------------------------------
100%
---------------------------------------------
During the period, the Fund shifted into additional Tier I
and Tier II gold stocks to more closely approximate the
performance of pure gold and silver indexes while remaining
within its prospectus guidelines.
- ---------------------------
Ten Largest Equity Holdings
(40% of Portfolio)
- ---------------------------
1. Stillwater Mining Co.
Exploration and development of mines
in Montana producing platinum,
palladium and associated metals
2. Barrick Gold Corp.
Gold exploration and production in
North and South America
3. Sutton Resources Ltd.
International gold and nickel mining
company
4. Placer Dome, Inc.
Gold, silver and copper mining company
5. AngloGold Ltd.
Exploring and mining of gold
6. Battle Mountain Canada
Gold and silver mining
7. Homestake Mining Co.
Major international gold producer
8. Euro-Nevada Mining, Ltd.
Large gold royalty company
9. Anglo American Platinum Corp.
World's largest pure platinum producer
10. Meridian Gold Inc.
Gold exploration and production
Placer Dome, Inc., the Fund's fourth largest holding, has
been a standout performer for the Fund during a difficult
period for gold stocks: the company has sold unproductive
holdings, increased cash flow to its bottom line, and
recently opened an extremely successful Nevada-based mine.
For more complete details about the Fund's investment portfolio, see page 10. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Gold Fund
<PAGE>
Portfolio Management Discussion
For an overview of the investment environment, strategy, and outlook for Scudder
Gold Fund, we are pleased to present an interview with Scudder Gold Fund's lead
portfolio manager, Clay Hoes.
Q: How did Scudder Gold Fund perform over the past twelve months?
A: During the fall gold stocks began to rebound, but the 12-month period was
difficult overall. Scudder Gold Fund's total return for the 12 months ended
October 31, 1998, was -26.88%. This compares with the -21.67% return of the
Lipper Gold Fund Index and the -6.16% return of gold over the same period.
Q: What were the key events affecting the price of gold over the past 12 months?
A: First, central bank sales depressed the market, and short selling ahead of
central bank selling exacerbated the downturn. Then, because investors perceived
that there was little or no sign of a pickup of inflation on the horizon, there
was little demand for gold from retail investors. The Asian financial crisis
worsened the situation -- there was a substantial reduction in demand from Asia
during the period that typically would come from jewelry consumption.
Following sharp declines in the price of gold and gold stocks, gold came off its
$273 bottom to $292 as of October 31, 1998 following the Russian debt default
and the near-default of Long Term Capital Management and other hedge funds.
These hedge funds, which had substantial short positions in gold, were forced to
buy them back.
Q: Are gold stocks tracking gold the same way they have historically?
A: Gold equity prices typically move three to five times as much in either
direction relative to a dollar movement in the price of gold. At this point,
Tier I and II stocks are tracking eight to ten times movements in the price of
gold bullion. That's because investors aren't participating in the Tier III, IV,
and V stocks; they only want high quality Tier I and II. This means Tier I and
II stocks will tend to move faster. Normally, when the market turns positive as
it has recently, money would move into the whole range of names.
Q: Are more investors returning to gold and gold stocks?
A: Yes. There is a lot of uncertainty about the direction of the global economy,
which has caused investors to start to look to gold. Two opposing scenarios, I
believe, are operating. First is worry over deflation. In a deflationary
environment, there is wealth destruction, and gold should perform as well in
such an environment as it did in the deflationary environment of the late 1920s
and early 1930s.
If the Federal Reserve and other central banks have managed to cut interest
rates quickly enough to avoid a global recession, then the second scenario is
operating -- the possibility of inflation. Wages certainly aren't decreasing,
the labor market is still very tight despite substantial layoffs, and commodity
prices have nowhere to go but up. Add to this the horrendous rainstorms that
wiped out agricultural commodities in Latin America, and you might have some
6 - Scudder Gold Fund
<PAGE>
strong inflationary pressures. By holding some gold, many investors feel they're
protected in either scenario, as a hedge.
Q: Can you talk about supply and demand for gold in the current environment?
A: Even if you include central bank sales -- which have continually occurred and
always will -- demand for gold still exceeds supply. Supply is contracting, as
mines continue to shut down high cost production. Gold firms are not allocating
budgets for exploration, so we are coming to a point where there's going to be
very little future replacement production. In fact, we're actually in a
depletion mode in the gold industry, which benefits the price. Heavy selling
from Asia has stabilized, and once Asia's economies turn around the people of
those countries will likely buy gold at the rate they have in the past. In
addition, coin demand in the U.S. is reaching record highs, something new to the
gold industry.
So I think we're in a situation where the supply is contracting, demand has
stabilized, and we're seeing some increases in demand from the United States.
Q: Where has Scudder Gold Fund been buying and selling over its most recent
fiscal year?
A: We have been shifting into more Tier I and Tier II names to more closely
approximate pure gold and silver indexes while remaining within the Fund's
prospectus guidelines. When there have been short rallies we've been selling
exploration stocks that haven't been productive for us. We have moved in and out
of diamond issues as opportunities presented themselves, but for the most part
we're out of them now. The Fund has gold exposure, platinum exposure, and silver
7 - Scudder Gold Fund
<PAGE>
exposure. Geographically, we have exposure to gold stocks based in the United
States, Canada, Australia, South Africa, and countries in West Africa.
Q: Which issues have performed best for the Fund?
A: Placer Dome has been a standout performer during a difficult period for gold
stocks. Placer has "rationalized" their assets to some extent -- they are
getting out of their very small base metal (copper and zinc) position, which the
market previously penalized them for holding. Placer also has been buying out
their minority interests, which provides more cash flow to their bottom line.
And the company has had phenomenal success with a Nevada-based mine which they
just opened up this year: Costs have been much lower, the mine came on faster,
and the grades of mined ore were higher than anticipated. The Fund purchased
100,000 shares of this stock at a 15-year low.
In addition, we purchased two Australian issues -- Acacia Resources and Delta
Gold-- when they were much less expensive. And Samax Gold, which we bought as an
exploration stock, is in the process of being acquired by a major firm.
Q: Are there countries that seem particularly exciting now that gold appears to
be rebounding?
A: I think Tanzania looks very interesting. Tanzania seems to be developing into
a major mining district, and interest from the major mining companies is
increasing. In Australia there's been successful exploration by Delta and Acacia
and a lot of interest is beginning to be shown there.
Q: How do you think gold and gold stocks will perform over the next six months?
A: Sentiment in the gold market is the best it has been in a while because of
the potential for either deflation or inflation that I cited earlier. And
because only fund managers and institutional buyers have participated in gold
since its rebound, I think there's still healthy growth potential for gold
funds.
Scudder Gold Fund:
A Team Approach to Investing
Scudder Gold Fund is managed by a team of Scudder Kemper Investments, Inc.
(the "Adviser") professionals, each of whom plays 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 the Adviser's large staff of economists, research
analysts, traders, and other investment specialists who work in our
offices across the United States and abroad. We believe our team approach
benefits Fund investors by bringing together many disciplines and
leveraging our extensive resources.
Lead Portfolio Manager Clay L. Hoes assumed responsibility for the Fund's
day-to-day management in 1997. Mr. Hoes, who joined the Adviser in 1996,
has been involved in the investment industry since 1987 and has worked as
a portfolio manager since 1996. 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. Mr. Wallace, who has over 17
years of investment experience, contributes expertise in quantitative
analysis.
8 - Scudder Gold Fund
<PAGE>
Glossary of Investment Terms
CENTRAL BANK A national bank that issues currency, administers
monetary policy (including open market operations),
holds deposits representing the reserves of other
banks, and engages in operations designed to
facilitate the conducting of business and the
protection of the public interest. In the United
States, central banking is a function of the Federal
Reserve system.
DIVERSIFICATION The spreading of risk by putting assets in several
categories of assets -- stocks, bonds, money market
instruments, and precious metals, for example.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of goods
available in the marketplace -- in other words, when
too much money is chasing too few goods.
LIQUIDITY A stock that is liquid has enough shares outstanding
and a substantial enough market capitalization to
allow large purchases and sales to occur without
causing a significant move in its market price.
MARKET CAPITALIZATION The value of a company's outstanding shares of
common stock, determined by multiplying the
number of shares outstanding by the share price
(shares x price = market capitalization).
NET ASSET VALUE (NAV) The price per share of a mutual fund based on the
sum of the market value of all the securities
owned by the fund divided by the number of
outstanding shares.
TOTAL RETURN The most common yardstick to measure the
performance of a fund. Total return -- annualized or
compound -- is based on a combination of share price
changes plus income and capital gain distributions,
if any, expressed as a percentage gain or loss in
value.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
9 - Scudder Gold Fund
<PAGE>
Investment Portfolio as of October 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount** Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreements 12.9%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/30/1998 at 5.4%,
to be repurchased at $16,802,558 on 11/2/1998, collateralized by a $13,425,000 ------------
U.S. Treasury Bond, 7.25%, 8/15/2022 (Cost $16,795,000) ............................. 16,795,000 16,795,000
------------
Short-Term Investments 1.9%
- ------------------------------------------------------------------------------------------------------------------------------
United States
Federal National Mortgage Association, 5.45%, 11/2/1998*** ............................ 2,221,000 2,220,664
U.S. Treasury Bill, 4.44%, 1/7/1999*** (f) ............................................ 250,000 248,125
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $2,468,800) 2,468,789
- ------------------------------------------------------------------------------------------------------------------------------
Convertible Bonds 1.0%
- ------------------------------------------------------------------------------------------------------------------------------
Canada 0.6%
Kinross Gold Corp., 5.5%, 12/5/2006 ...................................................CAD 1,500,000 777,706
------------
Chile 0.4%
Dayton Mining Corp., 7%, 2/28/2002 .................................................... 1,500,000 495,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $2,601,119) 1,272,706
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 88.0%
- ------------------------------------------------------------------------------------------------------------------------------
Australia 11.3%
Acacia Resources Ltd.* (Australian-based gold and mineral exploration and
production company) ................................................................. 1,900,000 3,028,125
Delta Gold NL* (Australian-based gold and mineral exploration and production
company) ............................................................................ 1,900,000 3,111,250
Newcrest Mining, Ltd.* (Australian-based gold and mineral exploration company) ........ 925,000 1,519,313
Niugini Mining Ltd. (Gold exploration and mining in Queensland, Papua New
Guinea, Chile and Thailand) ......................................................... 560,000 910,000
Normandy Mining Ltd. (Mining and oil enterprises) ..................................... 4,098,214 3,662,779
Resolute Ltd. (Exploration and production of gold and other minerals) ................. 2,600,000 2,242,500
Ross Mining NL (Junior exploration company) ........................................... 500,000 325,000
------------
14,798,967
------------
Bolivia 0.1%
Corriente Resources, Inc.* (Mining and processing of gold in South America) ........... 275,000 124,757
Jordex Resources Inc.* (Operator of mines producing zinc, lead and silver) ............ 150,000 46,662
------------
171,419
------------
Brazil 0.0%
Ouraminas Minerals Inc., Purchase Warrants* (expire 2/14/1999) (c) .................... 250,000 0
------------
Canada 4.6%
Emgold Mining Corp., Purchase Warrants* (expire 11/14/1998) (c) ....................... 100,000 0
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
10 - Scudder Gold Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Euro-Nevada Mining, Ltd. (Large gold royalty company) ................................. 250,000 3,904,731
Golden Knight Resources, Inc.* (Junior gold producer, with interest in Ghana) ......... 500,000 213,869
Kinross Gold Corp.* (Gold mining company, with interests in Zimbabwe) ................. 500,000 1,279,974
Redfern Resources Ltd.* (Exploration company in British Columbia) ..................... 50,000 16,850
Repadre Capital Corp.* (Junior gold royalty company) .................................. 400,000 648,088
------------
6,063,512
------------
China 0.0%
Zen International Resources Ltd.* (Mineral exploration and production in China) ....... 180,000 15,165
------------
Congo 0.1%
Banro Resource Corp.* (Gold exploration and development company) ...................... 50,000 22,683
Banro Resource Corp., Warrants* (c) ................................................... 150,000 66,688
------------
89,371
------------
Ecuador 0.2%
Ecuadorian Minerals Corp.* (Exploration company in Ecuador) ........................... 600,000 206,092
------------
French Guiana 0.0%
International Roraima Gold Corp.* (Gold and mineral exploration and mining in
South America and Africa) (e) ....................................................... 825,000 42,774
------------
Ghana 3.7%
Ashanti Goldfields Co., Ltd. (GDR) (Leading gold producer) ............................ 325,000 2,782,813
Ashanti Goldfields Co., Ltd.* (Preference shares) (c) ................................. 154,701 315,590
Ranger Minerals NL* (Gold producer and exploration company in Ghana) .................. 600,000 1,650,000
Tanganyika Gold NL* (Gold exploration company) ........................................ 900,000 50,625
------------
4,799,028
------------
Indonesia 1.4%
Augusta Gold Corp. "A"* (Gold exploration company) .................................... 200,000 6,481
Augusta Corp. "A" New (c) ............................................................. 50,000 0
Freeport McMoRan Copper & Gold, Inc. "A" (Mining company) ............................. 150,000 1,790,625
------------
1,797,106
------------
Kazakhstan 0.0%
Steppe Gold Resources Ltd.* (Gold and precious minerals exploration and mining) ....... 600,000 27,220
------------
Mexico 0.0%
Northern Crown Mines, Ltd.* (Mexican mineral interests) ............................... 115,000 5,962
------------
Namibia 0.3%
Namibian Minerals Corp.* (Diamond exploration and development company, offshore
Namibia) ............................................................................ 261,200 355,489
------------
Niger 0.5%
Etruscan Enterprises Ltd.* (Exploration and development of gold prospect in Niger) .... 800,000 674,012
------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
11 - Scudder Gold Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peru 2.3%
Gitennes Exploration Inc. (Exploration and development of gold mining properties
in Peru) ............................................................................ 146,000 52,041
Minas Buenaventura (ADR) (Mining company) ............................................. 240,000 2,940,000
------------
2,992,041
------------
Philippines 0.1%
Climax Mining Ltd.* (Gold exploration company in Australia and the Philippines
Islands) ............................................................................ 570,000 73,031
------------
Sarawak 0.1%
Menzies Gold NL* (Mineral and gold exploration and production) ........................ 2,000,000 156,250
------------
South Africa 16.6%
Anglo American Platinum Corp. (World's largest pure platinum producer) ................ 250,000 3,798,034
AngloGold Ltd. (Exploring and mining of gold) ......................................... 100,000 5,093,834
Driefontein Consolidated Ltd. (Gold mining company) ................................... 150,000 931,635
Driefontein Consolidated Ltd. (ADR) ................................................... 150,000 876,563
Gold Field Ltd.* (Gold exploration and mining in South Africa) ........................ 425,000 3,000,447
Harmony Gold Mining Co., Ltd.* (Gold mining company) .................................. 650,000 3,281,948
Impala Platinum Holdings Ltd. (Platinum, nickel and copper mining) .................... 275,000 3,003,128
Kroondal Platinum Mines, Ltd. (Platinum, palladium, and rhodium mining company) ....... 1,100,000 884,719
Kroondal Platinum Mines, Ltd. Warrants* (expire 8/31/2000) ............................ 450,000 32,172
Minerals & Resources Corp., Ltd. (Exploration, mining and processing of metals) ....... 45,400 778,981
------------
21,681,461
------------
Spain 0.7%
Rio Narcea Gold Mines Inc.* (Gold exploration and development in northern Spain) ...... 508,400 856,669
------------
Tanzania 0.3%
Pangea Goldfields Inc.* (Gold exploration company operating in Tanzania) .............. 360,000 396,630
------------
United States 10.7%
Crown Resources Corp.* (Gold, silver and mineral exploration company) ................. 180,000 450,000
Getchell Gold Corp.* (Developer of a gold mining project in Nevada) ................... 175,000 3,062,500
Piedmont Mining Co.* (Gold mining and development company in the Carolinas) (e) ....... 800,000 25,000
Piedmont Mining Co.* (c) (d) (e) ...................................................... 700,000 19,688
Romarco Minerals, Inc.* (Gold and base metal exploration and development) ............. 100,000 110,175
Stillwater Mining Co.* (Exploration and development of mines in Montana
producing platinum, palladium and associated metals) ................................ 300,000 9,712,500
X-Cal Resources* (Gold exploration and mining in Nevada and British Columbia) (d) ..... 714,286 171,281
X-Cal Resources Units* (Private placement) (expire 3/15/1999) (c) (d) ................. 500,000 110,175
X-Cal Resources Ltd.* (d) ............................................................. 1,000,000 239,792
------------
13,901,111
------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
12 - Scudder Gold Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Venezuela 0.1%
El Callao Mining Corp.* (Gold exploration and development company with interests
in Venezuela) ....................................................................... 800,000 119,248
Tombstone Explorations Co., Ltd.* (Acquisition and exploration of mineral
resource properties) ................................................................ 450,000 29,164
------------
148,412
------------
West Africa 9.5%
Birim Goldfields Inc., Purchase Warrants* (expire 5/5/1999) (c) ....................... 75,000 0
High River Gold Mines Ltd.* (Gold exploration and development) ........................ 850,000 363,577
IAMGOLD* (Development and funding of precious metal mining in west Africa and
South Africa) ....................................................................... 1,200,000 3,383,020
Leo Shield Exploration NL* (Gold exploration company) ................................. 1,488,797 59,552
Nevsun Resources Ltd.* (Holder of interests in gold prospects) ........................ 200,000 97,213
Novagold Resources Inc. (Exploration and development of mineral properties) ........... 150,000 72,910
Samax Gold Inc.* (Gold mining company) ................................................ 550,000 2,815,943
Sutton Resources Ltd.* (International gold and nickel mining company) ................. 1,450,000 5,591,380
------------
12,383,595
------------
Zimbabwe 0.1%
Zimbabwe Platinum Mines Ltd. (Mining company which explores for platinum) ............. 380,000 92,625
------------
International 25.3%
Barrick Gold Corp. (Gold exploration and production in North and South
America) (f) ........................................................................ 375,000 8,015,625
Battle Mountain Canada (Gold and silver mining) (f) ................................... 850,000 4,627,349
First Quantum Minerals Ltd.* (Diversified mining company) ............................. 446,600 318,380
Homestake Mining Co. (major international gold producer) .............................. 350,000 4,156,250
Lihir Gold Ltd.* (Gold exploration and development) ................................... 1,660,000 2,303,250
McWatters Mining Inc., Warrants* (expire 9/10/1999) (Mineral exploration and
mining company) (c) ................................................................. 25,000 0
Meridian Gold Inc.* (Gold exploration and production) ................................. 725,000 3,735,418
Newmont Mining Corp. (International gold exploration and mining company) .............. 50,000 1,062,500
Orvana Minerals Corp.* (International exploration and development company) ............ 80,000 40,441
Placer Dome Inc. (Gold, silver and copper mining company) ............................. 350,000 5,546,014
Solitario Resources Corp.* (Precious and base metals exploration company
primarily in Argentina and Peru) .................................................... 700,000 612,443
Trans Hex International Ltd.* (Diamond and precious metal exploration and mining) ..... 45,000 9,916
TVX Gold, Inc. (International gold and silver mining) ................................. 1,296,300 2,360,728
Vengold Inc.* (Gold exploration and development company with interests in Papua
New Guinea, Venezuela and Indonesia) ................................................ 300,000 243,033
------------
33,031,347
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $111,884,295) 114,759,289
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
13 - Scudder Gold Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Call -- Purchased 0.1%
- ------------------------------------------------------------------------------------------------------------------------------
United States ------------
Freeport A, strike price 12.5, expires 12/20/1998 (Cost $124,875) ..................... 1,500 159,375
------------
Put -- Purchased 0.2%
- ------------------------------------------------------------------------------------------------------------------------------
United States
Barrick Gold Corp., strike price 20, expires 11/22/1998 ............................... 500 34,375
Homestake Mining, strike price 12.5, expires 11/22/1998 ............................... 500 50,000
Newmont Mining, strike price 22.5, expires 11/22/1998 ................................. 500 121,875
Placer Dome, strike price 15, expires 11/22/1998 ...................................... 500 28,123
- ------------------------------------------------------------------------------------------------------------------------------
Total Put -- Purchased (Cost $348,660) 234,373
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Investment Portfolio (Cost $134,222,749) (a) .................................... 104.1 135,689,532
Scudder Precious Metals, Inc.:
Platinum* ($725,484) (b) ............................................................ 0.5 651,871
Other assets and liabilities .......................................................... (4.6) (5,944,491)
------ ------------
Net Assets ............................................................................ 100.0 130,396,912
====== ============
</TABLE>
* Non-income producing security or commodity.
** Principal amount is stated in U.S. dollars unless otherwise specified.
*** Annualized yield at time of purchase; not a coupon rate. (Unaudited)
(a) The cost for federal income tax purposes was $145,633,630. At October 31,
1998, net unrealized depreciation for all investment securities based on
tax cost was $9,944,098. This consisted of aggregate gross unrealized
appreciation for all investments in which there was an excess of market
value over tax cost of $16,148,978 and aggregate gross unrealized
depreciation for all investment securities in which there was an excess of
tax cost over market value of $26,093,076.
(b) The cost of Platinum for federal income tax purposes was $725,484. At
October 31, 1998, gross and net unrealized depreciation based on tax cost
was $73,613.
(c) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $512,141 (.39% of net assets). Their
values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at October 31, 1998 aggregated $1,203,972. These
securities may also have certain restrictions as to resale.
(d) Restricted Securities are securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
The aggregate fair value of restricted securities at October 31, 1998,
amounted to $540,936 which represents .41% of net assets. Information
concerning such restricted securities at October 31, 1998 is as follows:
Security Shares Acquisition Date Cost ($)
-------- ----------- ------------------ ----------
Piedmont Mining Co. 700,000 12/20/1996 280,000
X-Cal Resources 1,000,000 12/18/1996 731,663
X-Cal Resources 714,286 6/18/1997 360,529
X-Cal Resources 500,000 3/19/1998 193,969
The accompanying notes are an integral part of the consolidated financial
statements.
14 - Scudder Gold Fund
<PAGE>
- --------------------------------------------------------------------------------
(e) Affiliated issuers (See Notes to Consolidated Financial Statements).
(f) At October 31, 1998, these securities have been pledged to cover, in whole
or in part, initial margin requirements for open futures contracts.
At October 31, 1998, open futures contracts purchased long were as
follows:
Aggregate Market
Futures Expiration Contracts Face Value ($) Value ($)
------- ---------- --------- -------------- ---------
Silver 5,000 oz. 12/31/1998 117 2,879,585 2,950,155
Gold 100 oz. 12/31/1998 100 2,964,390 2,937,000
--------- ---------
Total unrealized appreciation on open futures contracts
purchased long .............................................. 43,180
======
Currency Abbreviations
- ----------------------------------------------------------------------
CAD Canadian Dollars
The accompanying notes are an integral part of the consolidated financial
statements.
15 - Scudder Gold Fund
<PAGE>
Financial Statements
Consolidated Statement of Assets and Liabilities
October 31, 1998
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market:
Unaffiliated issuers (including repurchase agreement of
$16,795,000) (identified cost $132,557,503) ..................... $ 135,602,070
Affiliated issuers (identified cost $1,665,246) ................... 87,462
----------------
Total investments, at market (identified cost $134,222,749) .......... 135,689,532
Platinum, at market 1,950 oz. (identified cost $725,484) ............. 651,871
Foreign currency holdings, at market (identified cost $1,358,079) .... 1,429,945
Receivable for Fund shares sold ...................................... 640,772
Dividends and interest receivable .................................... 161,609
Receivable for investments sold ...................................... 3,788,169
Other assets ......................................................... 4,090
----------------
Total assets ......................................................... 142,365,988
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Due to custodian bank ................................................ 7,251
Payable for investments purchased .................................... 2,067,185
Payable for Fund shares sold ......................................... 9,507,182
Payable for daily variation margin on open futures contracts ......... 29,720
Accrued management fee ............................................... 117,165
Other payables and accrued expenses .................................. 240,573
----------------
Total liabilities .................................................... 11,969,076
-------------------------------------------------------------------------------------------
Net assets, at market value $ 130,396,912
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income (loss) (464,510)
Net unrealized appreciation (depreciation) on:
Investment securities ............................................. 1,466,783
Platinum .......................................................... (73,613)
Futures ........................................................... 43,180
Foreign currency related transactions ............................. 40,884
Accumulated net realized gain (loss) ................................. (88,948,850)
Paid-in capital ...................................................... 218,333,038
-------------------------------------------------------------------------------------------
Net assets, at market value $ 130,396,912
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($130,396,912 / 20,470,266 shares of capital stock
outstanding, $.01 par value, 100,000,000 shares of capital ----------------
stock authorized) .................................................. $6.37
----------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16 - Scudder Gold Fund
<PAGE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Four Months
Ended
October 31,
1998 Year Ended
Investment Income (Note F) June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends (net of foreign taxes withheld of $8,501
and $48,139, respectively) .......................................... $ 523,398 $ 1,027,084
Interest (net of foreign taxes withheld of $0 and
$1,829, respectively) ............................................... 329,330 1,708,512
---------------- ----------------
852,728 2,735,596
Expenses:
Management fee ........................................................ 411,019 1,471,427
Services to shareholders .............................................. 192,865 636,904
Custodian and accounting fees ......................................... 84,920 177,735
Directors' fees and expenses .......................................... 9,980 47,652
Auditing .............................................................. 47,965 75,344
Reports to shareholders ............................................... 40,098 82,166
Registration fees ..................................................... 53,085 64,049
Legal ................................................................. 36,350 96,191
Other ................................................................. 7,963 19,344
---------------- ----------------
884,245 2,670,812
---------------------------------------------------------------------------------------------------------------
Net investment income (loss) (31,517) 64,784
---------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments - Unaffiliated issuers .................................... (27,523,519) (45,510,841)
Investments - Affiliated issuers ...................................... (191,826) (3,586,595)
Gold .................................................................. -- (1,252,102)
Futures ............................................................... (120,537) (339,950)
Foreign currency related transactions ................................. (103,077) (41,992)
---------------- ----------------
(27,938,959) (50,731,480)
---------------- ----------------
Net unrealized appreciation (depreciation) during the period on:
Investment securities ................................................. 26,707,714 (13,589,462)
Gold .................................................................. -- 801,154
Platinum .............................................................. (44,857) (141,880)
Futures ............................................................... 26,015 17,165
Foreign currency related transactions ................................. 48,860 1,369
---------------- ----------------
26,737,732 (12,911,654)
---------------------------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (1,201,227) (63,643,134)
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (1,232,744) $ (63,578,350)
---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17 - Scudder Gold Fund
<PAGE>
Consolidated Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Four Months
Ended
October 31, Years Ended June 30,
1998
Increase (Decrease) in Net Assets (Note F) 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income (loss) ............................ $ (31,517) $ 64,784 $ (1,213,425)
Net realized gain (loss) from investment
transactions .......................................... (27,938,959) (50,731,480) 8,272,276
Net unrealized appreciation (depreciation)
on investment transactions during the period .......... 26,737,732 (12,911,654) (46,971,575)
---------------- ---------------- ----------------
Net increase (decrease) in net assets
resulting from operations ............................. (1,232,744) (63,578,350) (39,912,724)
---------------- ---------------- ----------------
Distributions to shareholders:
In excess of net investment income ...................... -- (2,264,120) (32,213,271)
---------------- ---------------- ----------------
From net realized gains from investment transactions .... -- -- (3,509,513)
---------------- ---------------- ----------------
Fund share transactions:
Proceeds from shares sold ............................... 273,681,361 749,811,359 449,808,600
Net asset value of shares issued to shareholders
in reinvestment of distributions ...................... -- 2,054,132 32,732,697
Cost of shares redeemed ................................. (274,183,250) (717,824,287) (415,853,422)
---------------- ---------------- ----------------
Net increase (decrease) in net assets from Fund
share transactions .................................... (501,889) 34,041,204 66,687,875
---------------- ---------------- ----------------
Increase (decrease) in net assets ....................... (1,734,633) (31,801,266) (8,947,633)
Net assets at beginning of period ....................... 132,131,545 163,932,811 172,880,444
Net assets at end of period (including accumulated
distributions in excess of net investment income of ---------------- ---------------- ----------------
$464,510, $7,582,297 and $13,939,198 respectively) .... $ 130,396,912 $ 132,131,545 $ 163,932,811
---------------- ---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ............... 19,861,886 15,622,172 11,273,441
---------------- ---------------- ----------------
Shares sold ............................................. 43,924,388 92,092,490 34,365,516
Shares issued to shareholders in reinvestment of
distributions ......................................... -- 282,938 2,401,703
Shares redeemed ......................................... (43,316,008) (88,135,714) (32,418,488)
---------------- ---------------- ----------------
Net increase in Fund shares ............................. 608,380 4,239,714 4,348,731
---------------- ---------------- ----------------
Shares outstanding at end of period ..................... 20,470,266 19,861,886 15,622,172
---------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18 - Scudder Gold Fund
<PAGE>
Consolidated Financial Highlights
The following table includes selected data (a) for a share outstanding
throughout each period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
For the Four
Months Ended
October 31,
1998 Years Ended June 30,
(Note F) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
Net asset value, beginning of period ............ $ 6.65 $ 10.49 $ 15.34 $ 12.86 $ 12.64 $ 12.13
------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .................... .00 .00 (.08) (.09) (.08) (.10)
Net realized and unrealized gain (loss) on
investment transactions ....................... (.28) (3.70) (2.12) 4.28 1.02 .85
------------------------------------------------------------------------
Total from investment operations ................ (.28) (3.70) (2.20) 4.19 .94 .75
------------------------------------------------------------------------
Less distributions:
In excess of net investment income .............. -- (.14) (2.39) (1.08) (.25) (.24)
From net realized gains on investment
transactions .................................. -- -- (.26) (.63) (.47) --
------------------------------------------------------------------------
Total distributions ............................. -- (.14) (2.65) (1.71) (.72) (.24)
------------------------------------------------------------------------
------------------------------------------------------------------------
Net asset value, end of period .................. $ 6.37 $ 6.65 $ 10.49 $ 15.34 $ 12.86 $ 12.64
------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................................ -4.21** -35.45 -17.72 36.91 7.50 6.35
Ratios and Supplemental Data
Net assets, end of period ($ millions) .......... 130 132 164 173 126 130
Ratio of operating expenses to average daily
net assets (%) ................................ 2.13* 1.82 1.60 1.50 1.65 1.69
Ratio of net investment income (loss) to
average daily net assets (%) .................. (.08)* .04 (.62) (.61) (.69) (.81)
Portfolio turnover rate (%) ..................... 153.6* 68.3 38.9 29.7 42.0 50.8
</TABLE>
(a) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
19 - Scudder Gold Fund
<PAGE>
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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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 Nasdaq Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on Nasdaq. If there are no such sales, the value is the most
recent bid quotation. Securities which are not quoted on Nasdaq 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 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 other than money market instruments with an original
maturity over sixty days are valued by pricing agents approved by the officers
of the Fund, which quotations reflect broker/dealer-supplied valuations and
electronic data processing techniques. If the pricing agents are unable to
provide such quotations, the most recent bid quotation supplied by a bona fide
market maker shall be used. Money market instruments purchased with an original
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.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options on securities as a hedge against
potential adverse price movements in the value of portfolio assets. In addition,
during the period the Fund purchased call options on securities as a temporary
substitute for purchasing selected investments and to enhance potential gain.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire, it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
20 - Scudder Gold Fund
<PAGE>
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
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, is equal to at least the repurchase 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.
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.
21 - Scudder Gold Fund
<PAGE>
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.
Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased precious metals futures as a temporary substitute for purchasing
precious metals.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy.
Futures contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to hedge, the
Fund gives up the opportunity to profit from favorable price movements in the
hedged positions during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, 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. At October 31, 1998, the Fund had a net tax basis
capital loss carryforward of approximately $78,000,000 which may be applied
against any realized net taxable capital gains of each succeeding year until
fully utilized or until October 31, 2005 ($24,000,000) or October 31, 2006
($54,000,000), the respective expiration dates, whichever comes first.
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
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 and certain securities sold at a loss. As a result, net investment
income
22 - Scudder Gold Fund
<PAGE>
(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 premiums and discounts are amortized or accreted for both tax and
financial reporting purposes.
B. Purchases and Sales
For the four months ended October 31, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $64,934,573 and
$55,705,442, respectively. For the year ended June 30, 1998, purchases and sales
of investment securities (excluding short-term investments) aggregated
$119,520,338 and $78,849,656, respectively. For the year ended June 30, 1998,
purchases and sales of gold aggregated $11,473,455 and $21,319,187,
respectively.
The aggregate face value of futures contracts opened and closed during the four
months ended October 31, 1998 was $7,354,306 and $3,007,588, respectively. The
aggregate face value of futures contracts opened and closed during the year
ended June 30, 1998 was $11,257,108 and $9,759,850, respectively.
C. Related Parties
Under the Investment Management Agreement with Scudder Kemper, 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. As manager of the
assets of the Fund, the Adviser directs the investments of the Fund in
accordance with its investment objectives, policies, and restrictions. The
Adviser determines the securities, instruments, and other contracts relating to
investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Agreement. For the four months ended October 31,
1998, the fee pursuant to these agreements aggregated $411,019, of which
$117,165 is unpaid at October 31, 1998. For the year ended June 30, 1998, the
fee pursuant to those agreements aggregated $1,471,427.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's investment management agreement with Scudder Kemper was
deemed to have been assigned and, therefore, terminated. The Board of Directors
of the Fund has approved a new investment management agreement with Scudder
Kemper, which is substantially identical to the former investment management
agreement, except for the dates of execution and termination. The Board of
Directors of the Fund has obtained shareholder approval of the new investment
management agreement.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent. For the four months
ended October 31, 1998, the amount charged to the Fund by SSC aggregated
$151,836, of which $37,271 is unpaid at October 31, 1998. For the year ended
June 30, 1998, the amount charged to the Fund by SSC aggregated $487,250.
23 - Scudder Gold Fund
<PAGE>
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the four months ended October
31, 1998, the amount charged to the Fund by STC aggregated $6,735, of which
$1,707 is unpaid at October 31, 1998. For the year ended June 30, 1998, the
amount charged to the Fund by STC aggregated $19,391.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the four months
ended October 31, 1998, the amount charged to the Fund by SFAC aggregated
$26,870, of which $15,543 is unpaid at October 31, 1998. For the year ended June
30, 1998, the amount charged to the Fund by SFAC aggregated $67,605.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the four
months ended October 31, 1998 and the year ended June 30, 1998, Directors' fees
and expenses aggregated $9,980 and $47,652, respectively.
D. Lines of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
E. Transactions in Securities of Affiliated Issuers
An affiliated issuer is a company in which the Fund has ownership of at least 5%
of the voting securities. A summary of the Fund's transactions with companies
which are or were affiliates for the four months ended October 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Piedmont Mining Co. Inc. -- 201,076 -- 25,000
Piedmont Mining Co. Inc. -- -- -- 19,688
International Roraima Gold Corp. -- -- -- 42,774
-----------------------------------------------------------------------------
-- 201,076 -- 87,462
=============================================================================
</TABLE>
The Fund's transactions with companies which are or were affiliates for the
period ended June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Golden Knight Resources Inc. 1,336,405 4,985,092 -- 451,225
Piedmont Mining Co. Inc. -- 249,375 -- 100,540
International Roraima Gold Corp. -- -- -- 67,276
-----------------------------------------------------------------------------
1,336,405 5,234,467 -- 619,041
=============================================================================
</TABLE>
F. Year End Change
On September 15, 1998, the Board of Directors of the Fund changed the fiscal
year end from June 30 to October 31.
24 - Scudder Gold Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder Mutual Funds, Inc. and the Shareholders of
Scudder Gold Fund:
In our opinion, the accompanying consolidated statement of assets and
liabilities, including the investment portfolio, and the related consolidated
statements of operations and of changes in net assets and the consolidated
financial highlights present fairly, in all material respects, the financial
position of Scudder Gold Fund (the "Fund") at October 31, 1998, the results of
its operations for the four months then ended and for the year ended June 30,
1998, the changes in its net assets for the four months ended October 31, 1998
and for each of the two years in the period ended June 30, 1998, and the
financial highlights for the four months ended October 31, 1998 and for each of
the five years in the period ended June 30, 1998, in conformity with generally
accepted accounting principles. These consolidated financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 23, 1998
25 - Scudder Gold Fund
<PAGE>
This Page
intentionally
left blank.
26 - Scudder Gold Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder Gold Fund
<PAGE>
Officers and Directors
Daniel Pierce*
President and Director
Paul Bancroft III
Director; Venture Capitalist and
Consultant
Sheryle J. Bolton
Director; Chief Executive Officer,
Scientific Learning Corporation
William T. Burgin
Director; General Partner, Bessemer
Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; Private Equity Investor
William H. Luers
Director; President, The
Metropolitan Museum of Art
Kathryn L. Quirk*
Director, Vice President and
Assistant Secretary
Joan Spero
Director; President, Doris Duke
Charitable Foundation
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus and Director, Kirby
Corporation
Clay L. Hoes*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice Presidnet
Thomas F. McDonough*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder Gold Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
29 - Scudder Gold Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder Gold Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
800 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
31 - Scudder Gold Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
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